68 - Taking ASEAN+1 FTAs Towards the RCEP

Summary

INTRODUCTION

In November 2012, the leaders of the ASEAN+6 countries agreed to launch a new free trade agreement (FTA) negotiation called the “Regional Comprehensive Economic Partnership” (RCEP). This paper aims at providing rationales for pursuing an East Asian-wide FTA and making policy proposals for the key elements to be negotiated under the RCEP.

ASEAN has been playing a substantial role in developing FTAs in East Asia. The Common Effective Preferential Tariff (CEPT) entered into force in 1993 and was replaced by the ASEAN Trade In Goods Agreement (ATIGA) in 2010. The development of FTA networks with ASEAN's Dialogue Partners has been an integral part in the ASEAN Economic Community (AEC) design. As a result, five ASEAN+1 FTAs have come into force, namely the ASEAN-Australia-New Zealand FTA (AANZFTA), the ASEAN-China FTA (ACFTA), the ASEAN-India FTA (AIFTA), the ASEAN-Japan Comprehensive Economic Partnership (AJCEP) and the ASEAN-Republic of Korea FTA (AKFTA). Moreover, ASEAN is taking further steps to establish the RCEP, which was formerly called “ASEAN++ FTA” and will bring larger advantages for ASEAN countries.

We believe that ASEAN should take the leadership role in designing a new regional architecture, using the ASEAN+1 FTAs, the AEC efforts including connectivity and trade facilitation, and various cooperation schemes as building blocks. The three reasons for this belief follow in this section.

Most importantly, the current ASEAN+1 FTAs have not yet achieved a fully liberalized region: there is much room for the RCEP to strengthen ASEAN and East Asia as a production base. The level of tariff liberalization is not sufficiently high. Also, rules of origin (ROOs) are not liberal enough in some ASEAN+1 FTAs: while most ASEAN+1 FTAs allow co-equal rules, i.e., more business-friendly rules, some do not. Similarly, services liberalization have only small “WTO Plus” (or “GATS Plus”) components in the current ASEAN+1 FTAs. Trade facilitation chapters remain general in most ASEAN+1 FTAs. In fact, the RCEP negotiation framework can give ASEAN a source of additional bargaining power toward a higher target which is not valid under bilateral negotiations. All the FTA Partners have strong economic and political incentives not to be excluded from the new regional FTA.

Secondly, the existence of several ASEAN+1 FTAs itself creates a “noodle-bowl” (also known as “spaghetti-bowl”) situation which potentially hampers the firms’ usages of preferential systems and impairs the potential values of such FTAs.