The Asia-Pacific area clearly carries more weight in the global economic system these days, especially with the Regional Comprehensive Economic Partnership set to boost regional economic integration and hasten the shift in the global economic balance in favor of Asia-Pacific.
The RCEP deal, which was completed in November, brings together 15 Asia-Pacific countries, including China and ten ASEAN members, to form the world’s largest free-trade bloc, which covers about one-third of the global population and GDP.
On June 25, Japan accepted the agreement, making it the third member to take steps toward enforcing the RCEP. China and Singapore have already finished the ratification procedure in April. The agreement will take effect 60 days after six ASEAN members and three non-ASEAN nations have approved it.
The signing of the RCEP agreement is seen by China as a win for free trade and multilateralism. China, as the world’s second-largest economy, has consistently emphasized the importance of furthering reforms and broadening access to the rest of the world.
Over the next 20 years, the RCEP agreement will reduce tariffs on as much as 90% of products exchanged between its signatories. The agreement will also unify investment standards among its signatories.
The RCEP’s unified rule of origin has received great praise from experts. For items to be considered RCEP origin, only 40% regional content is necessary, which is a far lower standard than any previous free trade accords. The rule of origin determines whether a product originates in one of the member countries eligible for tariff reductions.
Furthermore, because the nations in the region have varying levels of development and no shared reference points for environmental protection and labor standards, the RCEP’s less restrictive norms may result in fewer trade barriers within the region.
The RCEP has sent a strong signal in favor of continued and strengthened regional integration, despite the fact that intraregional trade in Asia-Pacific is already very high compared to other regions, and Asia-Pacific economies have relatively high levels of complementarity with their regional trade partners.
Intraregional commerce in the Asia-Pacific accounted for 25% of total global trade in the 2010s, compared to 17% and 6% for the European Union and the North American Free Trade Agreement, respectively.
The RCEP will also help to create a variety of new businesses, like cross-border e-commerce and logistics.
It is widely acknowledged that the creation of a set of multilaterally unified comprehensive e-commerce standards represents the region’s agreement on a number of crucial problems, including cross-border data transmission, data storage, online consumer protection, personal data protection, and cybersecurity, which will provide a stable and enabling institutional environment for the digital economy’s growth.
Perhaps Edward Yau, China’s Hong Kong Special Administrative Region’s secretary for trade and economic development, captured the importance of the RCEP in regional development well during a recent video conference of the Asia-Pacific Economic Cooperation.
He called on economies to support the rules-based multilateral trading system and deepen regional economic integration toward the eventual realization of the Asia-Pacific free trade area, saying that high-quality regional free trade agreements would bring tangible economic benefits and strengthen the regional economy’s foundation.
When the RCEP is ready to accept additional partners, Hong Kong hopes to begin formal negotiations on its membership, according to Yau.
If everything goes according to plan, the RCEP agreement should go into effect next year, allowing the Asia-Pacific region to become an even more powerful force for global economic progress.