Regional Comprehensive Economic Partnership
The Regional Comprehensive Economic Partnership (RCEP /ˈɑːrsɛp/ AR-sep) is a free trade agreement among the Asia-Pacific countries of Australia, Brunei, Cambodia, China, Indonesia, Japan, South Korea, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, Thailand, and Vietnam.[2] The 15 member countries account for about 30% of the world's population (2.2 billion people) and 30% of global GDP ($29.7 trillion), making it the largest trade bloc in history.[3] Signed in November 2020, RCEP is the first free trade agreement among the largest economies in Asia, including China, Indonesia, Japan, and South Korea.[4]
"RCEP" redirects here. For other uses, see RCEP (disambiguation).Type
15 November 2020
Hanoi, Vietnam (virtual host)
1 January 2022
14
Australia (1 January 2022)
Brunei (1 January 2022)
Cambodia (1 January 2022)
China (1 January 2022)
Indonesia (2 January 2023)
Japan (1 January 2022)
South Korea (1 February 2022)
Laos (1 January 2022)
Malaysia (18 March 2022)
New Zealand (1 January 2022)
Philippines (2 June 2023)
Singapore (1 January 2022)
Thailand (1 January 2022)
Vietnam (1 January 2022)
English (lingua franca)[1]
The RCEP was conceived at the 2011 ASEAN Summit in Bali, Indonesia, while negotiations formally launched during the 2012 ASEAN Summit in Cambodia.[5][6][7] India, which took part in the initial negotiations but later decided to opt out, was invited to join the bloc at any time. Any other country or separate customs territory in the region can accede to the pact from 1 July 2023 onward.[8][9][10] The treaty was formally signed on 15 November 2020 at the virtual ASEAN Summit hosted by Vietnam. For the first ten ratifying countries, the trade pact took effect on 1 January 2022.[11][12][13]
The RCEP includes a mix of high-,[note 1] middle-,[note 2] and low-income countries.[note 3] It is expected to eliminate about 90% of the tariffs on imports between its signatories within 20 years of coming into force, and establish common rules for e-commerce, trade, and intellectual property.[4] Several analysts predicted that it would offer significant economic gains for signatory states, boost post-pandemic economic recovery, as well as "pull the economic centre of gravity back towards Asia, with China poised to take the lead in writing trade rules for the region," leaving the United States behind in economic and political affairs in the region.[note 4] Reactions from others were neutral or negative,[note 5] with some analysts saying that the economic gains from the trade deal would be modest.[30][31][32][33] The RCEP was criticized by the Australian Institute of International Affairs and Public Services International, among others, which said that it ignored labour, human rights, and environmental sustainability issues.[6][34][35]
Contents[edit]
The agreement is intended to reduce tariffs and red tape. It includes unified rules of origin throughout the bloc, which may facilitate international supply chains and trade within the region.[67][68] It also prohibits certain tariffs. It does not focus on labour unions, environmental protection, or government subsidies.[67]
The RCEP is not as comprehensive as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, another free trade agreement in the region that includes some of the same countries.[4]
The RCEP "does not establish unified standards on labour and the environment, or commit countries to open services and other vulnerable areas of their economies."[69]
The tariffs schedule just for Japan is 1,334 pages long.[69]
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Reactions[edit]
Positive[edit]
When the RCEP was signed, Chinese premier Li Keqiang declared it "a victory of multilateralism and free trade".[6] Singaporean prime minister Lee Hsien Loong called it "a major step forward for our region" and a sign of support for free trade and economic interdependence.[68] Vietnamese prime minister Nguyễn Xuân Phúc said the RCEP will be conducive to economic recovery and bring prosperity to enterprises and people in all countries concerned.[130] Cambodian Prime Minister Hun Sen stated that the RCEP has great potential to address major challenges as well as has a crucial role in maintaining prosperity and political stability in the region.[131]
Several analysts predicted that it would help stimulate the economies of signatory states amid the COVID-19 pandemic, as well as "pull the economic centre of gravity back towards Asia, with China poised to take the lead in writing trade rules for the region", leaving the U.S. behind in economic and political affairs.[6][14][15]
Mohamed Azmin Ali, Minister of International Trade and Industry of Malaysia, said the RCEP would encourage local businesses to enter global markets and would increase Malaysia's exports. He stated that RCEP signatories would enjoy preferential treatment due to the removal of tariff and non-tariff trade barriers.[21]
Joko Widodo, President of Indonesia, stated that the signing of the RCEP was a historic day that signalled Indonesia's strong commitment to multilateralism. Agus Suparmanto, Indonesian Minister of Trade, said that the RCEP could boost Indonesia's exports to signatory countries by 8-11% and boost investment into Indonesia by 18-22%, and expressed confidence that the trade pact would benefit Indonesian business.[20]
Hiroaki Nakanishi, Chairman of the Japan Business Federation, said the RCEP will help expand trade and investment in the region, and will bring further prosperity and stability, which is very important for achieving a free and open international economic order.[132]
Moon Jae-in, the President of South Korea, praised the RCEP as an unprecedented mega regional trading agreement and expressed confidence that it will "contribute to the recovery of multilateralism and the development of free trade around the world, beyond the region". Moon also stated that he expects the RCEP to open the world's biggest e-commerce market.[22] The Korean Chamber of Commerce and Industry welcomed the conclusion of the RCEP, expecting that it would "expand a new free trade bloc and serve as the basis for revitalizing the Asia-Pacific regional economic markets". The RCEP will benefit Korean companies by removing tariffs on several Korean imports in signatory states, especially in steel, automobiles and electronics.[23]
