The Biggest News You Likely Missed
Partner Contribution - RCEP
Covid infection rates and vaccine trials have dominated news headlines. Yet, our intense focus on the pandemic has overshadowed the progress being made in other areas. One important news item that may have an enormous impact on the world is the Regional Comprehensive Economic Partnership Agreement (RCEP).
RCEP is a free trade agreement between the Association of Southeast Asian Nations (ASEAN) members and six other regional countries: Australia, China, India, Japan, New Zealand, and the Republic of Korea.
Notably, RCEP is the first multilateral trade agreement in which China has participated. India had initially been in the negotiations but subsequently pulled back, although the members have indicated that India still has the potential to join in the future.
The agreement was signed in November of 2020 and is the largest trade deal globally, outsizing the EU and the US-Mexico-Canada Agreement. RCEP signatories also represent one-third of the world population and almost 30% of global GDP, percentages that would increase significantly should India come on board.
And while many of the member countries have existing bi-lateral trade agreements, under RCEP each country is treated equally across the trading block, breaking down barriers and complications. That in and of itself should make negotiations easier and help to lower costs.
Additionally, by reducing complicated tariffs between members, RCEP has the potential to increase intra-Asian trade and investment. The favourable treatment of “Common Rules of Origin” written into the pact should also encourage foreign investors to enter the region. Overall, RCEP will make doing business within Asia easier and more beneficial to all parties involved.
The true impact of RCEP will become clearer over time, although it is expected that the “big three” East Asian countries of China, Japan, and the ROK will benefit most in the short term, with a combined potential export gain of over USD 400 billion.
Members will also wait to see if the new Biden administration can move quickly to assert more influence on the world stage. If the US does decide to join the pact at a later point, it would represent an effective counterbalance to China, however at the same time serve to dilute the overall regional impact of the agreement. For the time being, all eyes are on the ratification process expected to conclude later this year, with approval needed by six ASEAN countries and three non-ASEAN members.
More information can be found here: https://rcepsec.org/