On November 15, the members of the ASEAN community, plus China, Japan, South Korea, Australia, and New Zealand signed the Regional Comprehensive Economic Partnership (RCEP) Agreement.
Here are the main points about it.
What Is the RCEP About?
The RCEP is a comprehensive free trade agreement (FTA) between the nations of Southeast Asia and their trading partners in the Asia-Pacific region. When implemented, it will be the largest trading bloc in the world, encompassing 30% of the global GDP and 30% of the world population.
The RCEP covers trade in goods, trade in services, investment, economic and technical cooperation, and new rules for electronic commerce, intellectual property, government procurement, competition, and small and medium sized enterprises.
It also marks a cornerstone as it is the first FTA between China, Japan and South Korea.
Which Countries Are Part of RCEP?
The RCEP was signed by 15 Asian countries from Southeast Asia, East Asia and Pacific.
Southeast Asia (ASEAN)
India, which was among the original partners of the RCEP, withdrew from the agreement on concerns about exposing its manufacturing sectors to cheap competition from East Asia.
Why Did Countries Sign RCEP?
Back in 2012, when negotiations started, many ASEAN countries had bilateral FTAs with their Asian trading partners. For example, Thailand had its own FTA with Japan, Japan–Thailand Economic Partnership Agreement (JTEPA) signed in 2007, whereas Singapore had signed the Japan-Singapore Economic Partnership Agreement (JSEPA) in 2002 already.
The idea was to substitute this web of bilateral agreements with one multilateral agreement between the whole ASEAN community and the other economies of Asia-Pacific.
What Does RCEP Cover?
The RCEP is composed of 20 chapters and covers:
Chapter 2: trade in goods;
Chapter 3: rules of origin, i.e. the criteria that determine where a product is made. This is a game changer. Until now, ASEAN’s trade agreements had different rules of origin. For example, if a company in Malaysia makes a bicycle it might be eligible under a free trade deal with Japan but would need different components to be eligible under a deal with South Korea. Now, manufacturing a product for RCEP works for all 15 countries.
Chapter 4: customs procedures and trade facilitation;
Chapter 5: sanitary and phytosanitary measures;
Chapter 6: standards, technical regulations and conformity assessment procedures;
Chapter 7: trade remedies.
Chapter 8: trade in services including specific provisions on financial services, telecommunication services, and professional services;
Chapter 9: temporary movement of natural persons.
Chapter 10: investment;
Chapter 11: intellectual property;
Chapter 12: electronic commerce;
Chapter 13: competition;
Chapter 14: small and medium enterprises (SMEs);
Chapter 15: economic and technical cooperation;
Chapter 16: government procurement;
Chapter 19: dispute settlement.
In terms of market access, the RCEP Agreement achieves liberalization in trade in goods and services and has extended coverage to investment.
Are There Areas Where RCEP Falls Short?
Apart from the absence of India, which leaves out a huge market in Asia, there are 5 areas where the RCEP falls short.
- Tariffs reduction: while RCEP reduces import tariffs by 90%, it is less ambitious than the overlapping Trans-Pacific Partnership trade deal (TPP), which cut tariffs by 100%.
- Common standards: RCEP does relatively little to set common standards for products.
- Agriculture: the RCEP leaves largely untouched the agricultural sector.
- Services: because the RCEP includes both rich and poor countries, diverging interests had to be accommodated. As a result, the coverage of the services in the FTA is mixed.
- E-commerce: perhaps the biggest disappointment given the relevance of the sector, as the 15 nations were unable to agree any rules on cross-border data flows or a customs moratorium on data transmission.
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