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RCEP services chapter: Risks for developing countries’ and LDCs’ policy space and regulatory sovereignty

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The national treatment rule would prevent, for example, banning foreign ownership or leasing of land.

RCEP Legal | 4 August 2016

Regional Comprehensive Economic Partnership (RCEP) services chapter:
Risks for developing countries’ and LDCs’ policy space and regulatory sovereignty

Professor Jane Kelsey, The University of Auckland, New Zealand

The leaked services chapter in the Regional Comprehensive Economic Partnership (RCEP) from August 2015 follows the standard pattern. Services are treated as commercial products that are exchanged for money through markets. That very narrow view takes precedence over the social, employment, development and environmental aspects of services that governments would normally give priority, or at least treat as equally important, when making and implementing domestic policies and regulation for services.

The rules target laws and policies that foreign firms say make it harder for them to sell their services in another country and to compete with locals, even when they are massive transnational companies. Viewed from the social perspective, the rules in RCEP’s services chapter severely restrict the regulatory sovereignty and policy space of governments, which can have serious social, environmental, cultural, gender, political and economic consequences.

Policy space is critical for developing countries, especially for least developed countries (LDCs), and requires flexible rules and the ability to respond to unanticipated problems without facing the threat of a legal dispute or economic sanctions. It is too easy to make mistakes in such a complicated chapter as services. What appears to be low risk at the time it is agreed can become a major liability, especially when domestic and global economic circumstances change and new technologies alter the impact of rules and commitments. The international context can also change. For example, all RCEP negotiating parties have committed to achieving the 2030 Agenda for Sustainable Development, which will require a rebalancing of developmental over commercial outcomes; yet the RCEP chapter is silent on those goals.

Instead, the leaked services chapter shows the non-ASEAN countries, especially Australia, New Zealand, South Korea and Japan, have been very aggressive in their demands and insisted on new ways to bind the hands of governments in the future. ASEAN has agreed to the framework, but is arguing about how far it should go. India has proposed some novel arrangements and protections, while pursuing its own ambitions for labour mobility, but seems to have few allies. China has not played a prominent role.

This paper examines some of the ways in which the leaked chapter restricts governments’ policy space and regulatory sovereignty. It is unclear how far the negotiations have progressed in the past year, which makes it difficult for specialists to provide independent analysis that could assist developing countries and inform citizens in all RCEP countries who stand to be affected. Pressure from ministers to close the RCEP by the end of the year has been reiterated at the ministerial meeting in Lao on 4 August 2016. It is of concern that developing country governments and the LDCs are being pushed into accepting outcome that could cause severe damage to their economies and societies in the future.

Read the full analysis (PDF):

 source: RCEP Legal