READ: The Regional Comprehensive Economic Partnership (RCEP) and its impacts on the environment

February 27, 2023

RCEP and the Environment

Introduction

The Regional Comprehensive Economic Partnership (RCEP) is a free trade agreement (FTA) between the ten member states of the Association of Southeast Asian Nations (ASEAN) (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam) and its five FTA partners (Australia, China, Japan, New Zealand and Republic of Korea).^[1] As of January 1, 2023, the countries covered are Australia, Brunei Darussalam, Cambodia, China, Japan, Lao PDR, New Zealand, Singapore, Thailand and Viet Nam^[2] with the addition of the Republic of Korea as of February 1, 2022.^[3] The regional free trade agreement (FTA) aims for a stronger economic integration by lowering trade barriers and expanding market access for goods and services.

However, there are five main issues on the agreement namely:

1. Lack of environmental provisions
2. Drive for natural resource extraction
3. Influx of China’s infrastructure projects
4. Impacts on climate change
5. Dangers of Investor-State Dispute Settlements

These have raised concerns and caused opposition from Filipinos and environmental advocates in other countries.

 

I. Lack of environmental provisions

RCEP has no chapter specifically on the environment.^[4] Environment is only used in the context of “investment environment”, “business environment” or “digital environment” and no mention on the environment as in nature and the man-made surroundings. It should be noted that the ASEAN Human Rights Declaration, an established framework for human rights cooperation, prescribes the right to a safe, clean, and sustainable environments in Article 28.

There are very few provisions in RCEP which refer to environmental protection.

In Chapter 5:Sanitary and Phytosanitary Measures mentions the protection of human, animal or plant life or health through sanitary and phytosanitary^[5] measures but this is if the situation directly or indirectly affects trade among the Parties. However, there is no mention of measures if the trade activities has impacts on human, animal or plant health.

• Chapter 5: Sanitary and Phytosanitary Measures
• • Article 5.2: Objectives – Protect human, animal or plant life or health in the Parties through the development, adoption, and application of sanitary and phytosanitary measures, while facilitating trade by minimising the negative effects on trade among the Parties
  • Article 5.3: Scope – This Chapter shall apply to all sanitary and phytosanitary measures of the Parties, which may, directly or indirectly, affect trade among the Parties.

In Chapter 11: Intellectual Property, the protection on new varieties of plants through an effective sui generis plant variety protection system was mentioned. Despite the seemingly good intention, caution must be taken in this approach since patents give “temporary technical monopoly on a novel technical solution which gives the owner of the patent the sole right to use and profit from that particular invention.”^[6] This might also lead to the limitation of the use of new varieties of plants to those who can affort to purchase these.

• Chapter 11: Intellectual Property
• • Article 11.48: Protection of New Varieties of Plants – Each Party shall provide for the protection of new varieties of plants through an effective sui generis plant variety protection system.

The adherence to the Convention on Biological Diversity (CBD) was mentioned In Chapter 17: General Provisions and Exceptions but no other international environmental agreements such as the Paris Agreement under the UN Framework Convention on Change were indicated.

• Chapter 17: General Provisions and Exceptions
• • Article 17.10: Convention on Biological Diversity – Each Party affirms its rights and responsibilities under the Convention on Biological Diversity done at Rio de Janeiro on 5 June 1992.

Aside from the provisions mentioned above, the regional free trade agreement (FTA) lacks provisions concerning environmentally critical activities, environmentally critical areas, and strengthening environmental or strategic impact assessments which are very important in environmental protection.

There are also provisions that might affect access to information which is important for environmentally critical activities or activities in environmentally critical areas. This has often happened in the Philippines where information about certain projects were withheld on the premise of confidentiality of the private entity / project proponent. Because of the lack of information, affected communities are not able to make informed decisions where there are public consultations and take measures to prevent social and enviornmental harms. Article 13.5: Confidentiality of Information and Article 17.7: Disclosure of Information stresses that sharing of information is not required.

