The RCEP

The RCEP

The RCEP

The RCEP (Regional Comprehensive Economic Partnership) is the World’s Largest free trade agreement covering 15 states. These 15 states cover over 2 billion people and some of the world’s most highly integrated nations in the global economy, responsible for about 1/3 of the world’s economic output. Negotiations started in 2013, lasting 31 rounds till the deal was formally signed on the 15th of November 2021. The primary aim of the RCEP was to simplify the so-called ‘Noodle bowl’ of overlapping and inconsistent trade agreements in East Asia, enabling firms to build a supply chain across the region. In the past, ASEAN +1 agreements had been the leading trade agreement in Asia, but they were limited, particularly on issues like trade in services and investment. The RCEP aims to be more comprehensive. Its Guiding Principles document states that it will cover ‘trade in services, investment, economic and technical cooperation, intellectual property, competition, dispute settlement, and other issues.

The RCEP is Chinas first multilateral free trade agreement, and as can be seen from this graph, it is set to realise the most gain of any states parties. These projections from the Asian Development Bank show that trade-related economic gains are situated in East Asia with China, Japan and South Korea. Existing agreements like ASEAN + 1 cover 82 % of RCEP trade. However, this is the first FTA agreement involving Japan, South Korea and China. ASEAN is already well integrated, with 70% of internal ASEAN trade occurring without tariffs. Even though ASEAN states will not benefit as much as East Asia, the RCEP embodies the ASEAN idea of ‘Omni-enmeshment’; pulling in major powers and balancing their influence. The RCEP will also address some of the weaknesses of the ASEAN +1 trade agreements. Namely the fact they focus heavily on trade in goods without too much emphasis on services. 

The RCEP has gained prominence in the background of the US pulling out of the Trans-Pacific Partnership. Japan has since taken over as the lead negotiator for the less ambitious Comprehensive and Progressive Agreement on Trans-Pacific Partnership. The CPTPP is watered down compared to the TPP but still far more ambitious than the RCEP in terms of standards on labour, environmental protection and human rights. This lack of ambition has led former Australian Prime minister Malcolm Turnbull to label the RCEP a low ambition deal. He also highlights that many states are already enmeshed in trade bilateral deals with different schedules and timelines for tariff reduction depending on the state. Therefore materialising the benefits of RCEP will take time. However, this pragmatic approach that targets low hanging fruit first and builds on early gains is a trademark of the ASEAN way. The RCEP 5 year review Mechanism reflects this, enabling states parties to slowly bring more issues under the purview of the disputes mechanism system. This method of slower integration is crucial when there is such a broad diversity of economies in the RCEP at varying stages of development. The RCEP also can be a forum to discuss setting new rules and standards of trade in things like 3D printing and Intellectual property. 
 
 
An essential part of the RCEP picture is also who is missing out. Notable omissions are the US and India. Whilst the US had its complementary or competing agreement in the TPP, India was heavily involved in RCEP negotiations but withdrew due to significant domestic opposition. This opposition was driven by protectionist concerns about cheap Chinese imports flooding India. To conclude, the most important benefit of the RCEP maybe what we can’t measure and what doesn’t happen. Specifically the lack of protectionist barriers, tariffs or otherwise implemented by states parties. 
 

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