What is the RCEP?
Signed during this year’s (mostly online) ASEAN summit with negotiations having started in 2012, the RCEP creates the largest free trade agreement in the world in terms of gross domestic product (“GDP”), accounting for roughly 30% of global GDP and covering one third of the world’s population.
Expected to take effect within two years, it is hoped the RCEP will be able to provide an economic boost to the APAC region as it looks to emerge from the COVID-19 pandemic.
What are the RCEP’s Objectives?
The goals of the participants in the RCEP are to update the coverage of the existing ASEAN Plus One Free Trade Agreements (“FTAs”), and in particular focus on the changing and emerging trade realities of e-commerce, micro, small and medium enterprises, the deepening regional value chain, and the complexity of market competition.
Intended to be comprehensive, the RCEP will eventually eliminate tariffs for some 92% of goods, as well as provide preferential market access for its members. Significantly simplified customs procedures and unified rules of origin are intended to facilitate much smoother and faster movement of goods between participating members, and the increase in foreign shareholding limits in key sectors including telecoms, financial and professional services will allow more foreign companies to provide services to the RCEP members.
Provisions within the RCEP will establish common rules for e-commerce, and better protect intellectual property rights. The intention is that the RCEP will achieve a liberalisation of trade in goods and services, as well as investments. In particular, the RCEP includes the following objectives:
- facilitate the expansion of regional trade and investment and contribute to global economic growth and development;
- progressively liberalise and facilitate trade in goods among the member states through, inter alia, progressive elimination of tariff and non-tariff barriers on substantially all trade in goods among the member states;
- progressively liberalise trade in services among the member states with substantial sectoral coverage to achieve substantial elimination of restrictions and discriminatory measures with respect to trade in services among the member states; and
- create a liberal, facilitative, and competitive investment environment in the region, that will enhance investment opportunities and the promotion, protection, facilitation, and liberalisation of investment among the member states.
What are the highlights of the RCEP?
- the promotion of competition in the RCEP markets and cooperation in competition law enforcement among member states’ authorities;
- enhancing intellectual property protection in the RCEP region by requiring each member state to ratify or accede to the same multilateral agreements to which it is not yet party such as the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, the Patent Cooperation Treaty, the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks, etc.;
- providing national treatment and most-favoured-nation treatment to investors in the RCEP region;
- facilitation of temporary entry and stay of persons engaged in trade, supply of services or conduct of investment;
- the opening up of avenues for greater services trade amongst the participants through substantial removal of restrictive and discriminatory measures affecting trade services, especially in finance, telecoms and professional services;
- the effective, efficient and transparent rules and procedures for resolving disputes arising in the RCEP region; and
- enhanced cybersecurity in the RCEP region by regulating the digitization of trade-related documents and materials, the use of electronic signatures, electronic authentication, spam and other fields, etc.
Why is the RCEP so Significant?
Not only is the RCEP the first free trade agreement between China, Japan and South Korea, it is also the very first multilateral free trade agreement to include China. The RCEP is also notable for taking into account the stage of development and economic needs of the member states, especially developing member states.
The RCEP is also significant in ways other than in pure economic terms. Its geo-political implications cannot be ignored. With the exclusion of the United States of America, the RCEP allows China to become the major participant in the world’s largest free trade agreement.
What is the legal status of RCEP?
The RCEP Agreement has just been signed by the 15 member states but has not yet come into force, and is subject to ratification, acceptance, or approval by each signatory State in accordance with its applicable legal procedures.
The Comprehensive Progressive Agreement for Trans-Pacific Partnership (“CPTPP”) that was signed in 2016 by several members of the RCEP is considered by many to be further reaching and more comprehensive than the RCEP. However, this does not diminish the importance of the RCEP which encompasses a market 5 times as large as that of the CPTPP. The RCEP is important not only in practical terms, but also in signifying the cooperative ambitions of such a vast swathe of the global population to seek to collaborate on economic prosperity, despite the often dramatically divergent diplomatic norms of participating members.
Ministers of member states have hailed the RCEP as a tool to increase confidence in business within the APAC region during difficult economic periods, as well as evidencing support for an open and rules-based multilateral trading system. If the RCEP works as intended, participating members stand to see an increase in GDP and export volumes.
Although India is not currently a participant, having pulled out of negotiations last year, there is a possibility that it will join in the RCEP in the future, further adding to the already considerable breadth of the agreement.
The importance of China’s participation in the RCEP cannot be emphasised enough. With the economic powerhouse signing its first ever regional multilateral trade pact, observers see China growing into its economic leadership role in the region and extending its influence.