Recently, fifteen Asia-Pacific economies came together to sign what could become the world’s largest free trade agreement in history. The trade deal, which was signed last Sunday, will cover nearly a third of the global population and about 30 percent of its GDP.
The Regional Comprehensive Economic Partnership (RCEP) will progressively lower tariffs and aims to counter protectionism, boost investment and allow freer movement of goods within the region.
RCEP includes China, Japan, South Korea, Australia, New Zealand and the 10 members of the Association of South East Asian Nations (ASEAN): Brunei, Vietnam, Laos, Cambodia, Thailand, Myanmar, Malaysia, Singapore, Indonesia and the Philippines.
The 510-page, twenty-chapter agreement was not made public before Sunday’s ceremony because “a number of parties would not consent to the release of the text prior to signature”, New Zealand’s foreign ministry said in a statement.
According to copies of the agreement uploaded to the foreign ministry websites of RCEP member states on Sunday, the deal must be ratified by at least six ASEAN countries and three non-ASEAN signatory countries before it can come into effect.
Part of what makes the trade deal historic is that the RCEP marks the first time China, Japan, and South Korea have been brought together under one single trade agreement; a process that has usually been marred by historical and diplomatic issues.
Fortunately for the less-developed economies of members, the RCEP provides a rather flexible arrangement with regards to legislative and practical changes it requires. For example, countries such as Laos and Cambodia have up to five years to upgrade their custom procedures in accordance to the trade deal’s specifications.
Specifically which areas are open to tariff reductions under RCEP is complex and changes from country to country. Some states have listed what RCEP includes, others have listed what it does not.
For countries which already have free trade agreements with each other, an added benefit of RCEP is that it creates a common set of rules of origin, which will facilitate easier movement of goods between the 15 members.
Compared to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) agreement, the RCEP focuses heavily on cutting tariffs and increasing market access; but overall can be seen as less comprehensive than the CPTPP.
It also requires fewer political or economic concessions and has less emphasis on employment rights, environmental and intellectual property protections and dispute resolution mechanisms.
RCEP’s market size is nearly five times greater than that of the CPTPP, with almost double its annual trade value and combined gross domestic product.
“For an agreement signed with countries that did not volunteer to participate and with such incredibly diverse membership, the quality of RCEP actually exceeds expectations,” said Elms at the Asian Trade Centre.