Forced Labour: The Role of NGOs in Labour Rights Enforcement

The past couple of years have been rough for several Malaysian-based companies, who were slapped with withhold release orders (WRO) on grounds of forced labour allegations, effectively prohibiting the importation of their products into the States. These orders, issued by the United States Customs and Border Protection (USCBP), came in light of rising social-related concerns along supply chains inadvertently uncovered by the Covid-19 pandemic.

NGOs have played a significant part in the issuance of these WROs, with some of the orders being made in response to concerns raised by such organisations. The WRO against FGV Holdings, for example, was issued in response to a joint complaint filed in 2019 by the Global Labor Justice–International Labor Rights Forum, Rainforest Action Network, and SumofUs pursuant to the US Tariff Act. A petition from Liberty Shared similarly resulted in the USCBP issuing an order, this time against Sime Darby—the anti-trafficking advocacy group would later file additional complaints of the same to the UK.

These instances are in line with the ongoing role of NGO as watchdogs against companies flouting labour and human rights. As NGOs continue to pressure customs officials to penalise these companies, it would, as described by Segi Enam principal Khor Yu Leng, pose a significant challenge for the palm oil and rubber gloves sectors, both of which Malaysia happens to be the world leader.

BFM: Travel Bubble with Indonesia Gets Green Light

Segi Enam Advisors principal Khor Yu Leng was invited on BFM to give her thoughts on the recent developments in the trade relationship between Malaysia and Indonesia. This remains a highly relevant issue, especially in light of the recent meeting between Prime Minister Muhyiddin Yassin and President Joko Widodo, which saw the two leaders discuss various regional concerns, including the two countries’ ongoing defence of palm oil and the political unrest in Myanmar. Click on the following link to listen to the podcast: Travel Bubble with Indonesia Gets Green Light.

With Malaysia and Indonesia agreeing in principle on a Reciprocal Green Lane, we speak to Khor Yu Leng to understand if this would strengthen trade ties between both countries, and if this points to the re-opening of our economy internationally.

Image Source: Afif Kusuma, Unsplash; produced by: Adeline Choong; presented by: Lee Chwi Lynn, Sharmilla Ganesan

Malaysia-Indonesia Top Exports (4 HS code)

Top Indonesia exports to Malaysia

1. Coal, briquettes, etc.

2. Petroleum coke, bitumen, etc.

3. Palm oil and its fractions

4. Flat-rolled products of stainless steel

5. Copper, refined, alloys, etc.

Top Malaysia exports to Indonesia

1. Petroleum oils, etc.

2. Polymers of ethylene

3. Polymers of propylene, etc.

4. Semi-finished products of iron or non-alloy steel

5. Electronic integrated circuits

SCMP: Palm Oil, Trade, and Talks of Cooperation

Last Friday, Malaysian Prime Minister Muhyiddin Yassin met briefly with Indonesian President Joko Widodo to discuss several ongoing regional issues, one of which included a reaffirmation of the two governments’ intentions to combat against palm oil discrimination. This follows Malaysia’s recent move of filing an official complaint with the World Trade Organisation (WTO) against the EU for its anti-palm oil campaign.

SCMP reported the meeting between the Southeast Asian two leaders, and Segi Enam Advisors principal, Khor Yu Leng, was quoted. Here are her full comments:

“In Indonesia and Malaysia, palm oil remains a popular and even a hot topic in high politics. So we won’t be surprised if Muhyiddin and Jokowi touched on it when they met in Jakarta this week. Palm oil producing countries have formally set up a Council in Jakarta (CPOPC), but we’ve yet to see its muscle. We now have an ASEAN-EU ministerial level Joint Working Group on Palm Oil, whose first meeting was attended by Indonesia, Malaysia, Cambodia, Thailand, Laos, Vietnam (Philippines and Myanmar are also rising producers of palm oil). Indonesia’s big palm oil production has shifted policy leadership to Jakarta, which influences the market with its biodiesel mandate.

