Fifteen Asia-Pacific countries signed the Regional Comprehensive Economic Partnership Agreement (RCEP) last November, making it the world’s largest free trade area. Experts believe that one of the challenges facing this agreement is how to be compatible with other existing trade agreements and to improve the investor-state dispute settlement mechanism.
Economic, trade and legal scholars and experts from the Asia-Pacific region said at a webinar of the non-profit organization American Society of International Law (ASIL) on January 21 that the imperfection of the dispute settlement mechanism remains a major challenge for the Regional Comprehensive Economic Partnership Agreement. Some analysts pointed out that China, as a party to the RCEP with the largest economy, has actively promoted multi-party negotiations. Under the framework of RCEP, market liberalization and the removal of tariff and non-tariff barriers will help refine the industrial division of labor in the Asia-Pacific region, which will in turn benefit the extension of China’s industrial chain. At the same Time, other parties digest China’s exports and to some extent alleviate U.S.-China trade friction. The problems currently revealed by RCEP are urgent priorities to be solved not only by other parties but also by China in the next negotiations.
Investor-State Dispute Settlement Mechanism Needs to be Negotiated
Lee Jae-min, a professor of international law at Seoul National University in Korea, pointed out in particular that in the RCEP, although Chapter X clearly defines investment and investors as well as substantive investment provisions, which provide applicable solutions for interstate dispute settlement, the investor-state dispute settlement mechanism (ISDS) has not been implemented: “Chapter X, which deals with investment, largely largely continues existing IIAs, but this chapter is sparse and too concise compared to the provisions of other IIAs. The most important and controversial issue is investment arbitration. What I consider most indispensable is the reform of the current investment dispute settlement mechanism in international negotiations. Chapter X applies only to the settlement of investment disputes between states.”
The Investor-State Dispute Settlement (ISDS) mechanism is based on public international law and provides a platform for investors to bring discriminatory actions against states. Although many bilateral trade agreements apply the mechanism, the WTO does not include it within its rules. In addition, the U.S. and the EU are united in their opposition to this trade dispute settlement mechanism for investor-versus-state litigation.
Within the next two years, RCEP members will negotiate this dispute settlement mechanism, but expect to see results only after five to six years, Lee Jae-min said.
Trinh Hai Yen, vice president of the International Law Institute of the Vietnam Diplomatic Academy, similarly argued at the conference that under Chapter 10 of the agreement, which deals with investment, investors subject to the agreement have only substantial investment protection, but the agreement has not yet clarified the enforcement mechanism on how disputes will be resolved: “There are two scenarios that will happen after the RCEP comes into force, one is that after the the expiration of the scheme, the Contracting States do not reach consensus on this dispute settlement, resulting in investors still complying with the investment provisions of other bilateral trade agreements that coexist with the RCEP. The second is that the contracting parties are unable to agree on a dispute settlement mechanism, a situation that still involves the enforcement of the relevant investment provisions of other trade agreements.”
Cui Haiyan said the agreement has established special and differential treatment provisions for low-income countries such as Cambodia, Vietnam, Laos and Myanmar. She believes that granting special treatment to the four countries so that they can continue to follow the provisions of other trade agreements would greatly reduce the attractiveness to investors from other contracting countries.
China’s accession to RCEP points to CPTPP (Photo by Radio Free Asia)
India’s influence in the Asia-Pacific region cannot be underestimated
According to Mia Mikic, Director of the Trade, Investment and Innovation Division of the UN Economic and Social Commission for Asia and the Pacific (ESCAP), although the RCEP does not have the same standards as other international trade agreements in terms of labor and environment, it is undeniable that the agreement has greatly contributed to the integration of the Asia-Pacific region. At the same time, the conclusion of the agreement has great potential to boost the regional economy, and indeed the global economy.
Speaking at the conference, Mary Elizabeth Chelliah, Chief Trade Commissioner of Singapore’s Ministry of Trade and Industry, said that the Regional Comprehensive Economic Partnership (RCEP), with its specific definitions on the protection of intellectual property rights and increased e-commerce facilitation, could greatly stimulate the development of the region’s emerging and transition economies, compared to the previous ASEAN and Trans-Pacific Partnership (TPP) agreements.
Shelly said the agreement still leaves room for India to negotiate. As one of the major countries in the Asia-Pacific region, India’s rejoining the RCEP would not only meet the expectations of other parties but also help stimulate India’s economic growth.In July 2019, after several rounds of negotiations, the Indian government announced that it would not join the agreement. However, as previously reported by the Indian media Economic Times, the Indian side still has no intention to rejoin the RCEP after it was contracted.
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