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The signing ceremony for RCEP being streamed over Zoom (Getty Images)
The signing ceremony for RCEP being streamed over Zoom (Getty Images)

BusinessNovember 17, 2020

What is RCEP and why are we in it? The major trade deal you’ve barely heard of

The signing ceremony for RCEP being streamed over Zoom (Getty Images)
The signing ceremony for RCEP being streamed over Zoom (Getty Images)

Over the weekend, New Zealand signed on to join the Regional Comprehensive Economic Partnership trade deal, also known as RCEP. What on earth is it, and what does it mean?

What’s the top line on this?

In the most basic terms, the Regional Comprehensive Economic Partnership (RCEP from here on out) is a trade agreement between the 10 members of the Association of Southeast Asian Nations (Brunei, Indonesia, Cambodia, Laos, Indonesia, Vietnam, Thailand, Singapore, Malaysia and the Philippines) and the six countries with which that group has a free-trade agreement. New Zealand is one of those countries, along with China, Japan, Australia and South Korea.

Technically, India also has a free-trade agreement with ASEAN, but after being part of the negotiations for many years, the country pulled out of RCEP. There’s a fast-track mechanism to allow it to come back in if it wants to. The whole thing was largely led by ASEAN, and negotiations have been thrashing around for most of a decade. It was formally signed over the weekend at a virtual summit.

Some of those are pretty big countries. 

Overall, RCEP will cover about 30% of the world’s population, and cover about the same portion of global trade. As the foreign affairs and trade ministry (MFAT) summary put it,”the relative importance of the RCEP region continues to increase in the global context”. It probably shouldn’t escape anyone’s notice that many of the countries involved are those that have done a good job in getting Covid-19 under control, and are thus in a better position than many to accelerate economically out of it.

But not India? What’s that all about?

Securing a free-trade agreement with India was one of the major reasons New Zealand got involved in the first place. However, in the end Indian negotiators had some concerns that were too big to get around. A less important reason for them appears to have been the prospect of New Zealand dairy exports getting much more access. And a more important reason for India appears to be the current tensions with China – both in terms of being flooded with Chinese manufacturing exports, and some diplomatic and military skirmishes that have been taking place recently.

So what does New Zealand get out of RCEP, exactly?

Because New Zealand already has free-trade agreements with everyone else in the agreement, there’s not a lot in terms of market access for exporters. NZ International Business Forum executive director Stephen Jacobi said there have been some minor fixes to existing agreements, particularly with getting more goods into Indonesia, and some extra services trade in a few other countries, but they’re not wildly significant.

However, Jacobi said one advantage of RCEP is that it will consolidate trade rules into one place, which will make things a lot smoother for exporters. “And secondly, particularly in the trade facilitation space – the way goods move around – we have been able to make good gains. One is that all the RCEP members have agreed to a target period for clearance of goods through ports and customs, down to six hours. That is quite a big deal.” He added that there’s a new agreement on “non-tariff barriers”, and a speedier dispute settlement process around them.

RCEP country leaders getting together in 2019 – back then, India was still involved in the negotiations (Photo: Getty Images)

We must be making a ton of money though?

Ah, no. Not really. MFAT estimates that the difference to New Zealand’s annual GDP will be between 0.3 and 0.6% higher as a result of RCEP going through, with it likely to be on the lower end of the scale, given India’s non-involvement. It’s not nothing, but it’s not exactly transformational either.

What about the wider message that trade deals send, in a diplomatic sense?

There’s a reason foreign affairs and trade are part of the same ministry in New Zealand – governments of both stripes have long held that they’re deeply interconnected in terms of the national interest. And for a small country, New Zealand is liable to be bullied without rules in place – trade minister Damian O’Connor said “it shores up support for international trade rules which small countries like New Zealand rely on, at a time when we’re seeing increasing protectionism”.

Jacobi put it even more simply, saying, “if we weren’t at the table, then these people would be making rules that we didn’t have a chance to have a say in. When we’re not at the table as a small country, we always lose. When China and Japan are negotiating arrangements, you can’t really rely on them to think of New Zealand.”

Who exactly is ‘us’ when it comes to major trade pacts?

Some would argue that New Zealand as a whole benefits from trade deals, so “us” means everyone. But one concern being raised by activists against RCEP is that the beneficiaries of trade deals aren’t necessarily representative of the country as a whole.

