Regional Comprehensive Economic Partnership or RCEP: All You Need to Know
Asia Pacific nations, which include China, Japan, and South Korea, signed the world’s most comprehensive regional free-trade agreement, RCEP, in November 2020. The Regional Comprehensive Economic Partnership (RCEP) Agreement is an arrangement that helps in broadening and deepening ASEAN’s engagement with Australia, China, Japan, Korea, and New Zealand. Collectively, the countries that are a part of RCEP agreement 2020 account for 30% of the global GDP and world population. The RCEP agreement aims to build a convenient, comprehensive, high-quality, and mutually beneficial economic partnership that will promote regional trade and investment and add to global economic growth. Consequently, it will also fetch new market and employment opportunities for companies and people in the region. The RCEP Agreement 2020, will work in a way that supports an open, comprehensive, and rules-based multilateral trading system. To know more about Regional comprehensive economic partnership(RCEP) and its benefits, keep on reading.
Regional Comprehensive Economic Partnership (RCEP)
To be precise, China and 14 other countries have agreed to form the world’s largest free-trade bloc. Encompassing approximately a third of all economic activity, many in Asia in this deal expect that this will help speed up the recovery from the traumas of the coronavirus pandemic. Let us dive deep into what an RCEP is!
What Is the Regional Comprehensive Economic Partnership (RCEP)?
As mentioned above, Regional comprehensive economic partnership is a wave that will support pandemic-weakened economies through decreasing tariffs, strengthening supply chains with ordinary rules of origin, and codifying the latest e-commerce rules.
The main expectation from the RCEP is to eliminate tariffs on imports, which also include provisions on intellectual property, telecommunications, financial services, e-commerce, and professional services. The most significant impact will definitely come from the new rules of origin. There are many member states that have free trade agreements (FTA) with each other, but there are limitations. The previous free trade agreement was very complicated as compared to RCEP.
Companies that had global supply chains encountered various tariffs even within an FTA. This is due to the fact that their product comprises components that are made elsewhere. For example, A product that is made in Indonesia and contains Australian parts might encounter tariffs elsewhere in the ASEAN free trade zone. Parts from any member nation would be treated equally under the RCEP agreement 2020. This might also give companies in RCEP countries an incentive to examine within the trade region for suppliers. There are 20 chapters of the RCEP agreement 2020. These chapters include trade in goods, services, investments, rules of the origin, customs procedures, intellectual property, competition, and much more. The 20 chapters include:
- Chapter 1: Initial Provisions and General Definitions
- Chapter 2: Trade in Goods
- Chapter 3: Rules of Origin (ROO)
- Chapter 4: Customs Procedures and Trade Facilitation (CPTF)
- Chapter 5: Sanitary and Phytosanitary Measures (SPS)
- Chapter 6: Standards, Technical Regulations, and Conformity Assessment Procedures (STRACAP)
- Chapter 7: Trade Remedies
- Chapter 8: Trade in Services
- Chapter 9: Temporary Movement of Natural Persons (MNP)
- Chapter 10: Investment
- Chapter 11: Intellectual Property
- Chapter 12: Electronic Commerce
- Chapter 13: Competition
- Chapter 14: Small and Medium Enterprises (SMEs)
- Chapter 15: Economic and Technical Cooperation (ECOTECH)
- Chapter 16: Government Procurement
- Chapter 17: General Provisions and Exceptions
- Chapter 18: Institutional Provisions
- Chapter 19: Dispute Settlement
- Chapter 20: Final Provisions
Why is this partnership important?
The Regional Comprehensive Economic Partnership is very important for the society especially after the pandemic. There are various analysts who think RCEP’s sheer size composes it more significantly. The membership of the RCEP agreement 2020 also consists of a larger group of nations. These also notably reflect on China’s membership, heightening the total Gross Domestic Product (GDP) of RCEP members. While China already has several bilateral trade agreements, this is the first time it has signed up for a regional multilateral trade pact.
