Southeast Asia will benefit significantly from RCEP ($19 billion per year by 2030), but less than Northeast Asia, as there are already free trade agreements with RCEP partners. However, RCEP could improve access to China`s Belt and Road (BRI) funds and improve market access gains by strengthening transport, energy and communication links. RCEP`s favourable rules of origin will also attract foreign investment. Secondly, this article examines the content of the RCEP agreement and possible changes in trade policy. Unlike most trade agreements, tariff and non-tariff barriers between RCEP countries have already been largely removed: with the exception of the Japan-China and Japan-South Korea pairs, trade agreements already exist for all bilateral relations between RCEP countries. Few further tariff reductions are expected, but the greater reduction in trade barriers will be due to the harmonization of rules of origin. Within the current network of bilateral agreements and given the close interdependencies in the region through complex value chains, rules of origin represent a high bureaucratic burden for businesses in the region. Many Member States already have free trade agreements (FTAs) between them, but there are limits. RCEP is not as comprehensive as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, another free trade agreement in the region that includes some of the same countries. [9] RCEP “does not establish uniform standards for labour and the environment and does not commit countries to opening up services and other vulnerable sectors of their economies.” [16] The largest tariff reductions are expected for the three largest economies, China, Japan and South Korea. Therefore, trade between these three pairs of countries is expected to increase the most thanks to RCEP. Although there is a trade agreement between China and South Korea, it has not yet led to large-scale tariff reductions.
Instead, tariffs are still 8% to 9% and non-tariff barriers remain.2 In addition, no trade agreements have yet been reached for Japan and China or for Japan and South Korea. Given that these three economies are the largest in the Asian region, significant effects on business creation are to be expected. In the midst of the COVID-19 PANDEMIC, the entry into force of RCEP can also promote trade resilience. Recent UNCTAD research shows that trade under such agreements has been relatively more resilient to the pandemic-related slowdown in global trade. The report stresses that RCEP members should benefit from the agreement to varying degrees. Tariff and non-tariff barriers between RCEP countries have already been largely eliminated: with the exception of Japan-China and Japan-South Korea, there are trade agreements between all other RCEP members. Table 2 provides an overview of existing agreements. Due to the dark green coloring, an agreement was reached. The average fare in the RCEP zone was only 1.6% in 2017.
Therefore, at first glance, the RCEP agreement does not entail major changes and trade liberalisation for the Member States. The Regional Comprehensive Economic Partnership (RCEP; /ˈɑːrsɛp/ AR-sep) is a free trade agreement between the Asia-Pacific countries of Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, Thailand and Vietnam. However, the report notes that the overall negative impact for some RCEP members does not mean they would have done better to stay out of the RCEP agreement. The effects of trade diversion would nevertheless have accumulated. To benefit from preferential market access, exporters must provide a proof of origin proving “domestic production”, i.e. all exported goods must be produced largely in the free trade area concerned. For example, Chinese car exporters must prove that at least 40% of their production took place in China or another ASEAN country in order to gain duty-free access to Laos. If this proof is not provided, a 20% rate applies. Similar rules apply to auto exporters who ship to other countries with which China has signed an agreement. In this case, however, only the intermediary services of the respective partner count to determine the share of domestic production. As for Chinese exports to Australia, only intermediate inputs from China or Australia can be considered as accounting for 40% of domestic production.
U.S. policy in Asia must adapt to the changing realities of East Asia and recognize China`s growing role, the maturation of ASEAN integration, and the diminishing relative economic influence of America. “Even without taking into account the other benefits of the RCEP agreement in addition to tariff concessions, the trade creation effects associated with participation in RCEP mitigate the negative effects of trade diversion,” the report says. When RCEP was signed, Chinese Premier Li Keqiang declared it a “victory for multilateralism and free trade.” [7] Singaporean Prime Minister Lee Hsien Loong called it “a big step forward for our region” and a sign of support for free trade and economic interdependence. [15] The impact of RCEP is impressive, even though the agreement is not as strict as the CPTPP. It creates incentives for supply chains across the region, but also responds to political sensitivities. Its intellectual property rules contribute little to what many members have, and the agreement says nothing at all about labour, the environment or state-owned enterprises – all key chapters of the CPTPP. However, ASEAN-centric trade agreements tend to improve over time.
Although only small tariff reductions are expected, given that most of the country pairs within the RCEP already have bilateral trade agreements, it can be expected that the RCEP will have effective trade effects. RCEP`s most important contribution is the harmonization of rules of origin, which has significant positive effects on global value chains in the region. .