Navigating Australia’s Regional Comprehensive Economic Partnership Agreement negotiations.

Navigating Australia’s Regional Comprehensive Economic Partnership Agreement negotiations.
The Australian Government’s Chief Negotiator, Regional Trade Agreements Division, James Baxter, visited the Perth USAsia Centre on Tuesday 11 June 2019. Mr Baxter is currently leading Australia’s delegation in negotiations for the proposed Regional Comprehensive Economic Partnership (RCEP) Agreement.

The RCEP agreement is an effort to link the six ASEAN (Association of Southeast Asian Nations) plus 1 free trade agreements, which ASEAN has with Australia, China, India, Japan, Korea and New Zealand into a region wide agreement.

RCEP matters because it is, in its own right, a significant trading bloc. Its members account for 30 per cent of the world’s GDP, it would be the world’s biggest trade bloc after the World Trade Organisation, and it is larger than the EU and NAFTA, and twice the size of the TPP-11.

That RCEP would include India, means it is the first ‘Indo Pacific’ agreement. India’s inclusion in RCEP is significant, because it means RCEP is a mechanism to build economic ties with India. RCEP has the potential to unlock value chains because it includes all of the major regional economies.

The Perth USAsia Centre has a body of work that focuses on RCEP, including ‘RCEP: An economic architecture for the Indo-Pacific?’ and an edition of the Indo Pacific Insight Series, ‘The Regional Comprehensive Economic Partnership: An Indo-Pacific approach to the regional trade architecture?’.

The roundtable discussion with Mr Baxter was timely, as the next RCEP negotiations take place in Melbourne, Australia, on 26 June.

The benefit for Australia

Australia benefits from multilateral and regional trade agreements. However because Australia’s trade is already very open, there is not a huge amount to put on the table when it comes to removing tariff and non-tariff barriers. This has made some negotiations for Australia challenging. For example, with Indonesia and India which have more protectionist economies. With Indonesia, the vast majority of tariffs reductions have come from the Indonesia side from approximately 30 major commodities that Australia exports to Indonesia. With India, negotiations have been difficult with the last round approximately four years ago. This is why RCEP is viewed as a tool to further economic engagement with India.

Increasing importance of regional supply chains

The US-China trade war means that regional supply chains are increasingly important, which creates a prerogative for negotiating a good quality RCEP agreement. We are seeing the effects of trade diversion as importers seek to bypass tariffs. We are seeing exports of tariffed items increasing from other economies like Vietnam, Taiwan, Malaysia, and even outside of the region across the Pacific in Chile. We will likely see a shift in investment as well.

The economic argument for the Indo-Pacific

Finally, it is worth expanding on RCEP as the Indo-Pacific’s economic anchor. At Perth USAsia Centre we talk a lot about the Indo-Pacific concept, which expands the Asia Pacific concept to include India. The Indo-Pacific is a geographic reality that has a clear security logic, reflecting the trade routes which connect the Indian and Pacific Oceans. It also accounts for India’s importance as a regional security actor. However, the economic argument for the Indo-Pacific is much less developed. There are little trade and investment links between South Asia and economies of the Pacific Rim. It is without doubt that RCEP is well poised to do this.

Perth USAsia Centre’s Kyle Springer and Erin Watson-Lynn, James Baxter, Member for Burt Matthew Keogh, and Consulate-General of the People's Republic of China Bing Liu.


Kyle Springer
Kyle Springer
Senior Analyst
Kyle Springer is the Senior Analyst at the Perth USAsia Centre. He provides high-level program assistance and develops the think tank and external outreach programs of the Centre. Kyle also directs the Centre's Indonesia programs and convenes policy workshops focussed on Australia-Indonesia relations.
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