“Talk of cooperation wafts through these lofty circles, but this floats above the reality of cut-throat competition for export between dominant producers, Indonesia and Malaysia. Malaysia eyes its monthly export market share by tweaking its export duty relative to Indonesia’s. Earlier, the duo were inking bilateral FTAs with big importers so that relative tariff advantages would flip annual majority market shares from one to the other. Malaysia’s recent problems with US Customs and Border Patrol is seen as a boon to Indonesia exports.

“Moreover, Indonesia is quite ahead of Malaysia in trade negotiation with the EU. Vietnam’s recently inked EU trade deal is now in force and it has acceded to stopping forced labour, and we should expect Indonesia to do similar. Neither have the big immigrant labour force conundrums faced by Malaysia. Even with CPTPP in the bag, Malaysia’s trade (and labour) policy needs to find better footing as its ASEAN powerhouse neighbours eye more big trade and FDI deals.”

The Effects of Near-real-time Deforestation Alerts

The Global Land Analysis and Discovery System, otherwise known as GLAD, is a popular tool that flags disturbances to the global forest canopy which may be due to deforestation. Developed by the University of Maryland’s Global Land Analysis and Discovery laboratory, the system relies on NASA’s Landsat satellite imageries and is mainly designed to provide law enforcement authorities, local communities, and the like near-real-time alerts of potential deforestation activity. An interactive map showcasing the alerts is available on Global Forest Watch.

A recent study by Maffette et al. (2021) has shown that the benefit GLAD has brought extends beyond its primary role as an alert system. The study, which analysed deforestation rates across 22 nations between 2011 and 2018—the last five years before and two years after GLAD was launched—indicated that GLAD has resulted in carbon sequestration benefits worth hundreds of millions of dollars in just the first two years of its use; in Africa alone, it is estimated that the social cost of carbon for avoided deforestation, i.e., the measure of economic harm due to carbon dioxide emissions, was worth between USD149-696 million within that same time period. Interestingly, according to Moffette:

“We think that we see an effect mainly in Africa due to two main reasons. One is because GLAD added more to efforts in Africa than on other continents, in the sense that there was already some evidence of countries using monitoring systems in countries like Indonesia and Peru. And Colombia and Venezuela, which are a large part of our sample, had significant political unrest during this period.”

SCMP: Improved Public Relations a Must in Malaysia's Defence of Palm Oil

Malaysia’s defence of palm oil against the EU continues, with the former’s more recent move being filing an official complaint with the World Trade Organisation (WTO) on grounds that the EU anti-palm oil campaign is in violation of WTO rules. SCMP, however, reports that experts believe Malaysia needs to improve its public relations in order to succeed in its complaint and its defence of palm oil in general. One of the interviewed experts is Segi Enam principal, Khor Yu Leng, who was quoted as below:

Khor Yu Leng, a political economist at Segi Enam Advisors, said the EU’s issues with the use of palm oil – including allegations of labour abuse within the industry, concerns over deforestation and other systemic risks – have threatened its future as a sustainable product.

“These issues need to be addressed with convincing evidence that this is of low incidence and there is an improvement plan,” she said.

“On the supply side, there has been a chronic shortage of labour in Malaysia over the years that has meant less than optimal operations and production,” she said, adding that the problems point to questions over “how the Malaysian authorities can address systemic labour market problems.”

“Flat denials from the authorities regarding deforestation or other oversights and no data transparency is a contrast to how commodity producers are nowadays aiming to charm their customers – the countries we export to,” she said.

“The other thing is to consider whether it serves palm oil‘s interest to be in the limelight too much. Being criticised on social media for poor human rights records is just not a good place to be,” she said, referring to the avalanche of bad publicity Malaysia received when the US slapped bans on the country’s top palm oil plantations.

