Accounting for 30% of the world’s population and 30% of global GDP, the bloc is larger than the European Union.
As the United Kingdom continues to negotiate trade agreements with the European Union and other trading partners, fifteen Asia-Pacific countries recently signed a new multilateral trade agreement named the Regional Comprehensive Economic Partnership (RCEP). That agreement, the subject of negotiations since 2012, is expected to shape the Asia-Pacific economy in the decades ahead by establishing a single set of harmonised and predictable trading rules applicable across developed and developing economies in the region. The new framework presents economic opportunities for many countries, including those outside the Asia-Pacific region, and provides the United Kingdom and its private sector new opportunities in a post-Brexit economy.
What is RCEP?
RCEP is a trade agreement signed by Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, Philippines, Singapore, South Korea, Thailand, and Vietnam on 15 November 2020. Once ratified, the newly created trading bloc will be the largest in the world by both population and economic size, exceeding both the European Union and the US–Mexico–Canada Agreement. The RCEP will account for 30% of the world’s population and 30% of global GDP.
Why is it significant?
The RCEP framework is based on existing trade agreements signed by the Association of Southeast Asian Nations (ASEAN) and effectively combines them into a single agreement that also includes Australia, China, Japan, New Zealand, and South Korea. This makes RCEP the first trade agreement between China, Japan, and South Korea — three of the largest economies in Asia — and one of the first multilateral trade agreements signed by China.
Accordingly, the RCEP is a move towards greater economic integration in Asia, achieving a single set of rules for trade across all fifteen, very diverse, developed, and developing economies.
Highlights of RCEP
- Covers trade in goods, trade in services, investment, temporary movement of individuals, economic and technical cooperation, electronic commerce, intellectual property, government procurement, competition, and small and medium-sized enterprises. (The agreement does not cover environmental protection, labour standards, or government subsidies.)
- Expected to progressively eliminate more than 90% of tariffs applicable to trade in goods between RCEP member states within 20 years
- Lowers non-tariff barriers to trade between RCEP member states by, for example, simplifying customs procedures and providing standardised rules of origin
- Improves market access for trade in services, including opening more sectors to foreign participation and allowing increased foreign shareholding
- Facilitates temporary entry and stay of individuals engaged in trade, supply of services, or conduct of investment
- Obliges RCEP member states to provide enhanced standards of intellectual property protection and enforcement
- Obliges RCEP member states to adopt or maintain competition laws and regulations to proscribe anti-competitive activities and to enforce such laws in an independent and non-discriminatory manner
- Requires RCEP member states to publish laws, regulations and procedures regarding government procurement
- Provides investment protections such as a fair and equitable treatment standard and protection from unlawful expropriation, but does not provide for investor-state arbitration. Rather, the agreement obliges RCEP member States to enter into discussions on an investor-state arbitration mechanism no later than two years from the agreement’s entry into force and conclude such discussions within three years from commencement of negotiations.
RCEP will enter into force when at least six ASEAN and three non-ASEAN signatories have ratified the agreement. This will require each signatory state to undertake their respective domestic treaty ratification procedures.
India was an original negotiating party to RCEP but withdrew from negotiations in late 2019. RCEP however provides India preferential treatment with respect to joining the agreement if it chooses to do so in the future — in particular, the agreement expressly grants India, and no other state, permission to join RCEP within the first 18 months of the agreement’s entry into force. If that happens, it would expand RCEP to include around half the world’s population and a little under 40% of global GDP.
RCEP also provides other states with the ability to accede to the agreement from 18 months after the date RCEP enters into force. All accessions, including India’s, is subject to the consent of the existing RCEP member states.