Regional Comprehensive Economic Partnership
RCEP is a free trade agreement in the Asia-Pacific region between ten member states of ASEAN and 5 ASEAN-FTA partners for a total of 15 countries. On Sunday, November 15, at the sidelines of the annual summit of Southeast Asian leaders and their regional partners, RCEP was signed virtually in an online signing ceremony hosted by Vietnam. The trade bloc is the world’s largest making up nearly a third of the world’s population and account for about 29 percent of the global GDP.
ASEAN (Association of Southeast Asian Nations) include 10 countries.
ASEAN-FTA (Free Trade Area) Partners
includes 5 countries.
India, an FTA partner of ASEAN, had initially participated in the RCEP negotiations but opted out in 2019 citing concerns it would hurt their domestic producers due to a flood of manufactured goods from China and agricultural and dairy product from the Oceania states, Australia and New Zealand. Even without India’s participation, it’s larger than any other trading bloc such as the European Union (EU) and the United States-Mexico-Canada Agreement (USMCA).
The RCEP trade pact was first conceived in 2011 during the ASEAN Summit in Bali, Indonesia. Formal negotiations were launched during the 2012 ASEAN Summit in Cambodia. In 2013, when TPP (Trans-Pacific Partnership) were in talks, RCEP negotiation were also underway with 16 countries. On February 4, 2016 the TPP was signed by all twelve participating countries. However, in January 2017, the newly elected U.S. president, Donald Trump, withdrew the U.S. signature from the TPP. As such the agreement could not be ratified as required and did not enter into force. In May 2017, the remaining eleven countries revived TPP talks and reached a final agreement in January 2018. In March of the same year, the eleven countries signed a revised version called the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership). The CTPP was the third largest free trade bloc in the world at the time.
RCEP chances of success was enhanced when the U.S. pulled out of TPP and gave China the opportunity to be a part of a trade bloc to help counter U.S. influence in the region. As the U.S.-China trade war not only hurting Chinese exporters, Asian exporter in the region were also negatively affected as demand for their goods were reduced and slowing.
“RCEP was hard fought, but a choice made easier by the calculations that Asia needed to push back against protectionism even as the United States chose that path.”
However, the RCEP implementation will still hinge on the ratification of six ASEAN states and three FTA Partners, with some anticipating the process taking as long as two years. According to RCEP members, India is still welcome to join the pack and is open to Central Asian countries, such as Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan Uzbekistan.
RCEP has taken the existing agreements signed by the 10 members of ASEAN and combines them into a single multilateral pack that extends to the 5 FTA Partners.
What RCEP will do.
Reduce or remove tariffs on industrial and agricultural products over a period of time.
Simplify customs procedures and improve measures to facilitate trade by allowing businesses to sell the same goods within the bloc without the need to fill out separate paperwork for each export destination.
Improve investment rules and disciplines to better support businesses’ regional investment which can help emerging economies in the trade bloc modernize.
More preferential market access, most notably into China, Japan and South Korea.
Facilitate emerging trade fields such as e-commerce, intellectual property (IP) and competition policy rights.
Critics point out the trade pack is relatively unambitious.
Under TPP almost 100 percent of the trade tariffs would have been eliminated while RCEP will eliminate about 90%.
There are no agreed rules on e-commerce cross-border data flow or a customs moratorium on data transmission.
China will be huge influencer in the trade bloc as India, the third largest economy in the world, has pulled out of the deal and would have provided a counterbalance to China.
Deficiency of services market access. One of the major reasons India pulled out of the deal.
Lacks the call for commitments from member countries to protect workers’ rights and the environment.
Although RCEP was conceived and ASEAN led, many critics feel without the involvement of India, China will eventually dictate the future path of the trading bloc as it is by far the largest market in the pack. With U.S. out of the picture in both, CPTPP and RCEP, the U.S. sits on the sidelines and traditional trading superpowers, like those in the EU, will have little say in Asia’s trading rules.