US Agriculture Exports: Day 3 Highlights on Trade Deals, Weather, and Aquafeed

Day 3 of the AG Supply Chain Asia 2021 conference moved on to policy, economics, and weather factors relevant to the US grain industry. There were some interesting news and updates on these fronts, including ongoing evaluation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) by the new Biden administration, expectations that the USD80 billion of farm purchases by China will push up US produce prices, and predictions of La Nina dissipating in the first month of spring in North America, resulting in sudden spells of precipitation to the region.

Source: Garriss (2021)

Interestingly, the third day of the conference also included presentation on aquaculture and aquafeed, particularly shrimp. It gave several interesting insights into the industry, such as projections of the aquaculture supply chain are also discussed, such as declining live marine fish processing, forcing players to look for ways that would allow them to keep their produce over a much longer period of time. Notably, however, the presentation emphasised on the sustainability of aquaculture practices, particularly that of unused feed, i.e., uneaten feed and feed passed into faeces, discharging into lakes and destroying the quality of water, and offered a distiller’s dried grain with soluble (DDGS) as a possible alternative to the usual soybean meal and wheat flour fed to shrimps.

US Agriculture Exports: Day 2 Highlights on Supply and Logistics

The 3rd Agricultural Supply Chain 2021 has just ended its three-day run covering a wide range of topics surrounding the US grain and corn industry, and supplemented with discussions from agricultural and trade experts.

Day 2 of the conference focused primarily on the US and global agribusiness supply chain. Unsurprisingly, one subject matter of interest is how the Covid-19 pandemic has affected the industry. Production-wise, the pandemic has resulted in a significant loss of more than USD 4.7 billion between January and June 2020 for US soybean farmers and crushers, although projections have suggested much more optimistic conditions for crushers in 2021, with positive projections including strong demand for soybean meal productions and protein-based products.

Source: National Oilseed Processors Association (2021)

From a logistics and transportation viewpoint, one expert discussed the undergoing changes in the transportation network of the food supply chain in general as the world adapts to the “new normal” resulting from the Covid-19 pandemic.

Source: IHS Markit (2021)

Again, discussions on the impact of the coronavirus outbreak on the agribusiness supply chain is timely. News is surfacing about shipping carriers rejecting an estimated 177,938 containers of US agricultural products during October and November 2020, preferring allegedly more profitable Chinese exports instead. This occurred during a peak season for agricultural products, following the harvest of crops, and according to port trade data, has resulted in a loss of USD632 million from the Port of New York and New Jersey alone. US exporters have been petitioning the Federal Maritime Commission, warning that the delays from these refusals are undermining industry reputation and threatening profits.

Rising Soybean Demand in China Threatens Oil Palm

We are currently attending the 3rd Agricultural Supply Chain Asia 2021, a three-day conference organised by the US Soybean Export Council and US Grains Council, aiming to provide the latest updates on corn and soybean sectors.

Source: Bloomberg, 2021

The conference is timely, given the recent market development in the soybean industry. China’s palm oil imports are expected to dip following large amounts of soybean purchases recently made. As palm oil’s top contender, and the primary source of animal feed, the major Chinese importers are, according to Bloomberg, “scooping up unprecedented quantities of soybeans and corn on world markets to feed domestic hog herds that are rebounding after being devastated by the African swine fever.” Interestingly, there have been a resurgence of the African swine fever (as well as a new strain of the virus), expectations are that a possible outbreak would not be as deadly as that in 2019.

Accordingly, soy stocks in the US and other key origins, are forecasted at lows. But traders point out that world stocks have shifted to South America in the last few years (and the US operates on tighter stocks due to higher logistics costs and seasonal factors), so the world stock-to-use ratio may not be so bad (see DTn graph at the bottom ). The question now is how this would affect the palm oil trade, especially in light of the improving weather conditions in Brazil and Argentina over the past two weeks.