Edward Miller from the activist network It’s Our Future said “us” is whoever has the most effective lobbying capacity for the government. “So generally, our primary industry exporters and a few other major industries. Workers and unions, environmental or development organisations, digital privacy groups and others don’t enjoy the same kind of access and input throughout the negotiation process. For most of the country (and indeed most of the RCEP countries), trade and investment agreements are something that is done to them rather than by them.”

There were huge protests against the Trans-Pacific Partnership Agreement. Why not with this?

Partly, it’s because some of the most controversial aspects of the TPPA (later renamed the CPTPP) weren’t included in this one. Professor Jane Kelsey, who staunchly opposed the TPPA, said those absences showed that citizens had become “wary and weary” of such deals. In particular, she noted that “there is no chapter on state-owned enterprises or government procurement, no right for foreign investors to enforce special rights through investor-state dispute settlement (ISDS), some intellectual property rights for Big Pharma are absent or diluted, the electronic commerce chapter left out some rules and is not enforceable.”

When the TPPA protests were happening, the ISDS system and the prospect of Pharmac being weakened were two of the really big sticking points mentioned a lot by protesters. Also, this particular trade agreement wasn’t really heavily trumpeted by those pushing for it – they largely got on with it in secret, and the full text has only just been released.

Sorry, hang on, RCEP was negotiated in secret?

Yes. That’s not necessarily unusual for trade agreements, or any sort of negotiation really – secrecy about what gets said in the room allows those doing the negotiation to speak more freely, and trust the process more. But for many opponents, there’s something quite sinister about powerful people sitting in (possibly) smoke-filled backrooms, making decisions on behalf of millions of people. The current government has sought to counter this impression through a feedback and consultation process run over recent years, called Trade For All.

What about Māori interests, and the Treaty of Waitangi? 

There are two points to make here, said Chris Karamea Insley, the chair of Te Taumata, an entity that champions the views of Māori in trade negotiations. The first is that Māori businesses are generally over-represented in the primary industries, and so the ability to export is crucial. “We know that one in every four jobs that gets created in New Zealand is directly derived from international trade. Jobs are so fundamentally important to our Māori people. We need trade enabled for products from our farms and our businesses, in order to be able to employ our people at home.”

And the other important point is that RCEP enshrines the pre-eminence of the Treaty of Waitangi within New Zealand. Karamea Insley said that in recent years, this has become normal for New Zealand’s negotiating position – but that wasn’t the case in the past. And other countries are now aware that “it’s not negotiable that it’s not included” for New Zealand.

So RCEP is now in force, whether we like it or not?

Not yet. The full agreement will take several years to actually implement. And in the world of international trade agreements, that’s not really slow, given it took eight years to get over the line in the first place.

Keep going!
New company DiDi says it will improve the Auckland rideshare industry. (Photo: Lucy Fox)
New company DiDi says it will improve the Auckland rideshare industry. (Photo: Lucy Fox)

BusinessNovember 16, 2020

Will DiDi bring meaningful change to the rideshare industry?

New company DiDi says it will improve the Auckland rideshare industry. (Photo: Lucy Fox)
New company DiDi says it will improve the Auckland rideshare industry. (Photo: Lucy Fox)

International rideshare company DiDi launched in Auckland last week, promising cheaper fares and better takes for drivers. But is the newest player to the rideshare game offering lasting solutions to the industry’s woes?

For weeks, rideshare drivers been promoting DiDi by handing out coupons to Uber and Ola customers, encouraging them to download the app. They’re endorsing DiDi before they’ve even started driving for it, motivated by the new brand’s cash-for-referrals scheme. 

It’s all to do with the distinctive market strategy of the newcomer to New Zealand, which started in China in 2012 and now makes 10 billion passenger trips per year with over 550 million users globally. Australasian company spokesperson Dan Jordan says DiDi’s approach will make ridesharing more affordable in Auckland by offering serious discounts and pressuring other rideshare apps to follow suit. DiDi is passionate about supporting its workers and riders, he says: as well up to 10% more affordable than other brands, DiDi offers an industry-leading average service fee, meaning drivers take home more of the fare – up to 95% – than in other companies. 

“We also provide incentives for when we come into the market. So for instance, drivers will drive with a 5% services fee for the remainder of the year,” he says. “We have a really strong referral programme, so drivers can earn up to $5000 each if they successfully refer 300 riders to DiDi. [We’re] trying to find ways that we can really support the driver community entering the market.”

