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  jata  Malaysia's Free Trade Agreements

 
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RCEP

BACKGROUND

  • The Regional Comprehensive Economic Partnership (RCEP) negotiation was launched during the 21st ASEAN Summit in Phnom Penh, Cambodia in November 2012. The 16 participating countries are 10 ASEAN nations, Australia, China, Japan, Korea, India and New Zealand.

  • The RCEP is an ASEAN driven initiative that aims to integrate economically the 16 countries in Asia and Oceania countries. The Leaders of the 16 RCEP participating countries agreed that RCEP shall involve broader and deeper engagement with significant improvements over existing ASEAN Free Trade Agreements (FTAs) and Comprehensive Economic Partnership Agreements (CEPs) with these countries.

  • The RCEP negotiations are based on the Guiding Principles and Objectives for Negotiating RCEP which was endorsed by the leaders at the time of launching the negotiations. The Guiding Principles is as attached.

Market Snapshot: AEC; RCEP; and TPP (2015/2016)

RTAs

AEC

RCEP

TPP

Population (million)

620

3,534.4 (50%)

789.2 (11.3%)

GDP (US$ trillion)

(US$2.5)

US$22.5 (30.4%)

28.55 (37%)

Total Trade and  % of World Trade

2,259.5 billion (6.8%)

9,547.2 billion (28.7%)

8,728.0 billion (26.3%)

Exports and % of World Exports

US$1,164.5 (7.0%)

5,077.4 billion (30.8%)

3,961 billion (24%)

Imports and % of World Imports

US$1,095.0 (6.5%

4,469.8 billion (26.7%)

4,767 billion (28.4%)
 

 

  • Collectively, the AEC and RCEP account for combined output amounting to US$22.4 trillion or 30.6% of world output. Total trade of RCEP in 2015 was significant at US$11.9 trillion and total FDI inflows to the 16 countries amounting to US$329.6 billion.

 

ASEAN Plus 1 FTAs/CEPs

FTA

Entry into Force

Scope

ASEAN-China

2005

Goods, Services, Investment, DSM

ASEAN-Korea

2007

Goods, Services, Investment, DSM

ASEAN-Japan

2008

Goods, Services, Investment, DSM

ASEAN-India

2010

Goods, Services, Investment, DSM

ASEAN-Australia-New Zealand

 

Goods, Services, Investment, DSM, MNP, E-Commerce, IPR, Competition and Economic cooperation.

SCOPE

  • The current scope of the RCEP cover:

    • Trade in Goods which include Customs, SPS, TBT, ROO);

    • Trade in Services, including financial and telecommunication services;

    • Investment;

    • Economic and Technical Cooperation;

    • Intellectual Property;

    • E-commerce;

    • Competition; and

    • Dispute Settlement.

  • The scope of the RCEP was further expanded by the Trade Negotiating Committee (TNC) and endorsed by the Ministers to include e-Commerce and SMEs, taking into account the global environment and the need to support SMEs in a liberalized economic environment.  Government Procurement, labour and environment are currently excluded from the scope.

  • The Chapters / Annex proposed for RCEP are as follows:

  • Preamble
  • Establishment, Objectives and General Definitions
  • Trade in Goods
  • Rules of Origin
  • Customs Procedures and Trade Facilitation
  • Sanitary and Phytosanitary
  • Standards, Technical Regulations and Conformity Assessment Procedures
  • Small and Medium Enterprises

 

  • Trade in Services
  • Financial Services
  • Telecommunications Services
  • Electronic Commerce
  • Investment
  • Economic and Technical Cooperation
  • Intellectual Property
  • Competition
  • General Provisions and Exceptions
  • Institutional Provisions
  • Dispute Settlement
  • Final Provisions

 

  • The RCEP Trade Negotiating Committee (TNC) is chaired by Indonesia and supported by the following working Groups and Sub-Working Groups:  

 

WG/SWG

Country Chairing the WGs/SWGs

Working Group on Trade in Goods (WG-TIG )

Singapore

Working Group on Trade in Services (WG-TIS)

Malaysia

Working Group on Investment (WG-Investment)

Vietnam

Working Group on Economic and Technical Co-operation (WG-ECOTECH)

Indonesia

Working Group on Intellectual Property (WG-IP)

Singapore

Working Group on Competition (WG-Competition)

Singapore

Working Group on Legal and Institutional Issues (WG-LII) and WG Dispute Settlement

Brunei Darussalam

Sub-Working Group on e-Commerce

Thailand

Sub-Working Group on Rules of Origin (SWG-ROO)

Thailand

Sub-Working Group on Customs Procedure and Trade Facilitation (SWG-CPTF)

The Philippines

Sub-Working Group on Standards, Technical Regulation and Conformity Assessment Procedures (SWG-STRACAP)

Thailand

Sub-Working Group on Sanitary and Phytosanitary (SWG-SPS)

Indonesia

Sub-Working Group on Financial Services

The Philippines

Sub-Working Group on Telecommunication Services

Vietnam

 

Goals of Malaysia in RCEP

  • ASEAN and the 6 FTA partners are significant trade and investment partners of Malaysia. 