• Chapter 13: Competition; Article 13.5: Confidentiality of Information
  • This Chapter shall not require the sharing of information by a Party, which is contrary to that Party’s laws, regulations, and important interests.
• Chapter 17: General Provisions and Exceptions; Article 17.7: Disclosure of Information
  • Nothing in this Agreement shall require any Party to provide confidential information, the disclosure of which would be contrary to its laws and regulations or impede law enforcement, or otherwise be contrary to the public interest, or which would prejudice legitimate commercial interests of particular enterprises, public or private.

The RCEP Joint Committee treats the document as a “living” agreement where they will be able to create a wider regional integration agenda to address key contemporary issues such as the environmental and climate change, skills development, green transformation and developing digital and smart urban centres.^[7] However, agreeing Parties would be basing their decision of approving the agreement on the existing document and not what the Joint Committee is envisioning for the future.

 

II. Drive for natural resource extraction

RCEP includes provisions for reducing barriers to trade and investment, which would encourage companies to extract more natural resources in the region. This could lead to increase in extractive activities.^[8] This makes mineral-rich developing countries like to Philippines vulnerable to more projects such as mining and logging which often cause grave environmental and social impacts.^[9]

In addition, the increase in competition as tariffs and other trade barriers are reduced could lead to increased pressure on mining companies to reduce costs and improve efficiency. This often means more lenient environmental provisions.^[10]

The mining industry in the Philippines has been one of the most liberalized industries with many tax incentives and tax holidays as prescribed by the Mining Act of 1995. It is also vulnerable to foreign control since Financial or Technical Assistance Agreements (FTAAs) allows 100% foreign ownership of operations.

Aside from mining, the higher demand for timber from RCEP member countries could lead to deforestation and habitat destruction according to a study by Forest Stewardship Council.^[11] Furthermore, “lowering trade barriers without corresponding measures to ensure responsible trade in forest products will likely accelerate unsustainable logging and associated trade.”^[12]

Also, several RCEP member countries, such as Indonesia and Malaysia, are major producers of palm oil, a commodity that is often associated with deforestation and greenhouse gas emissions. An increase in trade in palm oil could lead to increased deforestation.^[13] The expansion of agricultural plantations could also intensify land grabbing.^[14]

The impacts of the abovementioned activities leave both nature and human populations in danger with RCEP’s lack of environmental protection and social safeguards.^[15]

 

III. Influx of China’s infrastructure projects

 As a member and major proponent of RCEP, China has the potential to benefit from increased market access and investment opportunities in other member countries, including in the infrastructure sector. This could lead to more large dam and reclamation projects in the Philippines which more often than not have caused negative social and economic impacts.

For example, the Kaliwa Dam in Rizal Province which is funded through an ODA from China that gained much opposition due to the onerous loans^[16] as well as environmental impacts was still able to start being constructed. Also, in Manila Bay, there are at least five reclamation projects involving Chinese companies at varying stages of completion.^[17] Reclamation, the practice of dumping filing materials along coasts to increase land area, has been widely opposed by fisherfolks and scientists due to its impacts on coastal and marine ecosystems as well as on fisheries production.

 

IV. Impacts on climate change

RCEP is expected to increase trade in the region which could lead to increased demand for energy. If this demand is met with dirty energy sources, it could lead to increased carbon dioxide emissions that exacerbate the impacts of climate change.^[18]

Provisions for reducing tariffs on fossil fuels could make these cheaper and more accessible to member countries.^[19] It may drive further fossil fuel use especially for several RCEP member countries, including China, India, and Indonesia, that are already major producers and consumers of coal.^[20]

There is no explicit provisions promoting renewable energy which sets specific targets or commitments for member countries^[21] and incentivizes member countries to transition to cleaner energy sources for climate mitigation.^[22]

Furthermore, a recent study showed that complete tariff elimination among RCEP members would increase the annual global carbon dioxide emissions from fuel combustion by about 3.1%, doubling the annual average growth rate of global CO2 emissions in the last decade (Figure 1).^[23]

It should be noted that as of 2021, many countries in RCEP have been the highest emitters of carbon dioxide in the previous centuries (Figure 2).^[24]

 

