All about World's largest trade deal RCEP
In the following article, we are going to explain what exactly RCEP is. The Regional Comprehensive Economic Partnership is also known as the world’s largest trade deal. The agreement is becoming more and more dominant in the global economy as we know it today. RCEP allows and regulates business transactions of many kinds within its territory. Due to its major impact on the global and local economy, it is important to know about this trade agreement. Reading through the following pages you will get a deeper understanding of this deal. As a small or medium-sized enterprise, you might also find out if you can benefit from this.
The world’s largest free trade pact, the Regional Comprehensive Economic Partnership (RCEP), could help export-reliant Asian companies and may be good diplomacy, experts say.
What is RCEP, the world's largest free trade deal?
Initially conceived in Bali in 2011, RCEP is the world’s largest trade agreement ever. It is also known as the Regional Comprehensive Economic Partnership. This deal operates as a free trade agreement between many dominant players throughout the world. It was introduced at the 19th ASEAN (Association of Southeast Asian Nations) summit. Throughout the next decade, negotiations were held and all member countries have been finalizing their conditions and signed the deal. Its current 15 member nations account for over one-third of the global population. RCEP will cover about 30% of global gross domestic product (GDP), worth $26.2 trillion (€23.17 trillion). This makes the trade block the largest in human history. Therefore its impact is undeniable.
The Regional Comprehensive Economic Partnership is aimed to help reduce tariffs and red tape. This entails a set of commonly introduced policies or rules of origin. This is introduced with the purpose to boost supply chain operations and their effectiveness throughout internal and external markets alike.
RCEP, though, is not as complex as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. This similar free trade agreement includes some of the same countries as well. Unfortunately, though one aim is to allow equal opportunities and narrow the economic gap, still the Regional Comprehensive Economic Partnership does not yet seem to focus on equal standards. This is true when it comes to labor markets and environmental policies, as well as other economic vulnerability areas within the member states. The partnerships are continually evolving and have vastly elaborate plans. As an example, Japan’s plans for new tariff regulations and guidelines are a document of over 1300 pages.
Members of RCEP
To strengthen the bond of the earlier existing ASEAN +1 FTAs, RCEP was formed. The main purpose of the agreement was to increase the economic potential among its member countries. It was also an important goal to reduce development gaps among the member states. Besides, it helps trade and investment potentials and gets rid of unnecessary pre-existing obstacles. Later in 2012, the partnership’s leaders introduced the Guiding Principles and Objectives for Negotiating the Regional Comprehensive Economic Partnership. The goal of this was to establish a high value and equally beneficial agreement among ASEAN members and its FTA partners alike. The Regional Comprehensive Economic Partnership’s 15 member countries and their respective ratification dates are:
- Indonesia – November 15, 2020
- Myanmar – November 15, 2020
- Philippines – November 15, 2020
- Singapore – April 9, 2020
- China – April 15, 2020
- Japan – June 25, 2020
- Brunei – October 11, 2020
- Cambodia – October 15, 2020
- Thailand – October 28, 2020
- Vietnam – October 29, 2020
- Australia – November 2, 2020
- New Zealand – November 2, 2020
- South Korea – December 3, 2021
- Malaysia – January 17, 2022
The Economic Significance of RCEP
With a total of 16 member states, RCEP accounts for one-third of the world’s GDP. By calculations, it is expected to rise to the value of half of all global GDP by the year 2050. This trade agreement aims to allow for services, products, investments, e-commerce, intellectual property and any goods to flow easier between its member states. By making the previous factors happen easier, the aim is to increase the efficiency of economics. Mostly small and medium-sized enterprises are allowed in on this economic collaboration as larger, global enterprises tend to have their own systems and trade agreements already. Here are some of the key happenings in RCEP from its start:
- 2011During the 19th ASEAN Summit, the concept of RCEP was introduced to China and Japan as well as fellow potential members.
- 2012 Cambodia endorses a new RCEP framework.
- 2013 First RCEP negotiations take place.
- 2020The 29th RCEP negotiations commenced in April as progress was delayed by the current pandemic.
