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How RCEP will boost Asian integration in trade, supply chains and strategic ties
- RCEP represents the most significant, ambitious regional trade deal for decades, with medium- and long-term benefits
- Strengthened economic ties and standard alignments will help ensure China’s lost supply chain stays in Asia – to the benefit of members and the detriment of India
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The recent signing of the Regional Comprehensive Economic Partnership (RCEP) between Asia-Pacific nations marks an encouraging reversal to the rising trend of trade protectionism and deglobalisation. The deal has created the world’s largest trading bloc that accounts for roughly a third of the world’s population, gross domestic product and trade volume, helping accelerate the regional economic integration in the Asia-Pacific region.
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RCEP is by no means a perfect deal. Compared to the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), it has a long transition period for tariff reduction for certain industries, such as agriculture. That is designed to protect them – particularly in less-developed member countries such as Laos and Cambodia – from immediate competition.
Some of its agreement in areas of information-sharing and standards adoption are also non-binding. That creates risk for non-compliance, which might be difficult to address by the existing dispute-settlement mechanism embedded in the agreement.
Nevertheless, RCEP still represents the most significant and ambitious regional trade deal since the formation of the North American Free Trade Area and the European free trade zone. I believe RCEP will have profound impact on the Asian economies in the medium to long term through three dimensions.
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RCEP: 15 Asia-Pacific countries sign world’s largest free-trade deal
RCEP: 15 Asia-Pacific countries sign world’s largest free-trade deal
The first is trade. RCEP members will gain from the creation of the world’s largest tariff-free zone, where more than 90 per cent of goods traded will be exempted from tariffs. Two caveats should be kept in mind, though. The first is the long transition period, which will make the gains from tariff elimination gradual and drawn out over many years.
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