Thought September 09, 2019 / 08:15 am UTC

Asia: Limited Progress on RCEP

By Jeff Ng

After the seventh Ministerial Meeting in Bangkok on September 8, Economic Ministers for the Regional Comprehensive Economic Partnership (RCEP) pledged to continue moving forward. However, real progress was limited ahead of an expected signing of the agreement in 2020. A reduced agreement may not positively mitigate the global slowdown much.

At this stage, negotiators have finalized details on economic cooperation for customs and trade facilitation, state procurements, economic and technical cooperation as well as small and medium-term enterprises. The remaining articles are more difficult to resolve, including e-commerce to competition, intellectual property rights, telecommunications and market expansion for goods to services and investments. 

At this stage, we believe that the sixteen-member countries are looking for some positives to curb the downsides to GDP and export growth. Some, such as India and China, are suffering from below-trend growth and a few (such as Singapore) are facing prospects of a recession. This has diverted Asian governments to growth-support measures rather than taking liberalization actions. The appetite is only set to decrease further in 2020. 

The RCEP has the potential to supplement any downsides in global trade brought about by the U.S./China trade war. The ASEAN-10 countries, as well as the six major trade partners (China, Japan, South Korea, India, Australia and New Zealand) contribute 40-50% of world growth at the moment. 

However, there are bilateral tensions between the members themselves. Most notably, Japan and South Korea are engaged in a trade spat. China and India also have some trade tensions, with India concerned about the impact of its agricultural sector if tariffs are cut. 

2019 talks are slated to end in November at the ASEAN Summit. If progress is not made by then, the risk is for a more limited agreement or less participating partners. This will likely reduce any positive benefits from the trade pact. 

4Cast Ltd. and all of its affiliates (Continuum Economics) do not conduct “investment research” as defined in the FCA Conduct of Business Sourcebook (COBS) section 12 nor do they provide “advice about securities” as defined in the Regulation of Investment Advisors by the U.S. SEC. Continuum Economics is not regulated by the SEC or by the FCA or by any other regulatory body. This research report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Nonetheless, Continuum Economics has an internal policy that prohibits “front-running” and that is designed to minimize the risk of receiving or misusing confidential or potentially material non-public information. The views and conclusions expressed here may be changed without notice. Continuum Economics, its partners and employees make no representation about the completeness or accuracy of the data, calculations, information or opinions contained in this report. This report may not be copied, redistributed or reproduced in part or whole without Continuum Economics’s express permission. Information contained in this report or relied upon in its construction may previously have been disclosed under a consulting agreement with one or more clients. The prices of securities referred to in the report may rise or fall and past performance and forecasts should not be treated as a reliable indicator of future performance or results. This report is not directed to you if Continuum Economics is barred from doing so in your jurisdiction. Nor is it an offer or solicitation to buy or sell securities or to enter into any investment transaction or use any investment service.
Analyst Certification
I, Jeff Ng, the lead analyst certify that the views expressed herein are mine and are clear, fair and not misleading at the time of publication. They have not been influenced by any relationship, either a personal relationship of mine or a relationship of the firm, to any entity described or referred to herein nor to any client of Continuum Economics nor has any inducement been received in relation to those views. I further certify that in the preparation and publication of this report I have at all times followed all relevant Continuum Economics compliance protocols including those reasonably seeking to prevent the receipt or misuse of material non-public information.