By Nadirah SHARIF, 26 Nov 2021

Editor: This reminds of our chat with some traders about the Malaysia palm oil stocks situation. While these were reported at multi-year lows, some pointed out that tanks were surprisingly full. Are well monitored stocks figures getting less reliable and/or representative? Commodity reporters have in recent years noted that the Malaysia MPOB (official count) stocks are perceived as less reliable. For Malaysia it is worth asking if more tank farms ended up in customs free zones. For palm oil, there is also attention on (mostly unofficial) estimates of stocks for Indonesia, China and India.

Farmed Seafood Versus Wild-caught: Environmental Impacts & Sustainability

In this article, we will be looking at the environmental impacts of aquaculture, and how they compare to the impacts of conventional fishing. In case you haven’t read the previous article, I answered some common questions people have when it comes to aquaculture as a source of our fish. Aquaculture for those unfamiliar with the term is essentially the commercial farming of fish and other marine organisms for consumption. 

Is aquaculture actually sustainable and/or environmentally friendly? How does it compare with conventional fishing practices? Well, let’s dive into it!

Environmental Impacts and Sustainability of Aquaculture

Simply put, aquaculture has negative environmental impacts if not properly carried out. But these problems can be and have been minimised with proper practices, and in some cases even result in positive environmental impacts. 

Aquaculture ponds in the Northern Territory of Australia (CSPIRO/The Fish Site, 2020).

Brackish water fish farming in Malaysia (Hatchery International, 2019).

One core problem is the organic waste and uneaten feed which contain nitrates and phosphorus. In high density aquaculture farms, these are concentrated in one place when the farms are not located in moving currents or if the waste is not treated (Wu, 1995). This impacts water quality in that area, and could result in eutrophication (Chislock and Doster, 2013). Poor water quality has knock-on effects on the health of the fish, as it can irritate their gills or cause other health problems and diseases (Mannan et al., 2012). Eutrophication is the increased growth of algae from extra nutrients in the organic waste. This can be extremely detrimental for the ecosystem as it results in oxygen deprivation and the formation of dead-zones of low or no oxygen (Chislock and Doster, 2013); and the ecosystem may collapse. In this day and age, aquaculture farms are mostly set up in the right areas to prevent things like this from happening and work to treat waste adequately, but there are still cases where this could happen. 

One of aquaculture’s positive environmental features is its high resource efficiency in producing protein. It has a much lower feed conversion ratio, which means the amount of feed required to produce the same amount of protein is much lower for fish and shrimp compared to other proteins (Tacon and Metian, 2008); it takes less feed to produce a kilogram of fish than other meat. This is very sustainable as less feed crops need to be grown, potentially reducing cropland pressure. A whopping 36% of the world's cropland is used for animal feed (Cassidy et al., 2013). Food security could get a boost combining fish protein with land available for food crops. 

Besides that, another positive environmental impact is that the farming of seaweed and bivalves are beneficial to water quality (Buck et al., 2017). Bivalves are filter-feeding shellfish and are a type of extractive aquaculture, given this name due to their feeding habits extracting nutrients from the water (Buck et al., 2017). This prevents the aforementioned nutrient build-up from the farming of other fish species. They are sometimes farmed alongside other fish species to help combat the issue in a farming method called integrated multi-trophic aquaculture systems (Correia et al., 2020)! Think of this as an improved farm ecosystem. Species within the same trophic level share the same function in the food chain. Essentially you have both fish and shellfish on your aquaculture farm, where fish are in a higher trophic level while shellfish are on a lower trophic level, each playing a different key role in the system.

In terms of sustainability, aquaculture could improve the sustainability of wild fish stocks obviously. If we are farming more fish, we eat and demand less wild fish, therefore there should be less pressure on wild fish stocks . (If you have any questions about farmed fish vs wild fish, check out the previous article in this two-part series, where I look into common questions you may have about aquaculture.) The table below displays the most commonly caught endangered wild-fish species, which a conscious consumer might avoid. For example, tuna is the most popular wild-caught fish in the world, with about 4.6 million metric tonnes caught in 2018 (FAO, 2018). Furthermore, WWF points out that with population pressure, and 3 billion people already relying on seafood as a main source of food, aquaculture can help keep up with increasing demand without further pressure on the wild fish stocks (WWF, 2020a).

