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Using RCEP To Spur Investment? Deborah Elms ([email protected]) First East Asia Investment Forum Kuala Lumpur, Malaysia August 24, 2015 Asian Trade Centre RCEP Impact on Investment Uncertain Nine rounds of RCEP negotiations completed Initial offers on investment just exchanged Unclear how ambitious members willing to be RCEP builds on two existing models: • ASEAN+1 agreements (ASEAN with 6 AFPs: Japan, South Korea, China, India, and Australia/New Zealand) Not all agreements cover investment (esp with Japan) • ASEAN Economic Community (AEC) for ASEAN integration Investment coverage varies but often quite weak Asian Trade Centre Investment FTA Chapters Often Include Creating favorable investment conditions: • National treatment for foreign investors Greater certainty • Free transfer of capital and profits related to investments • Transparency of investment rules, regulations and policies No performance requirements • No unfair conditions to establish, operate and manage investments (such as requirements for export minimums for goods and services) Asian Trade Centre Investment Chapter Goals Continued: Stronger protection of investments • No expropriation of investments (except for public purpose) • Obligation to compensate if investments are expropriated • Investor-State Dispute Mechanism to allow aggrieved investors to seek redress Overall objective: stronger, more secure and predictable environment for investors Business receives improved market access and stronger protection than current regime Asian Trade Centre Odd Hybrid Model of Negotiations Generally, are two models of negotiating on investment liberalization • Positive list—everything listed is open for partners • Negative list—listed sectors are NOT open Possible to create lists that are equally open Negative list automatically opens new sectors ASEAN uses positive list, but some members have used negative approach (TPP and U.S.) RCEP using some sort of odd hybrid of two Asian Trade Centre Can Be Harder to Switch Generally, first time officials use negative list, response is to list every sector as closed Negotiations=painstaking paring down list • Services, for example, cover 12 sectors and more than 160 subsectors But many officials have extensive experience • Particular attention to 7 RCEP members also in TPP Rhetoric usually encouraging of inward investment, but in practice can be hard Asian Trade Centre RCEP and TPP: Overlapping Membership RCEP Cambodia China India Indonesia Laos Myanmar Philippines South Korea Thailand Asian Trade Centre TPP Australia Brunei Japan Malaysia New Zealand Singapore Vietnam Canada Chile Mexico Peru United States 7 Biggest Issue Likely to be AFPs In most of RCEP, biggest hurdle to closure is connections between ASEAN Foreign Partners (AFPs) Can be frosty relationships between AFPs Little history of working together and few existing agreements between them Investment could get caught up in larger disagreements about extent of liberalization, reach and depth of final deal Asian Trade Centre