Why regional election results are good for RCEP
The last three months have been an electorally active period for the Asia-Pacific. Several major countries of the region have had elections for their top offices. The verdicts from all have been in favour of the incumbent parties and their top leaders. This has important implications for progress on major regional initiatives, such as the Regional Comprehensive Economic Partnership (RCEP). There are also implications on how countries from the region might develop strategies for addressing the increasingly adverse impacts of the US-China trade war.
General elections were held in Thailand, Indonesia, India, and Australia, and mid-term elections were held in Philippines, during March-May 2019. Despite a reasonably good performance by the opposition, the Thai election results fell short of a decisive mandate. Subsequent events point to a coalition backed by the military being the front-runner for assuming office. The situation would be broadly similar to what has been prevailing in Thailand for the last five years. The Indonesian Presidential election was almost as intense and bitterly fought as the Parliamentary elections in India. The preliminary results were challenged and disputed. Nearly a month after the elections, incumbent President Joko Widodo, or Jokowi, was announced the winner by the General Election Commission. This gives Jokowi a second five-year term in office in the world’s third largest democracy. The long and gruelling Indian elections returned incumbent Prime Minister Modi and the BJP-led NDA to power with a comfortable majority. The margin of the BJP victory took many political analysts by surprise. But this surprise element was nothing compared with that produced by the Australian election results. In an election widely described as ‘unloseable’ for the opposition Labour Party, incumbent Prime Minister Scott Morrison’s liberal-national coalition was returned to office against all expectations. Finally, mid-term elections for the Philippine Senate confirmed the authority of incumbent President Rodrigo Duterte.
As leaders’ familiar with each other come back to continue the business in the highest offices of their respective countries, many quarters are heaving sighs of relief. The most pressing commitment for the region is conclusion of the RCEP. After more than seven years of negotiations, RCEP is at an advanced stage with several chapters of the deal finalised. There were anxieties over the fate of RCEP given the elections in five of its member countries. If, somehow, the elections had led to new parties and leaders in governments, the possibility of the new political choices reviewing country positions on RCEP couldn’t have been overlooked. That might have led to introduction of new country postures going against the trend of ongoing negotiations. Previous trade negotiation experiences show new governments have occasionally overturned what their predecessors had agreed to. This risk for RCEP has been avoided. It is now possible to visualise conclusion of negotiations if the 16 member countries can arrive at consensus on some pending issues, such as services, investment and treatment of e-commerce. The current state of negotiations indicates achieving consensus is now contingent upon political commitment of the members to RCEP. Continuity of leaders can help in sustaining the political commitment. The RCEP cannot afford to be prolonged for much longer as businesses in the region are eagerly awaiting its implementation.
The comeback of the old guard is also significant given that most countries in the region are working on addressing implications of the US-China trade war. A new round of tariff escalation between the two countries means greater push on relocation of regional supply chains. Prior to that, regional producers contributing intermediate products at different parts of the supply chains need to factor in the overall decline in global trade following the trade war. Tariff disruptions have been majorly responsible for global trade growth declining from 4.6 per cent in 2017 to 3.0 per cent in 2018 with the possibility of further decline in 2019. Large assemblers of final products are actively searching options for shifting bases out of the US or China to avoid tariffs on each other’s exports. Such relocation involves major logistic challenges. Regional businesses, while preparing for these shifts, are also gearing up for trading in an environment where trade prospects need to be reassessed outside the ambit of the US-China trade relations. The role of the RCEP is vital in this regard.
Coordinated regional responses are not limited to the trade war. They are also important given push-back in market access preferences. India has just been taken off the US GSP programme. Indonesia and Thailand are being reviewed for continuation of their eligibilities. Chances of GSP benefits being withdrawn from both are significant with the US beginning to take away preferential market access from more and more of the larger developing middle-income countries. This makes it imperative for these countries to come together for building new blocks of preferential market access, such as within RCEP. As mentioned earlier, this is not possible without the manifestation of a collective political will. The regional election results, hopefully, will provide the final and decisive impetus that RCEP and regional trade have been waiting for.
The author is Senior research fellow and research lead at Institute of South Asian Studies, National University of Singapore. Views are personal