Sources: WWF (2020b), FAO (2017; 2018), Greenpeace (2020)

Environmental Impacts and Sustainability of Conventional Fishing

Before we get into any of these impacts, we will need to spend a little time on the types of fishing the world carries out. Let me ask you a question. Visualise the first thing that comes to mind when I say the word ‘fishing’.

You probably pictured an angler sitting by a lake leisurely, waiting for the fish to bite. Was I right? What I’ve described is recreational fishing. Unless you are going out to catch endangered species of fish, or on a week-long trip with a strict catch and don’t release policy, the average recreational angler won’t have much impact on fish stocks. The next type of fishing would be small-scale commercial fishing. This would be the ‘nelayan’ (fisherman) you see go out to fish in the coastal communities of Malaysia to make a living for themselves. This doesn’t really have a large impact on the environment or sustainability, as the amount of fish caught is usually in small amounts relative to the heavyweight I'm about to introduce. You probably guessed it, large-scale commercial fishing. This is industrial fishing with large trawlers or boats that are capable of catching and storing large amounts of fish.

Large scale commercial fishing is the problem here. 

This involves a plethora of destructive and unsustainable fishing methods when not regulated (Pauly, 2006). It is NOT sustainable at all if left to its own devices. There is a world where such conventional fishing can be sustainable, but this is a highly unlikely scenario. Unless we regulate it, we face the Tragedy of the Commons. Essentially, firms will continue to exploit the fish stock resource as negative externalities (third-party costs caused by these firms), are not borne by them since no one ‘owns’ the oceans. Thus they continue to reap profit from fishing until there is no more profit to be gained, and overfishing is the norm as the full cost of doing so is not borne by them (Hardin, 1968). 

So what do we mean by sustainable? Sustainable fishing would require a certain sustainable level of fish to be caught annually. This level is called the maximum sustainable yield, which is equal to the level of growth of the fish stocks (Maunder, 2008).

What are the environmental impacts of volume-driven, unsustainable conventional fishing? First, methods such as bottom trawling and drift or gill nets are extremely dangerous to marine ecosystems and their denizens. Let’s take drift nets as an example. These are huge nets that are placed in the water column to catch anything and everything. Marine mammals, larger creatures and other fish species not being targeted end up in these nets as well, and die as bycatch (Lewison et al., 2004). Furthermore, these types of nets usually catch whole schools of fish, not leaving any behind to reproduce (FAO, 2020a). The damage does not stop there. Pieces of fishing gear might be discarded, or are abandoned if damaged or stuck on structures. These are near permanent environmental hazards for marine life, with more than 100,000 dolphins, whales, turtles and seals caught in abandoned gear annually (UNEP, 2018). 

Second, commercial fishing can destroy marine habitats and the seabed. This is an issue commonly associated with bottom-trawling, where large nets are dragged along the seabed to catch bottom-dwelling fish (FAO, 2020b). This completely destroys coral, sponges and other structures used as shelter for marine life. Coral reefs are key nurseries for many species, and damage to them adds to further fish stock decline on top of overfishing (Ecol et al., 2006). Another type of fishing involves dredging for clams in the sea-floor itself. This basically digs up the seabed, churning up sediment that is detrimental to water quality (Todd et al., 2014). This also dislodges worms and microorganisms whose actions are crucial for keeping the seabed habitable and supplied with oxygen (Coleman and Williams, 2002).

To conclude, aquaculture is the future, unless we find a way to reliably regulate the commercial wild-caught fishing industry. Proper regulation is extremely difficult due to the nature of the resource, and it is also hard to enforce on the high seas. A prime example is the super trawlers fishing off the coast of the UK now, as they scramble to exploit the UK's fishing grounds before Brexit happens, even when they are supposed to be regulated under EU regulation (Dalton, 2020). Even when people do care about preventing overfishing, there are also huge issues. In the EU for example, while they supposedly lead the push towards sustainability standards in food chains, only 1% of their marine protected areas out of about 3000 are protected by fishing bans (McVeigh, 2020). This shows us that aquaculture is the more sustainable and environmentally friendly option, and has obvious property rights and responsibilities, along with potentially easier regulation.

