The treaty establishing the Regional Comprehensive Economic Partnership (RCEP) was signed on November 15, 2020, during the 37th summit of the Association of Southeast Asian Nations (ASEAN) among the ten Member States of ASEAN (Brunei, Cambodia, Indonesia, the Philippines, Laos, Malaysia, Myanmar, Singapore, Thailand, and Vietnam) and five other Asia-Pacific countries with which ASEAN already had free trade agreements (Australia, China, South Korea, Japan, and New Zealand). As of January 1 of the current year, it has entered into force for Australia, Brunei, Cambodia, China, Japan, Laos, New Zealand, Thailand, Singapore, and Vietnam; and as of February, it will do so for South Korea; pending ratification procedures for the Philippines, Indonesia, Malaysia, and Myanmar.
The objective of the Regional Comprehensive Economic Partnership, which already had the backgrounds of the Comprehensive Economic Partnership for East Asia (CEPEA) and the East Asia Free Trade Agreement (EAFTA), is to establish a free trade zone that reduces tariffs and simplifies bureaucracy. Over a twenty-year period, this reduction is expected to cover 91% of the products traded among the signatory countries, under the condition that at least 40% of the parts of these products originate from the region. This will create the world’s largest trading bloc, even larger than the one created by the treaty between Canada, the United States, and Mexico (T-MEC, NAFTA 2.0), or the European Union. The growth forecasts include a 1% increase in GDP for China, South Korea, and Japan, and a 0.5% increase for Indonesia, Malaysia, Thailand, and Vietnam.
This new free trade zone covers a market of over 2.3 billion people, equivalent to 30% of the world’s population; a combined GDP of over $26.2 trillion; and 30% of global trade. While the economies of the countries in the Regional Comprehensive Economic Partnership are vastly unequal in size and development level, raising questions about whether the effects will be equally beneficial for all, their global contribution to the world economy is estimated to reach about $200 billion according to projections by the Asian Development Bank. This further demonstrates how the center of the world economy is inexorably shifting towards Asia, making it an inevitable choice for other countries and their companies.
Among other sectors, it covers investments, especially foreign direct investments; agriculture – which led to India’s withdrawal -, automotive industry, telecommunications, financial services, e-commerce, information technology, and professional services. However, it excludes labor issues, environmental concerns, or state aid and subsidies similar to how the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) does. To facilitate these exchanges, it aims to simplify customs procedures, unify rules of origin – promoting supply chains throughout Asia – and improve market access for signatory countries. These are ambitious objectives, perhaps not as many as those of the CPTPP but ambitious nonetheless.
The CPTPP, the successor to the Trans-Pacific Partnership (TPP) after the withdrawal of the United States, includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Some argue that it has more ambitious goals than RCEP due to greater liberalization and a broader and deeper content focusing on commercial challenges emphasizing innovation, productivity, competitiveness; establishing a common framework for intellectual property; and enhancing labor standards. Nevertheless, due to its importance and impact, the free trade zone created by the Regional Comprehensive Economic Partnership increasingly prompts thoughts about Asia and engages negotiations with Asia.
Antonio Viñal
Abogado
AVCO Legal
madrid@avco.legal