Aside from increasing overall carbon dioxide emissions, the increase in trade would also mean carbon dioxide emissions flows where in trade-related activities cause emissions to be brought to other countries (Figure 3). This is also called carbon leakage^[25], which occurs when emissions are shifted from one country to another as a result of changes in trade patterns. This could make it more difficult for countries to meet their emissions reduction targets under the Paris Agreement.^[26]

Therefore, RCEP could potentially conflict with other international agreements aimed at reducing carbon dioxide emissions, such as the Paris Agreement.^[27]

Aside from carbon emissions, the increase of other greenhouse gas (GHG) emissions in general is expected. RCEP is expected to boost trade between member countries, which could lead to an increase in GHG emissions from transportation and logistics. More trade means more goods being transported by trucks, ships, and airplanes, all of which contribute to GHG emissions. For example, a study by the International Transport Forum found that a 1% increase in trade leads to a 0.7% increase in GHG emissions from transportation.^[28]

RCEP could also lead to an increase in the production of energy-intensive goods such as steel, cement, and chemicals. These industries are major sources of GHG emissions, and an increase in their production could lead to higher emissions.^[29]

Finally, RCEP does not include binding provisions for climate action or emissions reductions. While some member countries have committed to reducing their emissions under the Paris Agreement, the agreement itself does not include provisions for enforcement or penalties for non-compliance. Without these mechanisms, it may be challenging for member countries to take meaningful climate action within the framework of RCEP.^[30]

 

V. Dangers of Investor-State Dispute Settlements

RCEP has an investor-state dispute settlement mechanism (ISDS) which allows foreign investors to sue states and claim compensation if they deem their investments “are adversely affected by the introduction of regulatory or policy changes in the host state”.^[31] This could put governments in danger of facing costly lawsuits from foreign corporations.^[32]

Even during the development of RCEP, a report showed that multinational corporations have launched 50 lawsuits worth at least USD 31 billion using secret international tribunals against 11 countries in Asia. This number can increase when the agreement takes effect. According to the report, “When the state loses an ISDS case or settles a dispute with an investor, governments can be forced to foot the bill with public money. In other words, ISDS effectively allows foreign investors to pass their investment risks on to citizens and public budgets.”^[33] More than one third of these cases are targeting environmental laws.^[34]

 

Summary and conclusion

RCEP’s drive for profit and disregard for environmental protection will worsen natural resource extraction, pollution and destruction of the ecosystems. The neoliberal framework of RCEP reinforces the fundamental ills of the capitalist system that is fundamentally at odds with environmental sustainability.

Environmental damage and destruction affects human populations especially the poor and vulnerable communities. This only aggravates existing problems of the Philippines as a semi-colonial and semi-feudal society.

Foreign trade agreements should prioritize people’s needs especially the poor and vulnerable instead of profit while ensuring environmental protection, rehabilitation and conservation through science-based methods. In addition, the natural resources of the Philppines should benefit mainly the Filipinos and not the global market.