I hope this and the previous article has given you some insight into the world of aquaculture. Till next time!

By Robin GOON, Segi Enam intern, 25 Jan 2021 | LinkedIn

Edited by KHOR Yu Leng and Nadirah SHARIF

RCEP: What's the Big Deal?

As Trans-Pacific View author Mercy A. Kuo writes, “RCEP is literally a big deal… RCEP consists of diverse countries—rich and poor, vast and tiny, highly advanced and those just beginning to industrialize”. The signing of the Regional Comprehensive Economic Partnership (RCEP) by the 10 ASEAN nations, China, Japan, South Korea, New Zealand, and Australia on 15th November 2020 does mark a historical moment. One cannot emphasize enough the geopolitical and economic impact this free trade agreement (FTA) would have towards the global economy.

To get started, here are some RCEP facts at the time this was written:  

• While China has existing bilateral trade agreement, RCEP represents their first regional multilateral trade deal.

• RCEP was eight years in the making.

• The trade deal covers 15 countries with a population of 2.2 billion people with a combined GDP of $26.2 trillion or 30% of global GDP.

• An analysis by the Peterson Institute suggests RCEP would boost global trade by $500 billion in the next ten years (a 1% boost to trade flow?) 

• World income is promised to increase $209 billion annually (or $27 for each of the 7.8 billion people)

• India opted out but are still welcome to join should the South Asian country change its mind.

• Regional Comprehensive Economic Partnership is not as comprehensive as the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). 

Source: Heijmans and Nguyen (2020)

Economic significance

RCEP covers 30% of the world’s economic output (GDP), making it the largest free trade area. The signing of RCEP amid a Covid-19 pandemic is not a coincidence or a stroke of luck—the deal was concluded after eight long years of negotiations, a feat considering that the coronavirus has laid waste to economies both local and global.

While the pandemic is expected to result in nations become more inward-looking in their policies, the fruition of RCEP is testament to the contrary. Cross-border investment, intellectual property, goods and services, government procurement, financial services, and e-commerce are just some of the areas that the FTA covers. Specifically, according to Bloomberg, RCEP is meant to eliminate tariffs on imported goods, strengthen the value supply chain with common rules of origin and codify new e-commerce rules (but tariffs are already low).

Furthermore, the US-China trade war has made RCEP indispensable. The tit-for-tat tariff banter between the two superpowers have threatened to upend the value supply chain in the international economy. RCEP is thus a means for East Asian economies to be interdependent among one another without relying on a developed economy like the US, signifying a world order where the US plays a less significant role.

The withdrawal of the US from TPP further suggests that the country at that time had no intentions of forming an FTA with East Asian economies, with the Trump administration adopting a protectionist approach when it comes to foreign economic policies. It is worth noting, however, that the overall sentiment of the US towards China has always been underlined with suspicion, even before Donald Trump became President; this suspicion towards Beijing was merely heightened under the Trump administration and is unlikely to disappear anytime soon. The question now is: will President-elect Joe Biden come to the same decision regarding the RCEP and reconsider joining CPTPP, or will he remain on the fence? 

A JP Morgan report identifies sectors that would benefit from RCEP:

• manufacturing

• electronics

• industrial machinery

• autos

China’s Dual Circulation Strategy

Interestingly, RCEP complements China’s overall economic strategy. As the name suggests, the country’s dual circulation strategy is a two-part plan in effort to become self-sufficient in a time full of economic uncertainty. The strategy is part of China’s 14th five-year plan (2021-2025), with an emphasis on the internal circulation, i.e. stimulating the domestic market, without abandoning the external circulation, i.e. export-oriented development strategy.

