ASEAN-X Risks Diluting RCEP

This week the Philippines proposed an alteration to the negotiating paradigm of the Regional Comprehensive Economic Partnership (RCEP), in an effort to relieve the logjam currently affecting the RCEP free trade agreement (FTA) talks involving 16 countries, ASEAN plus India, China, Japan, Korea, Australia and New Zealand.  The difficulty is that the Philippine proposal may add more complications to what is already a complex set of trade talks and increases the likelihood that those talks will result in a weaker FTA.

The Philippine proposal basically calls for the RCEP parties to apply “variable geometry” to the RCEP commitments.  Variable geometry, in FTA terms, allows parties to apply trade liberalization commitments on an asymetrical basis, e.g., not all FTA parties implementing their commitments at the same time or to the same extent.

In ASEAN, this is known as “ASEAN-X,” provided in Article 21.2 of the ASEAN Charter. A subset of ASEAN members can proceed with faster economic integration, with the understanding that other ASEAN members can later join the subset when they are ready. In this way, the integration process can continue and achieve the same end result, albeit at varying speeds. 

Thus, ASEAN-X is a useful tool to promote economic integration. The problem comes when not all parties share the understanding that the non-participating ASEAN members will eventually join the subset. As I explained in previously, this can happen when there are multiple subsets of ASEAN countries, or subsets which result from fundamentally incompatible policies. 

This is difficult enough in the ASEAN context, where at least there are regional institutions and processes in ASEAN to move the process along, however slowly.  Application of the ASEAN-X formula to the RCEP process could be even more problematic.  The RCEP talks have stalled because China, Japan, India, and Korea have no FTAs among them, whereas ASEAN has FTAs with those countries.  As a result, the RCEP talks have had difficulties “squaring the circle,” both among the three northeast Asian countries and, for all countries involved, in negotiating with India.  Application of the ASEAN-X formula could thus result in multiple subsets of RCEP being created for these countries.

That of course, undermines one of the fundamental objectives of the RCEP, which was to streamline the trading and investment relationships among the RCEP partners.  Furthermore, if the variable geometries are baked into the RCEP agreement, it will be more difficult for the RCEP parties, operating without established institutions and processes, to move the outliers into the main body of the RCEP commitments.

If applied to the RCEP talks, therefore, ASEAN-X and variable geometry could end the negotiating impasse.  But doing so carries the risk of diluting what already promises to be a relatively weak product from the RCEP talks.