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In January 2022, the Regional Comprehensive Economic Partnership (RCEP) entered into force allowing experts to weigh in on its global impact. The agreement was reached between sixteen Asian countries, including all the major players, namely China, India, Japan, South Korea, and Australia. While groundbreaking, it was particularly contentious for its eleventh chapter on intellectual property rights (IP). While some experts identify its significance as a geopolitical tool (Callo Müller, 2021), others note that it is a challenge to the status quo as it shifts Asia’s role from a norm-taker to a norm-maker (Yu, 2018). Nevertheless, either position agrees that China’s commitments to RCEP’s IP chapter has the potential to shift the global value chain. Thus, this article aims to outline the main implications of the RCEP in Asia and Europe to provide insight into the regional new regulatory environment. These former, in turn, could shift the economic focus of the international arena, especially regarding EU-China relations.
Before exploring the topic further, it is important to provide an introduction to Asia’s IP binding agreements. ASEAN is a critical piece of the global framework of IP law, but there is a lack of political will to mediate Asian integration (Zheng, 2020). The imposition of IP laws by foreign powers to protect their interest can partly explain the current legislative landscape. While the Asian Development Bank (ADB) is dominated by Japan and the US, the Asian Infrastructure Investment Bank is dominated by China, and ASEAN is still a politically soft institution (Nye, 2004). To combat the weaknesses in Asia’s regional framework, most economies in the region have adopted national IP strategies (see Zheng 2020 for more). However, a growing trend is emerging, using Free Trade Agreements (FTAs) with an IP clause to obtain a regional legally binding agreement. More precisely, in the past decade, there have been two mega-regional IP norm-setting exercises (Yu, 2018). On the one hand, the Trans-Pacific Partnership Agreement (TPP) signed in 2016, which aimed to cover 40% of global GDP; on the other, the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), signed in 2016 but never entered into force, accounting for almost 30% of global GDP. Both of the agreements’ requirements exceed the TRIPS agreement under the WTO and shape future regional copyright norm-setting in the Asia Pacific region, namely the RCEP.
Lead-up to the intellectual property rights chapter of the RCEP
The agreement entered into force on January 22, 2022 – signed on November 15, 2020 – constitutes one third of the world’s total economy (RCEP Legal Text, 2022). In comparison, the EU only constitutes around eighteen percent of the world market (Nicita et al., 2021). Members of the ASEAN focused agreement include its ten members (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam) and five neighbouring nations (China, Japan, South Korea, Australia, and New Zealand). In many cases, the RCEP has the potential to solidify the previous positive trade effects made bilaterally, as well as the Comprehensive and Progressive agreement for Trans-Pacific Partnership (Park, Petri, and Plummer, 2021).
The original RCEP negotiations that began in 2012 also included India, but Delhi dropped out of the proceedings after a change in national policy (Park, Petri, and Plummer, 2021). At the time of publication, all participating members have ratified the multilateral trade agreement into their national legislatures, with the Philippines and Myanmar being the only nations without this in full effect. In the case of the former, the RCEP only takes effect sixty days after ratification, and the Philippines only ratified it nationally on February 22nd, 2023 (RCEP Legal Text, 2022; Pangandaman, 2023). In the case of Myanmar, doubts were raised by ASEAN member states regarding the validity of a document ratified under a government formed by military coup in 2021.
There are eight guiding principles that inform the RCEP agreement, all with the aim to “achieve a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement [which] will cover trade in goods, trade in services, investment, economic and technical cooperation, intellectual property, competition, dispute settlement and other issues.” (Guiding Principles and Objectives, 2012). These principles lay out a broad, but clear set of goals for this agreement, but the most important principles are numbers two, three, and four. The second principle promotes engagement in “broader and deeper” connections between the members of the RCEP, while also respecting the individual circumstances of each member nation. Principles three and four expand on this need for respect, encouraging transparent trade practices, increasing engagement in supply chains, and flexible working relationships between member states (Guiding Principles and Objectives, 2012. Ideally, this agreement is meant to take the base of trade agreements already present between these countries and build upon it, imbuing this FTA with a strong foundation to build from. Additionally, these principles aim to provide open participation for any other nations with an interest in joining the RCEP after it has entered into force (Guiding Principles and Objectives, 2012). As of the time of publication, Hong Kong and Taiwan have applied for membership to the RCEP.
