By Cathy Rose A. Garcia,
Associate Editor

SEOUL — Negotiations for the Regional Comprehensive Economic Partnership (RCEP) will likely be tricky, as major economies like China, South Korea and Japan find little to gain from another multilateral trade pact, an economist said.

“The way to achieving the RCEP would be very bumpy,” Korea Institute for International Economic Policy Director of National Center for APEC Studies Kwak Sung-il told BusinessWorld last month.

RCEP is a proposed trade agreement between the 10 Association of Southeast Asian Nations (ASEAN) members and its free trade agreement (FTA) partners, China, South Korea, Japan, India, Australia and New Zealand. Negotiations are ongoing, with leaders expecting the deal to be forged in two years.

Mr. Kwak said ideally, the RCEP negotiations should be driven by ASEAN, but it is not easy for the regional bloc to achieve a consensus from its member countries.

“My first concern is the data shows ASEAN members are experienced in creating the economic bloc but it is not strong enough to achieve another multilateral partnership. Inside ASEAN, non-tariff barriers and regulations are going up. I doubt ASEAN is able to drive the RCEP,” he said.

China has backed the RCEP, which excludes the United States, as an alternative vision for regional trade.

However, Mr. Kwak said it is unlikely that South Korea, China and Japan would push for RCEP, since there are few incentives for the three countries to make it happen.

“Another factor is that for Northeast Asia, namely South Korea, Japan and China, we haven’t had any FTA for these three countries. Even though we are agreeing on the RCEP, the level of openness will be very low. There are doubts on what kind of benefit the three main powerhouses will get from the RCEP. It doesn’t help these three countries to push RCEP,” he said.

Mr. Kwak noted South Korea has been very aggressive in forging bilateral FTAs, but a multilateral agreement like RCEP may have its own benefits. South Korea has already signed FTAs with the United States, European Union, Australia, New Zealand, Singapore, and Vietnam among others.

“Because we have so many FTAs, sometimes it contradicts each other. We are not clear which FTA is for the most benefit, so inefficiencies are happening. From this perspective, multilateral FTA or mega-FTAs such as RCEP or TPP (Trans-Pacific Partnership) are valuable and can be very effective,” he said.

In addition to the RCEP, Mr. Kwak believes it could be advantageous for the Philippines to forge a bilateral FTA with South Korea.

“I think bilateral FTA between the Philippines and Korea might be favorable but currently we just have the Korea-ASEAN FTA, which works as a framework for the trade between the region,” he said.

“If you compare the usage rate of the Korea-ASEAN FTA, it’s just at 40% and the other FTAs is about 70%… Many companies, mostly SMEs (small, medium enterprise), using the Korea-ASEAN FTA say there are tricky and high-level documentation and requirements, so their capability to utilize the FTA is also low.”

Using the Korea-Vietnam FTA as an example, Mr. Kwak said this agreement makes up for the weaknesses of the Korea-ASEAN FTA.

“With our FTA with Vietnam, many Korean companies are actively using this because the openness level is higher and the documentation and requirements are simplified compared to the Korea-Asean FTA… If we develop the bilateral FTA in this way, I think it is favorable,” Mr. Kwak said.

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