Hanoi: Fifteen economies in the Asia-Pacific region signed on Sunday what would become the world’s largest free trade agreement, covering nearly a third of the world’s population and nearly 30% of global GDP.
The Regional Comprehensive Economic Partnership (RCEP) will gradually reduce tariffs and aim to combat protectionism, boost investment and allow free movement of goods within the region.
RCEP includes China, Japan, South Korea, Australia, New Zealand and the ten ASEAN members: Brunei, Vietnam, Laos, Cambodia, Thailand, Myanmar, Malaysia, Singapore, Indonesia and the Philippines.
India participated in early discussions but chose last year due to concerns about cheap Chinese imports.
Member states said there is still room for India to join RCEP. Anyone can join RCEP after 18 months of its entry into force, but India, as one of the original negotiating partners, can join at any time once the agreement comes into effect.
what happened after that?
The Regional Comprehensive Economic Partnership Agreement was signed at the end of the four-day ASEAN summit in Hanoi on Sunday and must now be ratified before it enters into force, a process that will take months to begin and years to complete.
The New Zealand Foreign Ministry said in a statement that the 510-page agreement, consisting of 20 chapters, was not announced before Sunday’s ceremony because “a number of parties will not agree to publish the text before signing.”
According to copies of the agreement uploaded to the State Department’s websites of RCEP member states on Sunday, the agreement must be ratified by at least six ASEAN countries and three non-signatories before it enters into force.
Rivalry in East Asia
Notably, RCEP marks the first time that China, Japan, and South Korea have been brought together under a single trade agreement – a process that has been marred by historical and diplomatic disputes.
Last year, at the height of the trade dispute between Japan and South Korea, which had its roots in a dispute stemming from Japan’s wartime colonization of the Korean Peninsula, South Korean officials said that Japanese trade restrictions violate the “spirit” of the Regional Comprehensive Economic Partnership Agreement.
Deborah Elms of the Singapore-based Asian Trade Center said: “Japan may find significant benefits (through RCEP), as it now enjoys preferential access to South Korea and China, which it did not.
when will you start?
RCEP provides some flexibility for the less developed members to implement the practical and legislative changes they require. Cambodia and Laos, for example, have three to five years to modernize customs procedures.
Specifically, the open areas for tariff cuts under the RCEP are complex and change from country to country. Some states have included what RCEP includes, while others do not.
For countries that already have free trade agreements with each other, an additional advantage of RCEP is that it creates a common set of rules of origin, which will facilitate the movement of goods between the fifteen members.
How does RCEP compare to CPTPP?
The RCEP idea, which emerged in 2012, was seen as a way for China, the region’s largest importer and exporter, to counter the growing American influence in the Asia-Pacific region. It gained momentum when Trump withdrew the United States from the Trans-Pacific Partnership (TPP) in 2017.
Since then, the name of TPP has been changed to the Comprehensive and Advance Pacific Partnership Agreement (CPTPP) and it includes seven RCEP members, but not the United States.
RCEP places great emphasis on lowering tariffs and increasing market access but is seen as less comprehensive than CPTPP.
It also requires less political or economic concessions, and has less emphasis on workers’ rights, environmental protection, intellectual property, and dispute settlement mechanisms.
The size of the RCEP market is roughly five times that of CPTPP, with twice its annual commercial value and combined GDP.
“For the agreement signed with the countries that did not volunteer to participate and with this incredibly diverse membership, the quality of RCEP really exceeds expectations,” said Elms of the Asian Trade Center.
“It will provide significant economic benefits to many companies.”