Dan Jordan, spokesperson for DiDi. (Photo: Lucy Fox)

But DiDi’s promotion is also targeting customers, offering everyone who signs up free vouchers and discounts, including the offer of a free ride for its first four Saturdays of operation. 

“It’s great that we can come in and make ride-sharing more affordable in Auckland, up to 10% more affordable than comparable services, but then also being able to importantly provide greater support for New Zealand’s driver community,” Jordan says.

The enthusiasm among drivers certainly seems to be there. The company has cemented itself as a market leader in Australia, and Jordan has previously said the company estimates it has signed up about 80% of Auckland’s active rideshare drivers, most of whom already drive for Uber and Ola.

So with higher driver pay, and cheaper rates, DiDi appears to be the kind of ethical company the rideshare market has been waiting for. But is it actually proposing meaningful solutions to the many issues plaguing the industry? Based on the inherent nature of the rideshare model, not everyone is convinced.

Anita Rosentreter, strategic project coordinator for First Union, says rideshare companies purposefully distance themselves from drivers by working with them as contractors. This enables them to avoid responsibilities of being an “employer”, such as paying minimum wage, sick leave and KiwiSaver.

Drivers say there’s often a lack of support and communication from the platform they use, she adds.

“The companies try and deliberately keep the drivers at arms’ length, because the more they interact and the more they accept responsibility for work related things, the more they’re displaying that these people probably should be employees rather than contractors.”

These issues were highlighted in a recent Employment Court case between Uber and a former driver, in which the driver’s legal team argued that the dominance and control Uber exerted over the driver indicated that he wasn’t in business for himself, and therefore should be considered an employee.

Didi’s Jordan, however, says his company’s drivers have not expressed any concern about being treated as independent contractors. In any case, he says drivers’ status as independent contractors gives them freedom, and rideshare brands like DiDi must support their drivers to ensure the drivers still support them. 

“Drivers can drive across multiple platforms, so we have to ensure that we treat our drivers with the utmost respect and increase their earning potential so they drive and continue to operate on the DiDi platform. “There’s no one thing, we have to make sure that we support our driver community in all areas, so they continue to support us.”

Many rideshare drivers sign up for all the rideshare apps. (Photo: Getty Images)

Rosentreter is also wary of the promised higher driver rates. Based on the rideshare industry’s track record, she says drivers’ margins may be temporarily squeezed and then – once DiDi has solidified its place in the Auckland rideshare market – the company may decrease the drivers’ take-home fee.

Rideshare companies are able to do this because their drivers are not employees. Employees in New Zealand are protected by the Wages Protection Act which by law prohibits employers from decreasing workers’ pay. When drivers are not employees, they lose this certainty, which can happen without any warning or agreement, says Rosentreter.

“We’ve seen it before where [new rideshare brands] come in and all offer these great things, and then turn around and lower them. Because they’ve just given themselves that much power.”  

Rosentreter says drivers have some autonomy in being able to pick and choose which apps they drive for, but most apps behave in the same way. Drivers often drive for more than one app because they are not making minimum wage and struggle to get 40 hours of work each week. 

It’s out of desperation that they’re signing up to each different one, to try and get as much work as possible, to try and get as much income as possible. 

While she does not know how DiDi will get on in the Auckland market, Rosentreter says in her experience, all apps follow a similar model. They might offer deals that benefit drivers and riders for a limited period of time, but always as a marketing tool to establish a point of difference from other apps rather than committing long term to driver rights. 

She says it would be great if one of the rideshare brands agreed to work with First Union to establish minimum pay and conditions, if they were really serious about looking after their drivers. 

“But our feeling so far is they benefit from misclassifying these workers as contractors, and that’s precisely the business model they’re after,” she says.

Rosentreter says DiDi’s dedication to their drivers and customers will become clear over time, but she does not expect much to change. 

“If they’re all participating in a race to the bottom on fares, it’s very likely they’re also participating in a race to the bottom on wages. Basically, if the money isn’t coming in, then the drivers aren’t going to be getting it.”

Earlier this year, First Union submitted to the government while they were undergoing a consultation process into legislative options to fix these issues. Rosentreter says she hopes they prioritise it, as the increase in redundancies from Covid-19 means more and more people are having to settle for precarious work.

She says many of these people who are used to more secure, traditional employment are signing up to drive for rideshare companies, “without really understanding what they’re signing up for, or what they’re signing away”.

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