Now that the dust has settled a little on the signing of the Regional Comprehensive Economic Partnership deal, we thought we’d take a look a what does the RCEP mean to you? How will it change your life?
On Nov. 15, the Regional Comprehensive Economic Partnership, or the RCEP, was signed over video link by the 10 members of the Association of Southeast Asian Nations (ASEAN) and five regional partners, namely China, Japan, the Republic of Korea, Australia and New Zealand. The 15 participating countries have a total population of 2.27 billion, with a combined GDP of $26 trillion and exports of nearly $5.2 trillion.
The signing of the RCEP will create the world’s largest free trade bloc. But why has it come into existence in East Asia?
The 21st century has witnessed the collective rise of Asian, especially East Asian economies. With ASEAN at the center, the 10+1 and 10+3 cooperation mechanisms were established by East Asian countries. As a result, the “spaghetti bowl” phenomenon undermined the effectiveness of their respective free trade agreements. More importantly, East Asia, with a well-established production network and active regional trade, lacked an overall free trade agreement. This prompted countries in the region to start negotiating just such an agreement.
In addition, the resurgence of unilateralism and trade protectionism over recent years have greatly disrupted regional trade in East Asia. Under the impact of COVID-19, industrial and supply chains in the region broke down for a time, negatively impacting its sustainable economic development. To address the challenges, the 15 countries accelerated RCEP negotiations.
The RCEP also represents a breakthrough in trade relations between China and Japan. Although the volume of bilateral trade exceeds $300 billion, the two countries had no free trade deal between each other. The signing of the RCEP has therefore laid a strong foundation for trade and investment liberalization and facilitation between China and Japan.
The RCEP is designed to be a win-win agreement embraced by all member countries to safeguard their respective national interests. Despite uncertainties in the future, there is reason enough to believe that the world’s largest free trade deal will be fully implemented in East Asia as scheduled, thereby promoting a complete regional and global economic recovery.