RCEP Negotiation Update:

Jakarta, 28 October 2019. Indonesia for Global Justice conducted an audience on 25 October 2019 with the Director of ASEAN Negotiations, Directorate General of International Trade Negotiations, Ministry of Trade, Dr. Ir. Donna Gultom, M.Sc. This opportunity was used by IGJ to gather information upon the development of RCEP negotiation up to the seventh year since 2013, when the negotiation was initiated.

IGJ representatives who attended the audience, some of them are: Rachmi Hertanti, Lutfiyah Hanim, Rahmat Maulana Sidik, and Teguh Maulana.

RCEP Will Not Be Signed in 2019 Yet

From information circulating in the media, that this year the RCEP negotiation will be signed at the ASEAN Summit in Bangkok this November. However, based on the information submitted by Ms. Donna Gultom, who is also a negotiator, there are still a number of issues which have not yet been resolved. Therefore, it is impossible for the RCEP agreement to be signed during the upcoming ASEAN Summit.

The ASEAN Summit meeting in November 2019 is targeted to reach substantial conclusion of the RCEP agreement, and should there is no hindrance the RCEP negotiations will be signed in 2020. Out of the 20 chapters and 8 annexes in the RCEP negotiations, there are three issues remain unfinished, namely: market access, services and investments related to local measures (local actions).

Market Access

Discussion on the issue of market access is still discussing on a commitment of tariff rate reduction, especially by India. Up to this moment only India has persisted in not opening a commitment of tariff reduction ambitiously, which remains at the level of 60%. This is based on India’s argument of which they will face a flooding of imported products from China hence it has the potential to increase India’s trade deficit in the future.

As a matter of fact, there is a statement from Indonesian negotiators that until now Indonesia is also still experiencing difficulties to earn a commitment to open market access for Indonesian products in India. For instance, in urging Indonesian CPO products to gain market access in India when various approaches have not yet been successful.

In negotiating the market access, it still seems to be a long battle with India. According to Ms. Donna Gultom, there is too much of India’s commodities to be included in the negative list for up to 6000 list of commodities. In fact, India is urging that the Rules of Origin in RCEP regulate a maximum domestic value chain limit of up to 35% of the total production chain and 5% for the Regional Value Chain.

Trade of Services

One of the issues that is still under negotiation in the service agreement is related to the modification of schedules commitment in services. This issue is debating about the liberalization approach of the service sector that has not been agreed on either the positive list or the negative list. One of the countries that has not agreed yet is the Philippines. Up to now, the Philippines remains applying the positive list approach for the service liberalization.

Nevertheless, with the pressure to apply negative list from various RCEP member countries, the Philippines asked to discuss a 5-year transition period to transform from positive lists to negative lists. However, the response from other countries is to ask for provision regarding compensation in terms of transition changes to the modification of the service sector liberalization commitment.

In the service negotiation, Ms. Donna Gultom further stressed that there are no standstill and rachet rules in the service rules at this moment. None the less, RCEP member countries have agreed to review this rule in the next five years after RCEP is applied.

Investment

One interesting issue from the discussion of the investment chapter is that RCEP does not regulate the controversial ISDS (Investor State Dispute Settlement) mechanism. This is due to the insistence of RCEP member countries, in particular Malaysia, Vietnam, Indonesia, the Philippines, and New Zealand. Nonetheless, the exclusion of the ISDS mechanism does not mean that RCEP has been safe. However, within three years after the RCEP is being applied, RCEP member countries have agreed to review it, therefore there was still a possibility of which the ISDS mechanism will be revived in RCEP.

In this regard, Indonesian negotiators are looking for ways on how investment can still be protected even if RCEP does not regulate it. One of the efforts which has been undertaken by the Government of Indonesia is to encourage the enactment of the Bilateral Investment Treaty (BIT) between Indonesia and RCEP member countries. This strategy certainly remains a problem for the public interest which is still potentially disadvantaged by the application of ISDS in the BIT.

