Where is the Regional Comprehensive Economic Partnership Headed?

The blog post was originally published in Spicy IP on September 7, 2016. It can be read here.

The US-led TPP and China-led RCEP were always touted as rivals racing to set global trade standards before the conclusion of the other. Well, TPP gunned ahead and is currently in the ratification phase, where as RCEP is yet to be concluded and talks may very well enter 2017. The latest round of RCEP talks ended last month and paints a worrisome picture for the global south, given that it will bring 3.5 billion people and 12% of world trade into its fold.

Free Trade Agreements (FTAs) do not enable zero-sum free trade. In fact, each country leaves with disproportionate gains and losses in their kitty, after the conclusion of the agreement. And the worst casualties are environment, public health, labour rights, SMEs and local markets. Since there is plenty of give and take occurring in a context of fluid foreign policy relations, it becomes imperative to locate the ‘barter’. Last month, Balaji wrote an excellent comparative analysis(I & II) of the RCEP IPR text, and this post complements that. I present a regional overview of negotiations and the impact on course of the agreement, as gathered from press coverage of the meetings and the leaks; and to provide a more wholesome picture of the barters, I discuss other relevant chapters at the end of this post. Further, as the negotiations are conducted in secrecy, different organisations and individuals have ‘leaked’ draft texts. KEI and bilaterals.org are two such organizations that regularly collate and release latest RCEP texts. I rely on RCEP’s IP Chapter(October 15, 2015 version) and Terms of Reference by the Working Group on Electronic Commerce(August 2015 version). Analysing the Telecommunications Services chapter is outside the scope of the post, and I link it here for the interest of our readers.

Impact on E-commerce

What is currently available are the terms for reference establishing the Working Group’s mandate on drafting a chapter on e-commerce. The document acknowledges the need for inclusion of a provision for special and differential treatment, and additional flexibilities to the least developed ASEAN countries. It draws a list of relevant elements for possible inclusion in the RCEP. I reproduce the list here (emphasis supplied is mine):

I. General Provisions

• Cooperation
• Electronic Supply of Services

II. Trade Faciliation

• Paperless Trading
• Electronic Signature and Digital Certification

III. Creating a Conducive Environment for Electronic Commerce

• Online Consumer Protection
• Online Personal Data Protection
• Unsolicited Commercial E-mail
• Domestic Regulatory Frameworks
• Custom Duties
• Non-Discriminatory Treatment of Digital Products

IV. Promoting Cross Border Electronic Commerce

• Prohibition on Requirements Concerning the Location of Computing Facilities
• Prohibition on Requirements Concerning Disclosure of Source Code
• Cross- Border Transfer of Information by Electronic Means

While there is no clarity on customs duties, there is a mention of non-discriminatory treatment of digital products. While India has no law on non-discriminatory treatment of digital products, this may conflict with the Indian government’s policy on adoption of open source software for government use.

More alarmingly, the first prohibition restrains governments from mandating data localisation. The Trans-Pacific Partnership (TPP) and Trade in Services Agreement (TISA) also bar governments from making rules on data localisation, i.e. requiring physical situation of servers and storage in their countries’ territories. This is a worrisome provision because it may effectuate surreptitious surveillance. The prohibition on disclosure of source code is also troublesome and is aimed to stop examination and review of code in computing devices. This would effectively ban security researchers from finding security vulnerabilities in devices, and the if the provision is drafted like its counterpart in the TPP, there will also be prohibitions on checks by regulating authorities.

Re ‘Cross- Border Transfer of Information by Electronic Means’, the provision will be most likely drafted to favour big data and advertising companies’ operations enabling unrestricted transfer of personal data(like the TPP). If that is the case, then it will be in conflict with Rule 7 of the Information Technology (Reasonable security practices and sensitive personal data or information) Rules 2011, which permits cross-border flow of personal information only in situations where the recipient of the information complies with Indian data protection standards as a bare minimum.

Impact on farmer's seeds

RCEP is bound to hit farmers the worst: not only are countries reducing tariffs for increased import of agricultural products, there also exists an obligation to join the International Union for Protection of New Varieties of Plants (UPOV system), which would mandate members to introduce a new IPR: the breeders’ right over new plant varieties. Japan and Korea want RCEP members to join UPOV 1991, and Japan has proposed criminal penalties for the infringement of breeders’ rights.