References:
^[1] https://rcepsec.org/#
^[2] https://asean.org/rcep-agreement-enters-into-force/
^[3] https://asean.org/rcep-agreement-enters-into-force/
^[4] https://edition.cnn.com/2017/01/24/asia/tpp-rcep-nafta-explained/index.html
^[5] Phytosanitary: of, relating to, or being measures for the control of plant diseases especially in agricultural crops. https://www.merriam-webster.com/dictionary/phytosanitary
^[6] https://croplife.org/news/the-importance-of-intellectual-property-in-plant-science/
^[7] https://www.eria.org/uploads/media/Books/2022-RCEP-Book1/RCEP-Implications-Challenges-Future-Growth.pdf
^[8] The Third Pole. (2020). The environmental impact of the RCEP agreement. Retrieved from https://www.thethirdpole.net/en/2020/11/26/the-environmental-impact-of-the-rcep-agreement/
^[9] KPMG. (2020). RCEP: Implications for the Mining and Metals Sector. Retrieved from https://assets.kpmg/content/dam/kpmg/xx/pdf/2020/11/rcep-implications-for-the-mining-and-metals-sector.pdf
^[10] Mining Technology. (2020). RCEP: Mining industry winners and losers. Retrieved from https://www.mining-technology.com/features/rcep-mining-industry-winners-and-losers/
^[11] Forest Stewardship Council. (2020). The Implications of the Regional Comprehensive Economic Partnership for Timber Trade and Forests. Retrieved from https://ic.fsc.org/en/news-updates/id/2847
^[12] https://www.bilaterals.org/?new-asia-pacific-trade-agreement&lang=es
^[13] “What is the RCEP and what will it mean for global trade?” BBC News, 16 November 2020, https://www.bbc.com/news/world-asia-54949260
^[14] https://thediplomat.com/2017/10/5-hidden-costs-of-the-rcep-to-people-and-planet/
^[15] The Diplomat. (2020). What Does the RCEP Mean for Asia’s Mining Sector? Retrieved from https://thediplomat.com/2020/11/what-does-the-rcep-mean-for-asias-mining-sector/
^[16] https://newsinfo.inquirer.net/1208953/onerous-provisions-of-kaliwa-dam-project-bared
^[17] https://asia.nikkei.com/Business/Construction/China-s-island-builder-has-US-embassy-in-Manila-surrounded
^[18] The Diplomat. (2020). The Environmental Impact of the RCEP. Retrieved from https://thediplomat.com/2020/11/the-environmental-impact-of-the-rcep/
^[19] Climate Home News. (2020). RCEP: Asia’s new trade deal could undermine Paris climate goals. Retrieved from https://www.climatechangenews.com/2020/11/17/rcep-asias-new-trade-deal-undermine-paris-climate-goals/
^[20] Climate Home News. (2020). RCEP: Asia’s new trade deal could undermine Paris climate goals. Retrieved from https://www.climatechangenews.com/2020/11/17/rcep-asias-new-trade-deal-undermine-paris-climate-goals/
^[21] InsideClimate News. (2020). Asia’s New Free Trade Agreement Has Climate Consequences. Retrieved from https://insideclimatenews.org/news/16112020/asia-rcep-trade-agreement-climate-change-emissions/
^[22] Forbes. (2020). The New Asia-Pacific Trade Deal: Environmental Implications. Retrieved from https://www.forbes.com/sites/oliverwyman/2020/11/26/the-new-asia-pacific-trade-deal-environmental-implications/?sh=2df06a136efa
^[23] Regional trade agreement burdens global carbon emissions mitigation. https://www.nature.com/articles/s41467-022-28004-5
^[24] https://www.carbonbrief.org/analysis-which-countries-are-historically-responsible-for-climate-change/
^[25] Carbon leakage refers to a situation where a company decides to move their production from a country with stringent policies, to a country that is more lenient, leading to an increase in greenhouse gas emissions. https://clear.ucdavis.edu/news/what-carbon-leakage
^[26] “Why RCEP trade deal is bad news for climate and environment,” Climate Home News, 17 November 2020, https://www.climatechangenews.com/2020/11/17/rcep-trade-deal-bad-news-climate-environment/
^[27] Greenpeace. (2020). RCEP trade deal undermines climate commitments. Retrieved from https://www.greenpeace.org/eastasia/press/12964/rcep-trade-deal-undermines-climate-commitments/
^[28] International Transport Forum. (2015). Transport and greenhouse gas emissions: Scenarios and policy options. OECD Publishing.
^[29] The Climate Group. (2020). The impact of trade agreements on climate change. Retrieved from https://www.theclimategroup.org/news/impact-trade-agreements-climate-change.
^[30] “Trade deal RCEP sidesteps tougher environmental action,” Climate Home News, November 19, 2020, https://www.climatechangenews.com/2020/11/19/trade-deal-rcep-sidesteps-tougher-environmental-action/.
^[31] https://www.abc.net.au/news/2016-12-08/report-shows-hidden-costs-of-rcep-trade-deal/8103602
^[32] The Diplomat. (2020). The Risks of RCEP’s Investor-State Dispute Settlement Mechanism. Retrieved from https://thediplomat.com/2020/11/the-risks-of-rceps-investor-state-dispute-settlement-mechanism/
^[33] https://www.abc.net.au/news/2016-12-08/report-shows-hidden-costs-of-rcep-trade-deal/8103602
^[34] https://thediplomat.com/2017/10/5-hidden-costs-of-the-rcep-to-people-and-planet/