How RCEP differs from TPPA, and its drawbacks

By Dr Jeyakumar Devaraj


MALAYSIA was one of the 15 countries that signed on to the Regional Comprehensive Economic Partnership (RCEP) on Nov 11. The agreement will come into force when at least six Asean nations and three non Asean countries ratify it.

So, what is the significance of the RCEP to the people of Asean?

This is considered by some to be a complicated issue. The RCEP agreement is a voluminous 700-page document and it is tedious to plough through the stilted language.

But it is important for leaders of social and political movements to properly understand the RCEP, locate it in its historical context and identify the positive as well as the negative aspects of this agreement.

The RCEP, like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the other free trade agreements, are based on the neo-liberal belief that whatever is good for investments and business is good for society.

That has been the mantra of corporate led globalisation over the past 35 years. This belief leads to the downsizing of Government services as neoliberals believe that businesses can provide all the goods and services that society needs in the most cost-effective way.

Therefore, neoliberal ideologues argue that Government policy should be as business-friendly as possible. (The COVID-19 pandemic however, has highlighted the serious defects of this approach to managing human affairs!)

However, despite arising from a common neoliberal mould, the RCEP differs in some significant aspects from existing free trade agreements.

For example, the RCEP defines “expropriation” much more strictly than the existing FTAs and investment agreements. These define expropriation to include any Government action that affects the future profits of a foreign company.

This is why Philip Morris could attempt to sue the Australian Government for a billion-dollar settlement over legislation pertaining to the packaging of cigarettes.

This would be much more difficult under the RCEP as it specifies that any actions taken by a Government to protect the health of its people or environment cannot be considered as expropriation even if the profits of certain firms are affected adversely. 

Secondly, the Investor State Dispute Settlement mechanism (ISDS), is not part of the RCEP. The ISDS, which is a part of many FTAs and investment agreements, allows the foreign investor to by-pass all the legal avenues in the host country and litigate the Government in a tribunal set up overseas.

More room for gov’ts

The RCEP requires all participating countries to ensure that their judicial system gives a fair hearing to foreign investors and without excessive delays. The ISDS provision has been referred to a committee and is to be decided within five years.

Thirdly, the RCEP is more relaxed in its intellectual property rights (IPR) provisions. The TPPA attempted to tighten up IPR provisions by, among others, introducing the concept of “data exclusivity”.

This means that the results of the clinical trials that enabled the originating company to determine the correct dosage schedule is considered to be the property of the originator company.

So even after the patent period is over, the pharmaceutical company interested in producing the generic version will have to acquire the rights to this data. That would increase costs and cause delays.

“Data exclusivity” is not mentioned in the RCEP. The attempt to extend a patent period beyond 20 years to “compensate” for delays in processing a patent application or in registering a medicine was also pushed back in the RCEP.

Fourthly, there is no requirement in the RCEP that Government procurement must be opened to foreign investors. The TPPA required Governments to treat foreign companies equally in the awarding of Government projects.

However, the RCEP affirms the right of Government to promote the development of certain sectors of the economy which are important to the nation.

Unlike the TPPA, the RCEP does not make ratification of International Union for the Protection of New Varieties of Plants (UPOV), the international agreement that criminalises the exchange of seeds among farmers, a pre-requisite for joining the RCEP.

These are five examples of how the RCEP, though set in a neoliberal mould, nevertheless represents a push-back to the prevailing trend in free trade agreements which have been becoming more and more pro-corporate over time. (There could be more such examples as I have not gone through all the chapters carefully).

This is not to say that the RCEP is a fantastic pro-people agreement. It is not. There are many issues that progressives would be unhappy with.

Room for improvements

For example, the treatment of knowledge as a “commodity” that can be owned and monopolised by a corporation. Many progressives would consider knowledge as part of the commons – something built up by the contributions of numerous generations and therefore belonging to all.  

And there is nothing in this RCEP that will slow the ongoing “race-to-the bottom” in our region.

The RCEP does not address the fierce competition among Asean countries for foreign direct investments (FDI) which leads to increasingly generous tax regimes, tight control of wages for workers and a certain disregard of environmental costs.

This is a little silly, even in capitalist terms – for consumer demand and Government spending are important components of aggregate demand.

The RCEP countries will generate a healthier market for all their businesses if aggregate demand in the 15 RCEP countries were to increase. Enhancing aggregate demand would require mechanisms to ensure that wages and Government revenue go up gradually across the RCEP region.

At present, there is a reticence to increase wages or taxes because the country doing this unilaterally might suffer a comparative disadvantage and manufacturers might relocate.

The RCEP could resolve this issue by introducing a mechanism that requires all RCEP countries to increase over time, the share of national income going to workers and to the Government. Unfortunately, there is no glimmer of such considerations in the RCEP.

There is no need to take a nuanced approach to the RCEP if one believes the role of progressives is merely to present a clear, principled and spirited critique of any Government policy or trade agreement that is based on neoliberal principles.

But if one believes that progressives should strive to become Government, then we need to demonstrate to the people that we have the policies to steer our societies in a more equitable and just direction, without crashing the economy!

Progressive coalitions that come to power will face serious challenges in attempting to share societal wealth more equitably because the entire world had been integrated into the global capitalist economy.

Building a national economy that is more inclusive, democratic, environmentally friendly and in which a larger portion of wealth created is used to provide a more secure safety net will require a redistribution of wealth back to workers and to the Government.

But this might cause capital flight and a rise in unemployment.

So, how do we, the progressives, create conditions that will enable us to redistribute wealth more equitably despite our country being locked into the global capitalist economy where the big trans-national corporations have enormous power?

As they say, Rome was not built in a day. I would argue that the push-back against corporate led globalisation evident in the RCEP is a step in the right direction for it curtails a little the rights of large corporations and increases the policy space of Governments. It is certainly not enough, but it is a start.

We need to strategise how we lobby for further such steps. Perhaps a good place to start would be to lobby that Malaysia does not ratify the CPTPP as many of its provisions are far more pro-corporate than the RCEP. Dec 13, 2020



Dr Jeyakumar Devaraj is the chairperson of Parti Sosialis Malaysia and a former MP of Sungai Siput.

 The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.

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