RCEP – The Largest Trading Bloc

Regional Comprehensive Economic Partnership (RCEP) is a trade agreement that aims to deepen economic integration between the Asia-Pacific region’s countries. It includes the 10-member Association of Southeast Asian Nations (ASEAN) and five of its major trading partners. These are China, Japan, South Korea, Australia, and New Zealand. The agreement covers a range of issues, including trade in goods and services, investment, e-commerce, and intellectual property rights.

With the agreement signed in November 2020, RCEP has become the world’s largest free trade agreement. It covers nearly a third of the global economy and population. This article provides an overview of the RCEP, its objectives, and benefits, key features, and potential impact on the global economy. We also discuss here criticisms and challenges, future plans, and key takeaways for businesses and consumers.

1. Introduction

The Regional Comprehensive Economic Partnership (RCEP) is a free trade agreement between 15 countries in the Asia-Pacific region. The agreement was signed on November 15, 2020, after eight years of negotiations. RCEP is the largest free trade agreement in the world. It covers a population of about 2.2 billion people and represents around 30% of the world’s GDP.

Background

The idea of a new pact was initiated in November 2011, during the 19th meeting of ASEAN. RCEP negotiations began in 2012, with the aim of creating a comprehensive free trade agreement that would promote economic cooperation among countries in the Asia-Pacific region. The agreement is like an alternative to the Trans-Pacific Partnership (TPP), which was abandoned by the United States in 2017.

RCEP negotiations were led by the Association of Southeast Asian Nations (ASEAN) and included countries such as China, Japan, South Korea, Australia, and New Zealand. On 15th November 2020, the agreement was finally signed at a virtual ASEAN meeting hosted by Vietnam. The new agreement will take place after the ratification by at least SIX ASEAN members and THREE NON-ASEAN members.  

2. Member Countries

The 15 member countries of RCEP are as follows:

1. Brunei
2. Cambodia
3. China
4. Indonesia
5. Japan
6. Laos
7. Malaysia
8. Myanmar
9. Philippines
10. Singapore
11. South Korea
12. Thailand
13. Vietnam
14. Australia
15. New Zealand

Overview of Member Countries’ Economies

The member countries of RCEP have diverse economic structures, ranging from developed economies such as Japan, Australia, and New Zealand, to emerging economies such as Cambodia, Laos, and Myanmar. China is the largest economy in RCEP, accounting for about 30% of the region’s GDP. The other major economies in RCEP are Japan and South Korea.

3. Objectives and Benefits

The objectives of RCEP are to promote economic cooperation and integration among member countries, reduce trade barriers, and create a more business-friendly environment. The agreement aims to facilitate trade and investment flows among member countries, promote regional value chains, and strengthen economic ties between the Asia-Pacific region and the rest of the world.

Benefits for Member Countries

RCEP is expected to bring numerous benefits to member countries. These include increased market access, reduced tariffs, and streamlined regulations. The agreement aims to promote regional economic growth and create new opportunities for businesses and consumers. For some countries, such as Cambodia, Laos, and Myanmar, RCEP could be a key driver of economic development.

Benefits for Businesses and Consumers

RCEP has a goal to provide significant benefits to businesses and consumers in member countries. The agreement will make it easier and cheaper for companies to trade and invest across borders, which will help to promote regional economic integration and create new opportunities for businesses. Consumers are likely to benefit from lower prices and a wider variety of goods and services, as a result of increased competition and reduced trade barriers.

4. Key Features of the Agreement

The RCEP agreement covers a wide range of areas, including trade in goods and services, investment, intellectual property, e-commerce, and dispute settlement. The agreement aims to reduce tariffs and non-tariff barriers to trade, promote investment, and strengthen economic cooperation among member countries.

Market Access and Tariff Reductions

Under the RCEP agreement, member countries will reduce tariffs on trade in goods and services, and provide greater market access to each other’s markets. The agreement also includes provisions to simplify customs procedures and reduce non-tariff barriers to trade.

Rules of Origin

The RCEP agreement includes rules of origin to determine which goods are eligible for preferential treatment under the agreement. The rules of origin aim to promote regional value chains and prevent non-member countries from taking advantage of the agreement.

Intellectual Property Rights Protection

The RCEP agreement includes provisions to protect intellectual property rights, including patents, trademarks, and copyright. The agreement aims to promote innovation, creativity, and technology transfer among member countries.

5. Potential Impact on the Global Economy

The global economy is highly interconnected. Countries engage in international trade and investment to drive economic growth and development. According to the World Bank, the global GDP was valued at $87.7 trillion in 2019, with the top economies being the United States, China, and Japan.

Impact on Global GDP

The Regional Comprehensive Economic Partnership (RCEP) has the potential to significantly impact the global economy. The agreement involves 15 countries, which together make up almost a third of the world’s population and around 30% of the world’s GDP. The agreement aims to boost economic growth by increasing trade and investment among member countries. According to projections by the Peterson Institute for International Economics, the RCEP could add $186 billion to the global economy annually by 2030.

Impact on International Trade

The RCEP aims to reduce trade barriers and promote free trade among member countries. This includes the elimination or reduction of tariffs and non-tariff barriers on a wide range of goods and services. The agreement also includes provisions for intellectual property rights, e-commerce, and government procurement. The RCEP is expected to simplify and harmonize trade rules, making it easier for businesses to trade and invest across borders.

6. Criticisms and Challenges

While the RCEP has the potential to benefit member countries and the global economy, there are also criticisms of the agreement. Some critics argue that the RCEP does not go far enough in protecting labor and environmental standards. Others are concerned about the impact of the agreement on small businesses and workers in member countries, particularly in industries that may face increased competition from imports.

Challenges

The implementation of the RCEP agreement also poses some challenges. Some of the provisions of the agreement will need to be ratified by member countries before they can come into effect. There may also be implementation challenges related to the complex rules and regulations involved in trade and investment. In addition, the agreement may face opposition or resistance from other countries or international organizations.

7. Future and its Role in Shaping Global Trade

The RCEP agreement was signed in November 2020 and is currently awaiting ratification by member countries. The RCEP is also expected to play a key role in shaping the future of global trade, particularly in the Asia-Pacific region.

RCEP’s Role in Shaping Global Trade

The RCEP is a potential rival to the Trans-Pacific Partnership, which was abandoned by the United States in 2017. The RCEP could lead to greater economic integration and cooperation among member countries, potentially setting a precedent for other regional trade agreements. The agreement may also encourage other countries to join or negotiate similar agreements, further increasing the trend toward free trade and globalization.

8. Conclusion and Key Takeaways

The RCEP agreement has the potential to significantly impact the global economy by increasing trade and investment among member countries. The agreement aims to reduce trade barriers and promote free trade, while also addressing issues related to intellectual property rights, e-commerce, and government procurement. However, there are also criticisms of the agreement related to labor and environmental standards, as well as concerns about the impact on small businesses and workers.

Implications for Businesses and Consumers

The RCEP could have significant implications for businesses and consumers, particularly in the Asia-Pacific region. The agreement may lead to increased competition and greater opportunities for businesses to trade and invest across borders. Consumers may also benefit from lower prices and greater access to a wider range of products and services. However, the agreement may also lead to job losses in some industries and potentially contribute to income inequality.

Close Up

In conclusion, the Regional Comprehensive Economic Partnership (RCEP) is a significant development in the Asia-Pacific region’s trade landscape. The potential impact of the agreement on the global economy will shape international trade in the years to come.