China and 14 other Asia-Pacific nations recently signed the world’s largest free trade deal, the Regional Comprehensive Economic Partnership (RCEP). As discussed in Asia-Pacific RCEPonds to Trump’s Snub, the launch of the RCEP raises uncomfortable questions for Washington even though it is relatively modest in terms of member commitments. That said, RCEP will usher in changes, and the resulting framework could give rise to interesting opportunities, not just for companies from member countries, but for local subsidiaries of U.S. companies and other nonmembers as well.
This is the second of a two-part series on RCEP. Click here for Part 1.
According to Australia’s Department of Foreign Affairs and Trade, RCEP includes commitments to ensure parties do not prevent business data and information from being transferred across borders. In addition, Article 12.14(2) of the RCEP agreement prohibits member countries from requiring businesses from other RCEP countries “to use or locate computing facilities in that Party’s territory as a condition for conducting business in that Party’s territory.”
Reflecting increasing concerns over data privacy, RCEP requires members “adopt or maintain a legal framework which ensures the protection of personal information of the users of electronic commerce.” This is an interesting provision, as at first glance the main beneficiaries appear to be the citizens of those RCEP countries that do not currently have a robust data protection regime. It is possible this requirement is meant to check the free flow of information described in the preceding paragraph. Critics have spoken of “digital colonialism,” decrying scenarios in which, for example, an “Australian private hospital operator in Thailand could not be prevented from transferring Thai patients’ health data outside the country.” The existence of legal mechanisms through which remedies can be sought for privacy violations may help allay some of those concerns.
The agreement also stipulates that members “shall not deny the legal validity of a signature solely on the basis that the signature is in electronic form” (Article 12.6(1)). This could be a development of great practical significance for many businesses. Hopefully, governments will join the bandwagon and increasingly move toward electronic permitting.
2. Intellectual Property
By requiring the parties accede to a number of international treaties on intellectual property rights (IPR), such as the Madrid Protocol, RCEP seeks to streamline the process for obtaining region-wide IP protection. In principle, companies from RCEP countries will “need only file a single patent or trademark application that would apply in other RCEP member countries.”
As we have discussed in this blog (see, for example, Register Your China Trademarks in China not Madrid), Madrid applications can seem almost magical, but in practice they can increase risks and complications. For example, though countries generally classify products for trademark registration purposes along similar lines, their product lists are not identical. For example, the Japan Patent Office does not have “teddy bears” on its product list, but it has “plush toys.” However, New Zealand’s Intellectual Property Office has both terms on its list.
It would be great to see RCEP members engage in the cooperation Article 11.76 calls for to harmonize their trademark lists. For now, though, RCEP’s impact on intellectual property appears to be limited in general terms, though it could set the stage for significant improvements in some of the least developed economies of the group.
3. Government Procurement
The RCEP agreement includes a chapter on government procurement, but its content is tepid. All Australia could muster to say about it was that it “will support improved transparency and cooperation on central government procurement and will promote greater economic integration among RCEP member countries.” New Zealand’s Ministry of Foreign Affairs and Trade was more direct, admitting that “CPTPP contains more ambitious [government procurement] commitments,” with RCEP merely “establish[ing] a foundation for us to expand on in the future.”
RCEP could be a big deal for some companies in the region, especially over the long term. The elimination of tariffs by a promising export market or a commitment to allow the provision of certain services by foreign companies can be a game-changer, especially for SMEs.
At the same time, RCEP will not—by itself—reshape global trade or even Asia-Pacific trade. Much of its spirit is already laid down in existing agreements. As for the novelties, these are weighed down by fine print, as well as an overall lack of bite. For example, China and South Korea have agreed to eliminate their hefty tariffs on Japanese sake—but only 21 and 15 years after RCEP’s entry into force, respectively (which, to be fair, may not seem long to Sudo Honke‘s 55th generation owner).
Ideally, RCEP will provide a framework within which more ambitious trade deals can be brokered at a bilateral or trilateral level. In this regard, the partial overlap between RCEP and CPTPP membership demonstrates that free trade need not advance at a constant speed.
For U.S., European, and Latam companies, it is worth looking closely at the opportunities RCEP is creating for member countries. If there are such opportunities that they would like for themselves, it might make sense to look for partners in the region, especially Down Under.