Kishore Mahbubani, Singapore's former permanent representative to the United Nations and former President of the United Nations Security Council, stated that the "future of Asia will be written in four letters, RCEP" and that India did a major geopolitical favour to China by withdrawing from the RCEP, just as the United States did by withdrawing from the CPTPP. Mahbubani added that with India and the United States absent, "a massive economic ecosystem centered on China is evolving in the region".[133]
According to Peter Petri and Michael Plummer at the Brookings Institution, the agreement represented "a triumph of ASEAN's middle-power diplomacy" and would lead to significant increases in world incomes and trade by 2030, even though it "says nothing at all about labor, the environment, or state-owned enterprises". They added, "However, ASEAN-centered trade agreements tend to improve over time."[16]
Criticism[edit]
In 2016, the Electronic Frontier Foundation described the first draft of RCEP's intellectual property provisions as containing "quite simply the worst provisions on copyright ever seen in a trade agreement." They praised the second draft for removing some of the most problematic provisions similar to the ones in the Trans-Pacific Partnership, but described as unnecessary the new broadcasting rights provision, which gives broadcasters exclusive control over content that has been broadcast, even if they do not hold any copyright in said content. They wrote that a prohibition on reproduction of broadcast content was "such an extreme proposal that it is currently considered off the table" in the proposed Protection of Broadcasts and Broadcasting Organisations Treaty.[24]
India pulled out of the deal in November 2019, primarily due to concerns of dumping of manufactured goods from China and agricultural and dairy products from Australia and New Zealand, potentially affecting its own domestic industrial and farming sectors.[25] Due to India's withdrawal, there are concerns that China may dominate RCEP.[68] ASEAN leaders stated that India was welcome to return and join the bloc. Any other state may join RCEP 18 months after it comes into force.[134]
The Wall Street Journal reported in November 2019 that the tariff-related liberalisations from RCEP would be modest, calling it a "paper tiger". A comprehensive study into the deal shows that it would add just 0.08% to China's 2030 GDP without India's participation.[31][32]
Human rights groups said RCEP could negatively affect small farmers, lead to more land conflicts, and make workers in poorer countries worse off. Rashmi Banga, a senior economist at UNCTAD, said that implementing RCEP at a time of crisis will make poorer coumtries in Southeast Asia even more vulnerable, adding, "Most Asean nations will see rising imports and declining exports. That will worsen their balance of trade and weaken their fiscal position."[35]
Former Australian prime minister Malcolm Turnbull said that despite the "hoopla", the RCEP was "a really low-ambition trade deal that we shouldn't kid ourselves on", adding, "It's a very old fashioned trade deal. It's low ambition. It's been affected largely for strategic reasons."[26][135]
CNBC reported that the economic benefits from RCEP would be modest and could take years to materialise, with analysts from Citi suggesting that RCEP was "a coup for China" non-economically. The Citi report also said that India is one of the biggest losers from RCEP, adding, "exclusion will likely make India less attractive as an alternative production base versus ASEAN."[30]
Indian external affairs minister Subrahmanyam Jaishankar said it is not in India's interest to join the RCEP, as the trade deal would have "fairly immediate negative consequences" for India's economy.[136][137] Zia Haq, associate editor at Hindustan Times, said India has "rightly shunned" the RCEP because at the moment it cannot take advantage of free-trade agreements. He went on to say, "India fears the RCEP will also limit its policy-making room in areas such as foreign investment." He said that according to some analysts, there will be limited gains from the RCEP without India, which is Asia's third-largest economy.[33]
Yen Huai-shing, deputy director at the Chung-Hua Institution for Economic Research, wrote on Taipei Times that the RCEP is "not to have a strong impact" on Taiwan. She said that most observers did not expect the RCEP to provide a high degree of openness, and that it provides no dispute settlement mechanism when handling certain trade issues such as meat inspection regulations, adding, "In other words, they are more symbolic than binding."[27]
According to Patricia Ranald at the Australian Institute of International Affairs, RCEP has limited gains from trade and ignores labour, human rights, and environmental sustainability issues. She said, "Despite claims about the benefits of common standards, the RCEP has no commitments to internationally recognised labour rights and environmental standards which Australia and other RCEP governments have endorsed through the United Nations and the International Labour Organization."[34]
Salvatore Babones commented on Foreign Policy that, by 2030, the world's economy would be expected to grow around 40% and the RCEP may add 0.2% to it, the scale of a "rounding error". He said that some main exports to China, such as Japan's machinery and Australia's iron ore, are already tariff-free. Babones said that with the signing of RCEP, "China may score propaganda points by posing as the guardian of the international system, but the system itself is increasingly bypassing China."[28]
Some analysts and economists said the RCEP is unlikely to benefit its developing member countries in the short term. Kate Lappin, Asia Pacific regional secretary at Public Services International, said that the pact has no provisions for improving labour rights, adding, "The agreement might not be good for governments and workers, but still deliver profits for foreign investors."[29]