Now, we will return to the implications included in the intellectual property clauses of the RCEP on the region. Indeed, even before the implementation of the RCEP, many countries in Asia had strict IP regimes in place. Starting in 2003 with Japan, several other countries have adopted domestic IP policy, including China, Korea, Taiwan, Singapore, Cambodia, and Thailand. (Liu and Zheng, 2020). Many of these national strategies go above and beyond what the WTO prescribed with the Trade Related Aspects of Intellectual Property Rights (TRIPS) (Chander and Sunder, 2018). While this agreement only requires the use of criminal penalties for commercial scale violations, much of the IP legislation of many Asian countries, including Taiwan, Japan, and Malaysia, penalises even small scale violations with incarceration (Liu and Zheng, 2020).
Asia’s future explosion of intellectual property rights
In the RCEP, the considerations surrounding intellectual property rights are grounded in the TRIPS agreement and even expound beyond the IP rights included in TRIPS and TPP, making this agreement potentially the strongest IP defence seen in Asia (RCEP Legal Text, 2022; Chander and Sunder, 2018). As a regional agreement, the purpose of the RCEP is to unite the different approaches to IP legislation across Asia to create a common base level of IP rights. ASEAN is currently the only standing institution governing IP regulation mediation, thus this will be the first attempt to align IP rights regimes region wide, centered on a “mostly Asian” institutional system (Liu and Zheng, 2020). To attain this, the RCEP obliges all member states to ratify several treaties and agreements regarding IP globally, in an effort to place the Asian standard to the global standard (Park, Petri, and Plummer, 2021). It must be noted that there are stipulations within this chapter regarding the differing levels of economic development and capacity, encouraging balance between protecting the rights of intellectual property holders and the advancement of technology, society, and knowledge (RCEP Legal Text, 2022; Park, Petri, and Plummer, 2021). This last point, however, will require further negotiation, considering the differing positions of member states on the global value chain (GVC), of which IP is an important element of protection.
According to the Asian Development Bank, there are four key factors that determine the possible impact of the RCEP IP regulations. Here, we will briefly examine these factors in the context of China’s highly developed IP legislation for a basis of comparison to be used by the reader. The first consideration is the extent of current implementation by member states. For states such as China, with already comprehensive legislation in place, this section of the RCEP is likely to have less impact since these provisions are already accounted for. It is the second factor, the consistency of implementation, which will be prominent in Chinese IP law reinforcement. In this instance, the RCEP would have the most impact on the enforcement of already existing or revised IP laws, constituting a much stricter adherence to these legal codes. This would require an increased regulation of usage and destruction regarding violations of Chinese IP law (Baker McKenzie, 2020; Park, Petri, and Plummer, 2021). Third comes the level of participation by each member state in other FTAs with similar IP provisions. Increased participation in these agreements prior to the implementation of the RCEP will reduce the adjustments needed to bring national legislation up to RCEP standard. Since China has already ratified these treaties, this factor will not heavily determine the impact of RCEP. Finally, the eventual breadth of implementation of RCEP aligned IP regulations will also determine its impact on member states (Park, Petri, and Plummer, 2021). The legal wording of the RCEP chapter on IP is very vague, and does not necessarily prescribe specific terms that these legislative measures must follow. A member state could choose to create an IP regime that is exceeding strict or lax, as long as it remains within the requirements of the RCEP.
It could be said that the member states who stand to gain the most from the RCEP IP provisions are those who have the least coverage in IP legislation. These would include the member states of Cambodia, Indonesia, Laos, Myanmar, and the Philippines, who have not fully developed their IP legislation to the standard that states like China, Japan, and Korea have (Park, Petri, and Plummer, 2021). Through their inclusion in the RCEP agreement, these states now have explicit guidance and examples of IP legislation to adopt from states with already developed IP legislation regimes. Although in the beginning of IP enforcement, states have less ability to create and borrow as freely as they once did, the establishment of a robust IP regime now will provide for many protections of goods and services in the future (Liu and Zheng, 2020). This process helps the state create value and trust in their goods and services, which can boost their economy and allow for increased trust between RCEP member states. Even if it is properly implemented, this process requires a long adjustment period beyond January 1, 2022.
However, member states like Japan and Korea - who already have highly developed goods and services on the GVC- also stand to gain plenty from the implementation of these provisions across Asia. With the implementation of more robust IP legislation through the efforts of RCEP member states, more trust will be fostered between the states through mutual protection and respect of intellectual property. These two members were very vocal during the negotiations, proposing relatively harsh penalties for any violations. China, while not as vocal as Japan or Korea in this process, also has comprehensive legislation for IP The implementation of strong IP legislation stems from having large amounts of intellectual property to protect, thus other nations adhering to similar regimes would provide security for intellectual property holders region-wide (Liu and Zheng, 2020). So for now, these implications will be predictive, but useful tools for future analysis.