  • 61.7% or US$223.07 billion of Malaysia’s trade is within RCEP countries. 60.6% of Malaysia’s exports are destined for these countries and similarly these countries supply 63.3 % of Malaysia’s import requirements.

  • 10 of the 16 countries (China, Singapore, Japan, Thailand, Indonesia, Korea, India Australia, Viet Nam and the Philippines) are Malaysia’s top 16 trading partners of Malaysia.

  • India, China, Indonesia, Cambodia, Lao PDR, Myanmar, Viet Nam, Philippines and Thailand are among the fastest growing economies in the world.  In 2050, India is expected to overtake the U.S. to become the 2nd largest economy in the world. ASEAN is expected to grow by 5.1% from 2017 -2021. India and China are expected to sustain growth exceeding 6%.  

  • Malaysia is already an open economy. Greater trade openness and reduced barriers within the 16 participating countries will provide additional benefits for Malaysia:

  • Greater market access for exports of goods and services;

  • Offers opportunities for Malaysian companies to enhance their participation in the regional and global supply value chain.

  • Attractive base for Malaysian companies cross-border investments. 

  • Malaysian companies investments in the region is expected to increase as these countries open up their economy. The goal is also to see more and more Malaysian companies expanding their base to these neighbouring countries. 

  • RCEP services market exceeds US$1.27 trillion (2015) and is growing rapidly. Four (4) of the RCEP countries are the top 12 exporters and importers of services in the world. Other markets for services are still relatively not developed and offer huge potentials.

  • RCEP will offer new opportunities created in services sectors, especially now as e-commerce and digital trade are becoming a critical part of global trade. Telecommunication, banking and finance, consultancy, construction, hotel and recreation, travel and airlines are some sectors where Malaysia can benefit from liberalization in RCEP. Malaysia is well placed to benefit from the market liberalization in the services sector.

  • Rules of origin are one of the important areas of RCEP negotiations. Currently, the businesses in the region have to cope with multiple sets of rules of origin to enjoy preferential tariff concessions under various ASEAN Plus 1 FTAs. In RCEP, Malaysia’s goal is to have more streamlined rules of origin that is trade facilitative and user-friendly which can boost exports, especially by SMEs.

  • Malaysia as a highly trade dependent nation has always subscribed to progressive trade liberalization. We need to expand exports by securing market access for our goods and services, and at the same time attract foreign direct investments to sustain economic growth. Trade liberalization has been one of the government’s key strategies to achieve objectives of securing newer markets and sustaining a competitive economy.

  • While the withdrawal of the U.S. from TPP is rather unfortunate, Malaysia is moving along with the negotiations for RCEP and bilateral FTAs with EFTA countries and a few more such as Iran. Today, Malaysia has signed 13 bilateral and regional.

Malaysia’s Trade with RCEP countries (2016)

Country

Exports

% of
Global Exports/
Ranking

Imports

% of
Global Imports/
Ranking

Total Trade

% of
Global Trade Imports/ Ranking

China

23,791.6

12.5% (2)

34,291.4

20.4 % (1)

58,011.0

16.2 % (1)

Singapore

27,591.6 

14.6 %  (1)

17,459.2

10.4 % (2)

45,050.8

12.6 % (2)

Japan

15,591.6

8.01 % (4)

13, 746.2

8.1 % (3)

28,978.4

8.0 % (4)

Thailand

10,621.4

5.6 % (5)

10,209.9

6.1 % (5)

20,831.3

5.8 % (5)

Indonesia

6,668.0

3.5 % (8)

7,085.2

4.2 % (8)

13,753.2

3.8 % (8)

Korea

5,477.1

2.9 % (11)

8,869.1

5.2 % (7)

14,346.1

4.0 % (7)

India

7,721.0

4.1 % (7)

4,003.5

2.4 % (11)

11,724.6

3.2 % (10)

Australia

6,439.9

3.4 % (9)

3,759.5

2.2 % (12)

10,199.4

2.8 % 13)

Viet Nam

5,746.8

3.0 % (10)

4,523.2

2.7 % (10)

10,270.0

2.9 % (12)

Philippines

3,292.1

1.7 % (15)

1,590.4

0.9 % (20)

4,882.6

1.4 % (16)

New Zealand

729.4

0.4 % (27)

687.7

0.4 % (26)

1,417.2

0.4 % (29)

Myanmar

945.0

0.5 % (25)

198.9

0.1 % (43)

1,143.9

0.3 % (33)

Brunei

512.8

0.3 % (37)

159.9

0.1 % (50)

 672.6

0.2 % (40)

Cambodia

248.8

0.1 % (44)

128.5

0.1 % (66)

377.3

0.1 % (51)

Lao PDR

18.56

Neg (122)

12.39

Neg (100)

30.96

Neg (124))

Total

116,341.06

60.61%

106,724.99

63.3 %

223,066.05

61.7 %

Source: MATRADE

PROGRESS

  • To date, 17 Rounds of Negotiations have been held. The 17th RCEP Meeting was in Kobe, Japan from 21 February to 3 March 2017. Substantial progress has been made across all negotiating areas. 

