Jul 1, 2014

Indonesia - No significant progress on Asia-Pacific trade deal

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Into the fifth round of talks on the Regional Comprehensive Economic Partnership (RCEP), the 16 Asia-Pacific nations still cannot agree on core issues pertaining to trade in goods and services as well as investment.

This is raising concerns over whether the target to conclude negotiations by the end of next year is attainable.

As the seven-day meeting in Singapore ended last Friday, no significant progress had been made on tariff reductions and
elimination modality as well as schedules of commitments both in trade in services and investment, RCEP’s Trade Negotiation Committee (TNC) chairman Iman Pambagyo said.

“These issues may need to be reported to trade ministers during a meeting in August. Further instructions on level of ambition will be necessary to achieve some progress,” he said in a text message on Sunday.

Economic ministers from RCEP countries — which comprise the 10 members of ASEAN plus Australia, China, India, Japan, South Korea and New Zealand — are slated to convene in Myanmar’s capital Naypyitaw in August.

The trade officials will report the outcome of the Singapore meeting during that event.

Despite the lack of progress on key issues, the meeting made some progress, such as in developing drafts for the agreement on trade in goods, Iman further said.

The rounds of talks, which began in Brunei Darussalam in May last year, aim to reach an accord that will create an integrated market across the Asia-Pacific of around 3.4 billion people with a combined gross domestic product (GDP) of US$21.4 trillion.

The deal would boost income gains to roughly $644 billion by 2025, representing 0.6 percent of the world’s GDP, through the freer flow of goods, services, investment and labor among participating economies, according to a study by the Asian Development Bank (ADB).

Indonesia would see an increase of 1 percent in its GDP by 2025 by implementing the deal.

That outcome, however, would be difficult to reach, as ASEAN and the six other trading partners may not have free trade
agreements, said Iman, who is also the Trade Ministry’s director general for international trade cooperation.

Australia, for example, still does not have a free trade agreement with Japan and China.

The absence of an agreement on tariff reduction and elimination modality, for instance, has hampered further talks on the liberalization of goods among the countries.

Negotiators, however, are still sticking to next year as the target date for finishing the talks, Iman added.

Titik Anas, an economist from Padjadjaran University, said that to complete negotiations would be difficult as the six nations outside ASEAN maintained different interests, thereby a consensus would be hard to reach.

“If negotiating members at present still cannot agree on the modality on trade in goods, it will be hard to get the commitment in 2015,” Titik said.

“Maybe they will only come out with a non-substantive deal,” she added, saying the deal on trade in services would be more difficult to conclude.

RCEP has been touted as a way for ASEAN to maintain its centrality after several challenges were posed by the US-led Trans-Pacific Partnership (TPP), which also includes four ASEAN members, namely Singapore, Brunei Darussalam, Vietnam and Malaysia.

Linda Yulisman

Business & Investment Opportunities 

Saigon Business Corporation Pte Ltd (SBC) is incorporated in Singapore since 1994. 

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