RCEP: why benefits from the world’s largest trade pact may not be as clear-cut as they seem

Regional Comprehensive Economic Partnership forecast to boost intraregional trade by nearly 2 per cent, or about US$42 billion

But the potential benefits in some sectors like e-commerce or for workers are uncertain, due to limitations in its scope, experts say

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Despite the promise of huge payoffs, the RCEP trade pact has clear limitations, analysts say. Photo: Xinhua

Published: 12:00am, 9 Feb 2022Updated: 1:19am, 9 Feb 2022

More than a month after the world’s largest trade pact came into force, questions remain over its practical application and potential benefits for small businesses, the e-commerce sector and workers.

The Regional Comprehensive Economic Partnership (RCEP), comprising 15 countries – including China – and covering around 30 per cent of the world’s population and global gross domestic product, took effect for most members on January 1. South Korea was the latest country to formally join early this month.

Tariffs on more than 65 per cent of trade in products are expected to immediately reach zero under the regional agreement, and that figure is expected to rise to around 90 per cent over 20 years.

Under its “rules of origin”, companies that source materials from and export to other countries within the trade bloc will be able to qualify for tariff preferences, promoting free flow of goods in the region and reducing costs.

The United Nations Conference on Trade and Development estimated in December that RCEP’s tariff reductions will boost intraregional trade by nearly 2 per cent, equivalent to about US$42 billion.

But despite the promise of huge payoffs, experts say the deal has clear limitations and a number of uncertainties remain.

The complexity of the trade framework has raised questions about how much small and medium-sized businesses can maximise its advantages.