Europe’s late entry to the economic neighbourhood
The use of FTAs to promote regional economic integration is the growing preferred option to provide development opportunities to member states. Europe’s political and economic integration, together with the status quo imposed during the colonial period, has made the EU the largest consumer market in the world. Nevertheless, Europe is co-dependent on other regions as a result of the global value chain, especially so with respect to Asia. Nowadays, the latter is starting to take the lead in the production of value added products and services, making chapter eleven of the RCEP both a challenge and an opportunity for the EU. This chapter strengthens the rules-based IP arena that Brussels has long promoted and provides benefits to non-signing countries similar to TRIP-Plus. However, it also provides the building block for a non-western value chains, posing a challenge to Europe’s privileged position. Thus, the question arises, what implications does the world’s largest FTA have on Europe?
Starting with the opportunities for European enterprises, four major benefits can be identified. First, all the signatures will accept the IP protections of the agreement and thus protect the rules-based system. The EU as a normative power is very proactive in the promotion of multilateral economic integration, especially so with ASEAN as it is their “economic neighbourhood” in the words of Josep Borrell, High Representative of the European Union for Foreign Affairs and Security Policy and Vice-President of the European Commission (Borrell, 2020). Second, the RCEP’s IP chapter contains most-favoured-nations and national treatment obligations which grants European enterprises access to their market (Chander and Sunder, 2018). However, Asian enterprises will not be guaranteed reciprocal rights in the bloc, meaning higher benefits for the EU. Third, it gives Brussels leverage to include favourable IP clauses in future trade agreements with Asian countries. The EU has multiple FTAs with South-Asian countries and is currently under negotiations with Indonesia, Australia and New Zealand (Borrell 2020). In promoting the RCEP, Brussels assures the protection of their intellectual property in a traditionally hostile region. Fourth, it will make RCEP nations dependent on western markets for the manufacturing of generic medicines (Chander and Sunder, 2018). Stricter IP provisions would possibly entail a delay on generic competition, and thus translate into higher prices and prevent affordable generic medicines from reaching consumers. These limitations would only affect RCEP’s member states, providing a big leverage to the European pharmaceutical industry.
Nevertheless, the RCEP could become a double-edged sword as it will have a significant impact on the global supply chain. It should not be forgotten that although the EU has the largest Single Market, the RCEP encompasses 15 countries, one-third of the world’s population and 30% of the global GDP (McDonald 2020). Although the regional agreement grants access to an immense consumer market and lowers costs for companies, it also promotes trade diversion and a decrease in the competitiveness of European products in Asia (Adachi 2022). Moreover, the RCEP provides a coordinated and consistent approach to the Belt and Road Initiative (BRI) that could help China become a leading world power. With the growing political divide between the US and China, the rising protectionism and the COVID-19 pandemic recovery, China stands to gain a lot with the RCEP (Armstrong and Drysdale, 2022). As of today, Beijing has forged an FTA with over 24 countries, securing a stable environment to promote their peaceful rise. The EU continues to have a weak relationship with Asia, even with its new agreement, the EU Strategy for Cooperation in the Indo-Pacific (Allard and Grare, 2021).
In summary, the RCEP could be an important tool to help consolidate Asia’s economic integration through regional cooperation. The region could greatly benefit from the higher exposure and a more secure IP environment for companies to operate in. The RCEP chiefly stands to align IP rights region wide, creating more confidence for intellectual property holders, increasing the potential of many Asian GVCs, as well as providing for technological development needs in several member states. For the EU, the RCEP agreement provides a new secure and technologically sound market with low tariffs that could be key for assuring itself as the world’s third power. However, Brussels should understand that Beijing is also looking for an opportunity to promote its own IP norms within the RCEP framework to solidify its peaceful rise.
About the Authors:
Leanne Voshell received a Research Master’s degree in Asian Studies from the University of Leiden (Leiden, The Netherlands). Her focus during this time was on international internet regulation, Chinese norm development, technological innovation, and international institutions. Her previous work also focused on the international reception of Chinese foreign policy, especially regarding norm promotion. You can find her and her CV on Linkedin.
Berta Tarrats Castillo holds a bachelor degree in International Relations from Blanquerna - Ramon Llull University (Barcelona, Spain). Her past writing collaborations include El País, ISGlobal, PMFarma and RECERCAT. The main elements of her portfolio include Sustainable Development Goals, the Digital Silk Road, social movements theory and health policy-making. She is currently working as a consultant on digital and innovation policies in the public sector. You can find her on LinkedIn.
The opinions expressed in this article are those of the author(s). They do not necessarily reflect the opinions or views of European Guanxi or its members.
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