On November 15, 2020, China, Japan, South Korea, Australia, New Zealand, together with 10 ASEAN member countries (i.e., Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam), officially signed a landmark Regional Comprehensive Economic Partnership (RCEP) Agreement, forming the largest free trade pact in world history. The agreement requires ratification from at least six ASEAN countries and three non-ASEAN countries to take effect.
On November 2, 2021, the ASEAN Secretariat issued a notice announcing that the threshold for the RCEP agreement coming into force had been reached. Six ASEAN member states, including Brunei, Cambodia, Laos, Singapore, Thailand, and Vietnam, as well as four non-ASEAN signatory states, including China, Japan, New Zealand, and Australia, have deposited their instrument of ratification/acceptance with the Secretary-General. As a result, the agreement will come into effect in and among these ten signatories on January 1, 2022.1
A Brief Introduction of RCEP
The newly signed RCEP Agreement composes of a preamble, twenty chapters, and four commitment schedules. It covers not only typical issues that are included in the traditional free trade agreements (FTAs), such as trade in goods and services, rules of origin, customs procedures, and trade facilitation, but also the information sharing and cooperation among small and medium enterprises, electronic commerce, competition policy, and government procurement, which are rarely seen in FTAs.
According to Wang Shouwen, the Vice Minister of China’s Ministry of Commerce (MOFCOM), RCEP is featured by comprehensiveness, modernity, high quality, and reciprocity.2
Comprehensiveness: With 20 chapters, it covers almost every aspect of free trade, investment, and their facilitation, including market access for goods trade, service trade, investment, etc., as well as rules on intellectual property rights, e-commerce, competition policy, government procurement, etc.
Modernity: It contains the rules of origin accumulation to support the development of regional industrial chain and supply chain; advocate new technologies to promote customs facilitation and the development of new cross-border logistics; adopts a negative list to make investment access commitments, which greatly enhances the transparency of investment policies; and includes contents related to e-commerce and IP protection to meet the needs of the digital economy era.
High-quality: It requires the member states to remove tariffs, including some direct reductions and some phase-outs within ten years, to eventually achieve zero tariffs for more than 90% of goods trade in the region. To consumers and countries that rely on imported raw materials and parts, the cancellation of tariff tax and non-tariff barriers will significantly reduce import/export costs. Therefore, consumers can buy imported products at lower prices, and foreign enterprises will be easier to enter other RCEP member countries. The level of service trade and investment liberalization is significantly higher than the ASEAN’s original "10+1" free trade agreements. Besides, due to the signing of the RCEP Agreement, China gets to have free trade with South Korea and Japan.
Reciprocity: With members ranging from developed, developing, and underdeveloped countries, the RCEP Agreement will balance the benefits to satisfy the demands of each party. Preferential policies are provided for underdeveloped countries.
According to 2019 data, RCEP covers a market of 2.27 billion people, USD 26 trillion GDP, and USD 5.2 trillion export volume, accounting for approximately one-third of the global population, GDP and trade volume.3 When coming in force, it will create the world's largest free-trade bloc, bringing together 15 of the most active trading economies in the Asia-Pacific region into a single trade framework with a common set of rules and standards, lowered trade barriers, streamlined customs procedures, and expedited market access. The trade liberalization and economic integration within the region will then be significantly facilitated.
In addition, ASEAN Secretary-General Dato Lim Jock Hoi also pointed out that the implementation of the RCEP Agreement starting 1 January 2022 will give a tremendous boost to the post-COVID-19 economic recovery efforts.1