Other investment issue which are still under discussion in RCEP is related to the scope of investment. The debate has arisen related to local measures which can be disputed. Most RCEP member countries insist that local measures can be disputed only at the central and provincial levels. Although developed countries such as Japan and Australia are asking that this is applied to all levels. However, the discussion leads to on local measures up to 2 levels of government structure in accordance with the regulation in each country.

Corresponding to this, the agreement could not yet be reached in the discussion since Vietnam also wants the local measures to apply to it. However, other countries assume that Vietnam has a different structure in accordance with the application of regulation in the country. Up to this moment, Vietnam is still trying to convince other RCEP member countries that local measures up to 2 levels can be applied in Vietnam because they are currently revising their domestic regulation related to this issue.

Other Controversial Issues Which Are Eliminated from RCEP

In its development RCEP no longer has the spirit of which is agreed upon at the beginning of the negotiations, which are ambitious and widespread. This was confirmed by Ms. Donna Gultom. She explained on how difficult it was for the RCEP negotiation to reach agreement on various controversial issues. In addition to market access and investment, other controversial issues are Intellectual Property Rights (IPRs) and E-commerce.

She further explained, in the Chapter of the IPRs which negotiations had finished there were sensitive provision which were eventually eliminated. The provision is related to data exclusivity and patent extension period, or commonly known as the TRIPS Plus provision. However, apart from the two provision which were eliminated, RCEP still included law enforcement for patents in the border (Custom Border). Enforcement provision for patents are still considered provision which have the potential to disadvantage patients’ rights to access the affordable medicines.

Another issue is the E-commerce chapter. This chapter has already been discussed. According to Ms. Donna Gultom the provision of the e-commerce chapter were also formulated with a strategy to minimize the risk of impacts that will arise in the future. There are still many RCEP member countries, in particular ASEAN, which consider that E-commerce provision does not need to be formulated ambitiously given that almost all ASEAN countries are still studying this issue about what will be developing in the future.

Some of the provision in the E-commerce chapter are considered un-ambitious, such as eliminating the definition of electronic transactions since there are a lot of debate about this, especially if it is related to the application of custom duties for electronic transmission. In the provision of tax, RCEP member countries agree to refer to the WTO decision.

The provision regarding data localization are eventually possible to be applied by the state or country if it is considered important for the public interest in accordance with the provision in each country. Each country is also asked to make data protection provision through domestic policies.

In addition, the provision regarding the prohibition of source code disclosure were eventually removed in RCEP. Finally, the dispute mechanism in the e-commerce issue is also not regulated, but it is still open for review after five years of RCEP.

Pressure to Open RCEP Text Agreement to the Public

Until the day when the RCEP negotiation will be completed, the public has never been able to access the ongoing negotiated text or the one that has been negotiated. IGJ’s efforts to ask for more detailed information and texts during the audience were not responded positively, and were considered that the negotiations were not finished, therefore the text could not be opened yet. Whereas the text transparency to the public is utmost important to conduct an impact assessment of the RCEP agreement which will be ratified by the State.

Impact analysis before the ratification of the agreement by Government and Parliament was legitimized by Constitutional Court Ruling No. 13/PUU-XVI/2018 regarding international treaty law. Therefore, it must be a mandatory for decision makers such as the House of Representative of Republic of Indonesia (DPR RI).

For information that the RCEP ASEAN negotiation involve ASEAN member countries and six other countries, including: People Republic of China, Japan, Republic of Korea, New Zealand, India, Australia. This negotiation has been going on for seven years since 2013 until now. Based on information from Indonesian negotiators, were there no obstacles this negotiation is targeted to be completed and signed in November 2020.

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For further information:

Indonesia for Global Justice (IGJ)

Komplek PLN Duren Tiga, Jalan Laboratorium No. 7

Jakarta Selatan. 12760.

Website: www.igj.or.id

Email: igj@igj.or.id atau keadilan.global@gmail.com