Highlight 2/2020 – The Regional Comprehensive Economic Partnership Agreement: the future largest free trade agreement
Maddalen MARTIN-ARTECHE, 26 November 2020
On 15 November 2020, Australia, China, Japan, South Korea, New Zealand and the Member States of the Association of Southeast Asian Nations (ASEAN, hereafter), that is, Brunei, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam, signed the Regional Comprehensive Economic Partnership Agreement (RCEP, hereafter). The RCEP Agreement remains open to India’s participation, who withdrew from the negotiations in November 2019.
The RCEP Agreement updates the existing so-called ASEAN Plus One Free Trade Agreements, meaning the agreements adopted between the Association and China, South Korea, Japan, Australia, New Zealand and India, respectively. The Agreement will complement the WTO Agreement and will build on it.
In a nutshell, the RCEP Agreement seeks to facilitate the expansion of regional trade and investment among the parties, as well to contribute to global economic growth and development. In order to do so, it provides for the progressive elimination of tariff and non-tariff barriers on trade in goods, the elimination of restrictions and discriminatory measures with respect to trade in services and the creation of a liberal, facilitative and competitive investment environment among the Parties.
The Agreement comprises of 20 Chapters covering trade in goods, sanitary and phytosanitary measures, standards, technical regulations and conformity assessment procedures, trade remedies, trade in services, measures on the temporary movement of natural persons. In addition, there are chapters on investment, intellectual property, electronic commerce, competition, small and medium enterprises, economic and technical cooperation, government procurement, and legal and institutional provisions, including dispute settlement provisions. By contrast to trade agreements adopted by other regional organizations, such as free trade agreements concluded between the European Union and third countries or the recently in force United States-Mexico-Canada Agreement, the Agreement does not contain a dedicated chapter to sustainable development, including labor and environment provisions.
Once in force, the RCEP Agreement will cover a market of 2.2 billion people (almost 30% of the world’s population), a combined Gross Domestic Product of US$ 26.2 trillion (about 30% of global GDP), and 28% of global trade, based on 2019 figures. Considering the latter figures, it will be the largest free trade agreement to date. In addition, the Agreement is expected to boost global trade and hence, economic growth.
Political implications resulting from the entry into force of the RCEP Agreement are also worth mentioning. First, the signature of the Agreement comes at a crucial time for the global economy, shrinked as a result of the Covid-19 pandemic, and for global economic governance, which presents symptoms of fatigue (e.g. the WTO Appellate Body crisis). Despite the aforementioned fatigue, the signature of the RCEP Agreement will come in support of the multilateral trading system. Second, the Agreement provides ASEAN with the opportunity to strengthening its influence in the Asian continent. Third, China stands particularly to gain economically and in influence from the Agreement. Indeed, once the Agreement will be in force, China will have liberalized access to developing markets and thus, will reduce its reliance on domestic consumption. In addition, China views the adoption of the Agreement as an opportunity to set trade rules in the continent without the United States’ influence. Indeed, such influence has plummeted following the US’s withdrawal, in 2017, from the negotiations leading to the adoption of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in 2018. The Partnership is a free-trade agreement between 11 Pacific countries: Canada, Mexico, Peru, Chile, New Zealand, Australia, Brunei, Singapore, Malaysia, Vietnam and Japan.
Following signature, the entry into force of the RCEP Agreement requires that at least six ASEAN and three non-ASEAN signatory States deposit their instruments of ratification, acceptance or approval.
Maddalen MARTIN-ARTECHE, The Regional Comprehensive Economic Partnership Agreement: the future largest free trade agreement, MEIG Highlight N°2/2020, available at www.meig.ch
The views expressed in the MEIG Highlights are personal to the author and neither reflect the positions of the MEIG Programme nor those of the University of Geneva.