It is in the external circulation bit that RCEP complements China’s economic strategy. While developing its domestic market to boost self-sufficiency, China would open the country to more trade relations with other nations. The signing of RCEP laid the foundation as China’s first multilateral FTA. It would simply a matter of time before China would consider joining other more advanced FTAs, such as CPTPP.  

Why is there RCEP when CPTPP exists?

Source: Loh (2020)

TPP was signed under the Obama administration in early February 2016 with a particular goal in mind: to foster economic and geopolitical cooperation among the nations that house the Asia-Pacific region (but it was announced by Hilary Clinton in the Department of State, so that is seen as geopolitical). TPP member countries consisted of the 11 Asia-Pacific nations of CPTPP with the inclusion of the US. However, the following year saw the Trump administration withdrawing the US from the FTA. Following this, TPP reformed itself into CPTPP, with most of the free trade terms still intact.

To reiterate, CPTPP is one of the largest free trade agreements, comprising 13.5% of global GDP centered on Asia-Pacific economic cooperation. Then there is the RCEP, which is arguably the largest FTA, covering 2.2 billion people with a combined GDP of $26.2 trillion.

Concurrently, there are two FTAs that are centered around the economies in the Asia-Pacific region. The questions that arise are: (1) why are there two FTAs; and (2) what separates them apart? To answer the latter, one includes China and the other does not, although that may soon change. However, a more notable contrast between the two agreements is simply that RCEP is not as comprehensive as the CPTPP when it comes to the terms of trade. CPTPP outlines provisions regarding sustainable practices of the environment, labour, human rights, and the need for transparency and freedom of information, which are missing from RCEP.

The fact that there are two FTAs centered around the same region insinuates geopolitics in play by means of who stands to benefit from a multilateral economic expansion and who stands to lose. This would explain some of countries stance on RCEP, particularly the US and India, who may be of the opinion that signing the FTA is not entirely favourable to them. 

Geopolitical significance

The narrative spun by western news outlets would have us believe that RCEP is a China-led initiative, with the sensational headlines such as “Why is China Creating a New Asia-Pacific Trade Pact” circulating the media, creating a misunderstanding especially if the rest of the write-up goes unread. It is worth reiterating here that RCEP is an ASEAN-led initiative and, had it been spearheaded by China, the likeliness of RCEP coming to fruition would be slim.

Nevertheless, China does stand to be the biggest beneficiary of the RCEP, allowing the Asian giant to expand its economic influence over Asia-Pacific. The FTA provides China with the opportunity to create new value supply chains amongst REP member countries, establishing itself as a possible hegemon in a time where US influence is diminishing (although suggesting that the US is no longer the global economic hegemon is a highly contested argument itself).

Interestingly, while RCEP was presented as a step towards multilateralism, sceptics believe otherwise. There is underlying pattern of countries being more confrontational towards China, stemming from the US-China trade war—trade tensions between Australia and China is a notable example. The worry amongst political and economic stakeholders is that countries will become more vocal in expressing their dissatisfaction against China in matters of world affairs, creating tension among RCEP member countries and potentially compromising the FTA. 

The future of RCEP?

Now that RCEP is signed, the implementation of the FTA shall only take place once it is ratified by each participating country, a process that may take years. There are still uncertainties regarding the agreement and the effect it will have in the Asia-Pacific region and its Western allies. The uncertainties stem from the future of trade amidst the backdrop of an ongoing pandemic and how RCEP will evolve to cater to unforeseeable changes, including the likelihood of India re-joining, the US position in this new global economic order, and future of trade multilateralism as a whole. 

As with any multilateral trade agreement, there will be winners and losers, so the real question here is: are the countries ready to shoulder the burden of the losers? Only with the unravelling of time would we see these questions being answered.

By Cyrene PERERA, Segi Enam intern, 14 Jan 2021 | LinkedIn

Edited by KHOR Yu Leng and Nadirah SHARIF