Members of the RCEP agreement 2020 want this deal. For starters, officers believe that the agreement will help to push recovery from the coronavirus pandemic. Following the current global happenings, the fact the RCEP has been signed after eight long years of negotiations brings a ray of light and hope amid the clouds. Many consider this agreement as a victory of multilateralism and free trade.
India has also been a part of the negotiations, but it pulled out last year over concerns that more inexpensive tariffs could hurt local producers. However, the signatories of the deal said the door is always open for India to join in the future. Members of the RCEP agreement 2020 makeup approximately a third of the world’s population and estimate for 29% of global gross domestic product. The new free trade bloc will be more prominent than both the US-Mexico-Canada Agreement and the European Union.
Benefits of this partnership
There are endless benefits of this partnership. A few of RCEP benefits are mentioned below:
- Modern Agreement – The RCEP agreement 2020 is an agreement made keeping the future in mind. It renews the coverage of the current ASEAN Plus One FTAs (ASEAN’s FTAs with the five dialogue partners). It also considers changing and emerging trade realities, including the age of electronic commerce, the potential of small and medium enterprises, the deepening regional value chain, and the complexity of the market competition. The RCEP agreement 2020 will complement the World Trade Organization (WTO), building on the WTO Agreement in areas where the Parties have agreed to update or go beyond its provisions.
- Comprehensive – The RCEP agreement is comprehensive in terms of both coverage and depth of commitments. On its coverage, the RCEP Agreement comprises 20 Chapters and includes many areas that ASEAN Plus One Ftas did not previously cover. The RCEP agreement 2020 has specific requirements covering trade in goods, including rules of origin, customs procedures and trade facilitation, standards, technical regulations and conformity assessment procedures, and trade remedies. It additionally covers trade in services, including specific provisions on financial services, telecommunication services, professional services, and natural persons’ temporary movement. Also, there are chapters on investment, intellectual property; electronic commerce; competition; small and medium enterprises (SMEs); economic and technical cooperation, government procurement, and legal and institutional areas, including dispute settlement. The RCEP Agreement 2020 achieves liberalization in trade in goods and services. It also has extended coverage to investment in terms of market access.
- High-Quality – The RCEP Agreement contains provisions beyond the existing ASEAN Plus One FTAs while recognizing the individual and diverse levels of development and economic needs of the RCEP Parties. The RCEP agreement 2020 addresses the issues required to support the Parties’ engagement in the global and regional supply chain. This complements market access commitments with trade and investment enabling rules that are business- FINAL Page 2 of 10 facilitating while at the same time preserving legitimate public policy objectives. The RCEP Agreement strives to boost competition in a way that drives productivity, which is sustainable, responsible, and constructive. Additionally, the RCEP Agreement has the added value of bringing together a single rulebook to facilitate the development and expansion of regional supply chains among Parties.
- Mutually beneficial – The RCEP Agreement brings together countries with diverse levels of development. Thus, the RCEP Parties have recognized that its success will be determined by its ability to get benefits mutually. The RCEP agreement 2020 is designed to accomplish this objective in several ways, including appropriate forms of flexibility and special and differential treatment provisions. The RCEP Agreement 2020 includes technical cooperation and capacity building that will be made available to support the implementation of commitments made under the RCEP Agreement and for the Parties to maximize the benefits accruing from that place. The RCEP agreement 2020 also includes provisions that will ensure that economies with different development levels, businesses of differing sizes, and broader stakeholders can benefit from the agreement.
The Peterson Institute for International Economics predicts the deal could boost global, national revenue by $186bn yearly by 2030 and add 0.2% to its member states’ economy. However, there are analysts that think the agreement is likely to benefit China, Japan, and South Korea more than other member states. The economic advantages of the agreement might only be marginal for southeast Asia. Still, there are some exciting trade and tariff dynamics to watch in north-east Asia. The actual results will be out after some time of implementation of the RCEP agreement 2020. But, the overall impact of this agreement is pretty good.