Signing of Regional Comprehensive Economic Partnership (RCEP); How Will It Impact on Indonesia?
On Sunday 15 November 2020, a total of 15 countries in the Asia-Pacific signed the Regional Comprehensive Economic Partnership (RCEP) in a digital meeting, thereby effectively establishing the world’s biggest trading bloc.
The signing ceremony of the RCEP also marks the end of nearly nine years of efforts, preparations, and negotiations between all involved countries. Development of the RCEP was originally initiated in 2011 at the time when Indonesia held chairmanship of the Association of South East Asian Nations (ASEAN). The Indonesian government kept playing a coordinating role in RCEP negotiations over the years.
So far, 15 countries have joined the RCEP. However, others are welcome to join. In particular India (with its huge internal market) would be a great addition to the bloc. Initially, India was willing to join negotiations. However, in 2019 it ended talks as the country is concerned over the possible massive influx of cheap Chinese products as a consequence of the trade deal (which could kill off domestic players’ business).
Similar concerns have existed in Indonesia. This was particularly apparent when the ASEAN-China Free Trade Agreement (ACFTA) came into effect at the start of 2010 since the majority of Indonesia’s agricultural products and manufacturing goods are considered to be uncompetitive against products and goods made in China.
And, indeed, the ACFTA led to a widening trade deficit with China. It also meant that a number of Indonesian businesses had to remodel their business structure due to their lack of competitiveness, for example by turning into importers instead of being producers themselves.
In the context of the RCEP we did not hear such concerns in Indonesia. But obviously – and contrary to the case of India – the RCEP should not bring significant changes for trade flows between Indonesia and China because these changes were already introduced by the ACFTA back in 2010.
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