While India has applied to become a member to the UPOV Convention, in 2001 it passed the Protection of Plant Varieties and Farmers’ Rights Act, and thereby built a sui generis system of protection (ambitiously trying to balance breeders’ rights and farmers’ rights). It will be naive to expect a similar attempt in balanced lawmaking by other countries. Furthermore, “…India’s current legislation is less stringent than UPOV 1991. It allows farmers to continue with their seed practices, except they cannot sell packaged seeds of protected varieties. The space for both small farmers and public breeders to freely work with seeds will be lost of RCEP goes the way of what Korea and Japan are proposing.” Using FTAs to reduce farmers’ freedom has been well documented, and you may read more on that here.

The text also desires all RCEP members to codify traditional knowledge and make it available to various patent offices. This push is widely regarded as problematic, as it is feared that documenting and digitization of existing knowledge may propel companies to use that information for commercial gains, to the detriment of the indigenous people and farming communities. On the other hand, it would be feasible to share such data in a confidential manner with patent offices, as India has done under the TKDL.

Massive reduction in tariffs

Tariffs emerged as an enormous sticking point in the August round, and there was pressure on India to eliminate tariffs completely. India proposed a differential tariff reduction plan, but countries kept pushing for a single-tier plan – particularly Japan. Finally, in what is seen as a big loss, India offered tariff cuts as high as 80% goods trade for all RCEP partners, except China. With China, India said that it was only comfortable with a 65% tariff cut initially, given the skewed trade deficit between China and India. It is worth noting that for India, RCEP will become the first FTA to forge trade partnerships with China, Australia,and New Zealand.

As a result of the heavy concession in tariffs, the Kerala Agriculture Minister has moved a cabinet note, and written a letter to the Centre expressing serious concerns on lowering of tariffs for agricultural products. He also requested to include Kerala in the RCEP pre-negotiation talks.

Staving off ISDS

Provisions on investor-to-state dispute settlement (ISDS) are being pushed by Japan and South Korea. Countries are not convinced about agreeing to this, especially India. In fact, India is in the process of rolling back on bilateral investment treaties, and has already moved for BIT termination with 57 countries. We’ve already seen ISDS being (mis)used by private entities against governments – there have been enough challenges to countries’ IPR laws and policies as well.

Mobilised Movements against the RCEP

Individuals and organizations are advocating for scrapping the RCEP, given the impact that it is expected to have on people’s rights and freedoms. A ‘People’s Strategy Meeting’ last month conducted large-scale sessions to inform civil society organizations, NGOs, trade unions, farmers groups and other peoples’ movements in the Asia-pacific region. Many have also been persistently calling out for a meeting with negotiators of their respective countries and for a public hearing on the RCEP.  The Asia Pacific Research Network has released a policy brief on the RCEP, and you may read that here.

The road ahead

Looking at the larger picture, it is evident now that neo-FTAs’ focus on trade has descended into attacks on sovereign states’ economic and social policies.

With respect to the RCEP IPR text, India is trying to eliminate TRIPS plus provisions from the text. And after heavy concessions on the tariff front, it will be bargaining for liberalisation in services in the next rounds. India’s aim is to clinch a deal allowing for free-er movement of its workers and professionals. Further, the negotiations are going to proceed quickly now. Members are becoming desperate to lock down the text, and therefore, this year we will see more rounds than the usual scheduled ones. The urgency is driven largely by Japan and Korea – both of which wish to ratify the TPP soon and would like the RCEP to work in tandem.

In another worrisome development, Phillipines, Thailand and Indonesia have met with US trade officials on what they need to do to join the TPP, once it is implemented. These countries are considering making serious changes to their labour, environmental, IP, and other standards. Yesterday, US Prez. Obama arrived in Vietnam for the Asean summit, trying hard to sell the TPP. Japan and Korea are already TPP members, and if ASEAN countries come under TPP’s fold as well, we may see an upping of standards at the RCEP.

India will have to deploy serious negotiating chops at the upcoming rounds if it is remotely hopeful of steering the RCEP standards away from the TPP.

Author’s note: Added the sentence “On the other hand, it would be feasible to share such data in a confidential manner with patent offices, as India has done under the TKDL.”