- 2021 Several member countries, such as Japan and China have progressed in their ratification processes.
- 2022 The first 10 member countries reached full ratification for RCEP on January 1st.
The Impact of RCEP
The agreement that the Regional Comprehensive Economic Partnership embodies is significant. This organization has the power and potential to create new ways through which business is conducted. This could be achieved by new regulations as well as new opportunities provided by RCEP for its member states or even outsiders by way of new deals. Affected areas could be new opportunities for small and medium-sized enterprises. One specific obstacle that will be eased by the organization is making it easier to access markets when it comes to goods or services. Besides, RCEP will help boost the transparency of trade investments and logistics as well as certain transport processes. Its members need to deepen their relationship regarding investment and trade. As well as to strengthen their engagements with local and global supply chains.
RCEP finds it important also to focus on inclusivity and embrace the new opportunities and challenges that come with globalization. One significant recent change is of course the trade wars strongly related to trade liberalization. After its inception RCEP has faced both positive and negative outcomes and reactions:
RCEP was called, by Li Kenqiang Chinese premier, a victory in free trade. It is also a significant step forward for many regions joining the agreement. Besides, several economists believe this deal will help pull the global economy back towards Asia once more.
One thing that strikes me the most about the RCEP is that the RCEP brings together countries at different stages of economic development. The deal combined an existing agreement between the member nations of the ASEAN – Brunei, Cambodia, Indonesia, Thailand, and Vietnam and incorporated those into one single agreement. The RCEP contains specific provisions that will help less-developed countries Cambodia and Myanmar.
It also said that beyond improving the ways of doing business, RCEP would spark the creation of new regional supply chains apart from strengthening existing networks, boosting the growth of domestic businesses as they immerse into the global trading ecosystem. “Business communities, from large to small scale entrepreneurs, are encouraged to take advantage of the vast investment opportunities and greater participation in regional and global value chains presented by this mega-trade agreement,” it said. The mega free trade agreement has been applauded by the Asia-Pacific region as an important step toward deeper.
The mega free trade agreement has been applauded by the Asia-Pacific region as an important step toward deeper regional integration and a renewed worldwide momentum for free trade and multi-lateralism at a time of multiple global uncertainties.
RCEP, at the same time, eases pressure on China to reach separate trade deals with other countries, for example with Japan and South Korea, Menon said. China, Japan and South Korea, already mired in historic political disagreements, have been working on a three-way trade deal since 2012 with no breakthroughs. All three are now RCEP members. The presence of many countries under one agreement stands to reduce the influence that China as the world’s No. 2 economy has in its two.
The agreement has been called out on its negative copyright provisions. Besides, in 2019 India pulled out of the deal over local economic and environmental concerns. This raises worries about China’s potential to single-handedly dominate RCEP and the world economy alike.
The least developed countries in Asia ― Cambodia, Laos, Myanmar ― currently benefit from inter-ASEAN trade, which could be “eroded” by RCEP trade, Langhammer said.
For example, the poorer nations’ exports to Singapore could be usurped by Japan, which now has the same trade access to all ASEAN countries.
Who benefits most from RCEP?
Different person with different idea:
The RCEP pact comes into effect January 1 and eases trade between Southeast Asian and Asia-Pacific nations. China Japan South Korea are expected to benefit the most.
China set to benefit most
Langhammer said there will be differences among the 15 signatories of RCEP in the benefits of the agreement. China is likely to gain the biggest economic benefit, compared to Japan and Korea. The deal will be customized to China’s economic interest both in exporting. RCPE is planning to give China free trade to key export markets such as Japan and Korea as well as securing access to ASEAN export markets.
growth and revitalisation of economies, anchored on the rules-based multilateral trading system, RCEP enables Malaysia to enjoy the global trade and investment ecosystem, benefiting from the eventual elimination of around 90 percent of tariff among members. “Other advantages to be gained include further liberalization of trade encompassing removal of non-tariff barriers, increased trade facilitation, removal of barriers to the services sector as well as enhancement of business environment through regulations relating to intellectual property protection, government procurement practices and e-commerce”