  • The negotiating/expert groups that met at the last Round were:

    1. Working Group on Trade in Goods (17th Meeting);

    2. Working Group on Trade in Services (17th Meeting);

    3. Working Group on Investment (17th Meeting);

    4. Working Group on Intellectual Property (13th Meeting);

    5. Working Group on Legal and Institutional Issues (12th Meeting);

    6. Working Group on E-Commerce (9th Meeting);

    7. Sub-Working Group on Rules of Origin (15th Meeting);

    8. Sub-Working Group on Customs Procedures and Trade Facilitation (14th Meeting);

    9. Sub-Working Group on Sanitary and Phytosanitary (SPS) Measures (12th Meeting);

    10. Sub-Working Group on Standards, Technical Regulations and Conformity Assessment Procedures (12th Meeting);

    11. Sub-Working Group on Financial Services (8th Meeting);

    12. Sub-Working Group on Telecommunication Services (8th Meeting);

    13. Trade Remedies Expert Meeting; and

    14. Government Procurement Experts’ Meeting (voluntary, chaired by New Zealand)

  • Two (2) RCEP Chapters have been finalised at policy level, namely, the Economic and Technical Cooperation (during the 15th Round), and Small and Medium Enterprises (during the 16th Round). The Working Group on Competition did not meet at this Round as the Group has substantially concluded the Chapter at the 16th Round.

  • In Kobe, good progress was achieved in the three core negotiating areas of trade in goods, services and investment. Consensus was achieved on a number of areas related to market access as well as discussions on other areas such as the Rules of Origin, Trade Remedies, Intellectual Property (IPR), Sanitary and Phytosanitary (SPS) Measures (SPS), e-commerce, Standards, Technical Regulations and Conformity Assessment Procedures and Legal and Institutional Issues.

  • The ASEAN Chair of the RCEP Trade Negotiating Committee (Mr. Iman Pambagyo of Indonesia), briefed and updated the 23nd ASEAN Economic Ministers Retreat on the progress of RCEP negotiations on 8 March 2017 in Pasay City, the Philippines. The Ministers provided substantial guidance to the ASEAN Trade Negotiating Committee on key issues in order to move forward the negotiations.

  • In the Kobe Round it was also agreed that all Parties will submit second offers for trade in goods (2 May 2017), revised offers for trade in services (7 April 2017), and revised reservation lists for investment (2 May 2017, for the remaining RPCs).

  • The 18th RCEP Round will be held from 2-12 May 2017 in Manila, the Philippines. The ASEAN Trade Negotiating Committee will also be meeting from 20-21 April 2017 in Bohol, the Philippines to firm- up ASEAN’s common position on key issues based on the Ministerial guidance before meeting the ASEAN FTA partners in May 2017.  Efforts are being intensified to substantially conclude negotiations by the end of the year.  Additional meetings are being scheduled for 2017, beyond the 18th Round.

Past RCEP Negotiating Rounds and Ministerial Meetings

BENEFITS TO MALAYSIA

  • The RCEP will allow a more comprehensive economic integration within the region. This is important to strengthen Malaysia's foothold as a trading nation. In 2016, Malaysia trade to the RCEP parties covers 62% (USD221.7 billion) of the nation's global trade.

  • The RCEP also aims to simplify and harmonized the current ASEAN+1 FTAs. Currently ASEAN+1 FTAs implement different rules and procedures. This has resulted in difficulties to utilize the FTAs especially for SMEs. Through better governance and risk management, the RCEP is envisaged to create a more conducive business environment.

  • Integration of business in the region through the global supply chain will increase the regions attractiveness as an investment destination. The involvement of India and China in RCEP will allow better access to these markets. These developing economies offers huge potential for Malaysian businesses can tap into opportunities provided through the FTA.

CONTACT US

  • All queries and further clarification regarding RCEP should be forwarded to: allasean@miti.gov.my

  • For other enquiries, please contact the FTA focal point(s) as follows:

Ms. Zuriana Ibrahim
ASEAN Economic Integration Division
DL: 03-6200 0385
Email: zuriana@miti.gov.my

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