The RCEP marks ASEAN’s biggest free trade pact to date, covering a market of 2.2 billion people with a combined size of $26.2 trillion. ASEAN said together, these RCEP participating countries account for about 30 percent of the global gross domestic product (GDP) and 30 percent of the world population.
“The signing of the RCEP Agreement is a historic event as it underpins ASEAN’s role in leading a multilateral trade agreement of this magnitude, despite global and regional challenges and eight years of negotiations,” said Dato Lim Jock Hoi, secretary-general of ASEAN. “RCEP will give a much-needed boost for a swift and robust recovery for businesses and peoples in our region particularly during the current COVID-19 pandemic crisis.”
ASEAN is made up of Indonesia, Thailand, Singapore, Malaysia, the Philippines, Vietnam, Brunei, Cambodia, Myanmar and Laos. The deal will improve market access with tariffs and quotas eliminated on some 65 percent of goods traded and make business predictable with common rules of origin and transparent regulations.
This will encourage firms to invest more in the region, including building supply chains and services, and to generate jobs, ASEAN said. The objective of the RCEP pact, ASEAN said, is to establish a modern, comprehensive, high-quality and mutually beneficial economic partnership that will facilitate the expansion of regional trade and investment and contribute to global economic growth and development.
The deal, said Rajiv Biswas, Asia Pacific chief economist for IHS Markit, marks the “world’s biggest free trade agreement (FTA) measured in terms of GDP, larger than the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the European Union, the recent US-Mexico-Canada Free Trade Agreement or Mercosur.”
“The new Regional Comprehensive Economic Partnership (RCEP) trade deal will add a further silver lining to the medium-term export outlook, as 15 Asia-Pacific countries create the world’s largest free trade agreement to further liberalize trade and investment flows,” he added.
The agreement updates the coverage of the existing ASEAN Plus One Free Trade Agreements and takes into consideration changing and emerging trade realities, including the age of electronic commerce, the potential of micro, small and medium enterprises, the deepening regional value chain, and the complexity of market competition.
“The RCEP Agreement will complement the World Trade Organization (WTO), building on the WTO agreement in areas where the parties have agreed to update or go beyond its provisions,” the organization said.
The RCEP has specific provisions covering trade in goods, including rules of origin; customs procedures and trade facilitation; sanitary and phytosanitary measures; standards, technical regulations and conformity assessment procedures, and trade remedies. It also covers trade in services, including specific provisions on financial services, telecommunication services and professional services, as well as the temporary movement of people.
In addition, there are chapters on investment, intellectual property, electronic commerce, competition, small and medium enterprises (SMEs), economic and technical cooperation, government procurement and legal and institutional areas including dispute settlement.
ASEAN said the RCEP strives to boost competition in a way that drives productivity that is “sustainable, responsible and constructive.”
“In addition, the RCEP agreement has the added value of bringing together a single rulebook to help facilitate the development and expansion of regional supply chains,” the organization said.
India is notably absent from the trade pact, however. “India, which had been one of the nations involved in the RCEP negotiations at an earlier stage, eventually decided in 2019 not to join the RCEP deal,” Biswas said.
“India’s decision not to join the RCEP deal reflects considerable domestic concerns amongst political parties as well as industry groups in India about the potential economic shock to Indian industries from dismantling tariff barriers for trade with the other RCEP member nations,” he added. “However, the other RCEP members have left the door open for India to join at a later date.”
Additional reporting by Jessica Binns.