Established relatively recently in November 2020 after a decade in the making, the RCEP is a new partnership collectively embracing nearly a third of the world’s population and GDP. Formed of 15 countries, 10 of which are members of the Association of Southeast Asian Nations (ASEAN), as well as the Pacific countries of China, Japan, Korea, Australia and New Zealand, the partnership has the potential to add $500bn to world trade by 2030 – and it has just hit a crucial milestone.
The aim of the partnership is to lower tariffs, allow for freer movement of goods within the region and to boost investment. Members will strengthen their links in technology, mining, manufacturing and agriculture, empowering them to build and expand their supply chains across different countries. While the immediate impact of the partnership on UK and European businesses will likely be minimal, according to the Policy Exchange think tank, the Asia-Pacific region is the most important area for expanding UK trade after Brexit. In the long run, the partnership could provide access to a customer base of more than two million people, making it easier to produce, buy and sell goods within the region. The process of shipping products within the RCEP area will also be streamlined, making it much easier to transport goods without encountering different rules of origin criteria, benefitting, in particular, those companies with multiple supply chains across the region.
China joins the pact
In March 2021, the RCEP reached a long-awaited and pivotal milestone with China’s official ratification of the pact. What’s more, China is expected to now be pushing ahead with negotiations over the trilateral free trade pact with two other Asian manufacturing powerhouses, Japan and South Korea. These are two hugely important steps for the RCEP as the success of the partnership relies on China’s central role and its willingness to establish a single trade agreement with Japan and South Korea for the first time. The deal should firmly anchor China’s role in regional supply chains, bringing down costs and increasing cooperation between member states. It builds on China’s One Road, One Belt policy, which was established in 2013 and is a colossal step up for global trade, aiming to build trade routes with more than 70 countries across Asia, Africa and Europe.
The RCEP has been compared as a rival trade pact to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP. The RCEP, being the significantly larger of the two partnerships in terms of market size, has no stipulations on labour rights, environmental standards or intellectual property protections, and could pose challenges for the smaller CPTPP. Since China’s recent placement within the RCEP, it is alleged that preliminary work has taken place regarding their interest in the CPTPP, too.
Who and what comes next?
The RCEP is youthful and in flux, and it is hard to predict how it will evolve as global trade is works through a vast number of present complexities. Other countries may join the partnership in future, giving companies the potential to access more key states. India was originally involved in the talks and withdrew in 2018 over concerns about safeguarding its own agriculture and dairy industries, but as the world’s fifth-largest economy and as a founding negotiating partner, it can join any time after the deal is implemented. Other nations may join the RCEP 18 months after it comes into force, and in theory, there is nothing to stop the UK from taking a place. However, due to the concerning lack of agreement over labour rights and environmental standards, the UK is more likely to dedicate its focus on joining the CPTPP.