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26 Jun 2019

International Economy

Thailand as the ASEAN Chair is pushing the conclusion of RCEP… to reboot the multilateral free trade system (Current Issue No.3001)


        The ASEAN Summit 2019 ended with members agreeing to conclude the talks for the Regional Comprehensive Economic Partnership (RCEP) framework by 2019. Thailand should take this opportunity as the ASEAN Chair to act as the facilitator to bridge the differences among members to push for the success of the RCEP trade liberalization. RCEP members include ten ASEAN countries and the other six negotiating partners (Plus 6) including China, Japan, South Korea, India, Australia and New Zealand).

         KResearch views that one of the main obstacles to the RCEP talks is the attempt to open up the markets of the Plus 6 countries, which so far have no free trade agreements among each other. To unlock this obstacle, the RCEP members may proceed with the following: 1) to establish the flexible liberalization timeline for countries which are not ready in order to give them some time for adjustment; 2) to establish specific conditions for items that each member may have some concerns. For example, in the process of setting the general conditions for RCEP, the members may come up with individual sensitive/highly sensitive lists which are subject to a longer tariff cut timeframe. Or, RCEP can set up specific conditions such as sophisticated rules of origin (ROO) to protect their domestic industries. At any rate, the outcome of trade talks depends on the opinions of the RCEP members, whereas Thailand will have to work hard to seriously drive the momentum of the negotiations forward throughout the year.

         KResearch views that the RCEP trade liberalization reaffirms the success of the multilateral trade system by grouping countries to form the largest economic bloc in the world. The mega trade deal will help boost the confidence for the rule-based international trade system, which is being undermined by the ongoing trade war between the US and China. KResearch posits that, during the starting period, Plus 6 countries will benefit from being able to access the markets of other members which have not had any free trade deals before. The direct benefit for Thailand may be limited because Thailand already has free trade deals with 16 members. However, indirectly, Thai products which are part of the supply chains of the RCEP group will thrive.

           ​In the long term, RCEP will trigger the relocation of manufacturing and investment in the region, posing a challenge for Thailand to attract investments in order to build up Thailand's existing industries toward advanced technology. Moreover, Thailand has to be able to attract a new wave of investment in the industries of the future to establish high-tech industries in Thailand before it is too late.

International Economy