CC BY
67
THE REGIONAL COMPREHENSIVE ECONOMIC PARTNERSHIP (RCEP):
PROSPECTS AND CHALLENGES
Nguyen Quoc Phong, Student
National Research University - Higher School of Economics (Russia, Moscow)
DOI:10.24412/2411-0450-2022-10-2-117-120
Abstract. Since officially entering into force, the Regional Comprehensive Economic Partnership (RCEP) has become a mega-regional trade agreement, promoting the integration and cooperation of the economies of East Asia and thereby creating one of the largest trading blocs in the world. This article outlines the formation and key commitments of the agreement and points out potential challenges to the implementation of the agreement by member states. Keywords: RCEP, formation, trade agreement, prospects, challenges.
Along with ASEAN's close relationship with major regional partners, The Regional Comprehensive Economic Partnership (RCEP) is expected to be an ambitious megaregional economic agreement aimed at establishing a comprehensive economic partnership that benefits member countries significantly, thereby forming one of the world's largest trading blocs.
1. The formation of the RCEP
By the late 1990s, institutionally oriented regional economic integration emerged in East Asia, driven primarily by the establishment of free trade agreements. Formed in 1967, it was not until 1992 that the Association of Southeast Asian Nations (ASEAN) signed an agreement establishing the ASEAN Free Trade Area (AFTA).
The early 2000s saw the signing of a series of FTAs by East Asian countries. The ASEAN-China Free Trade Agreement (ACFTA) was signed in 2002 and then upgraded in 2015. Next, a series of FTAs were negotiated and signed separately by ASEAN with the countries of Japan, South Korea, Australia, New Zealand, and India. As of 2010, five FTAs under the ASEAN+1 approach (with China, Japan, South Korea, India, and Australia - New Zealand) have been signed.
The ASEAN+1 free trade agreements were one of the most significant achievements of ASEAN's foreign policy since 2007. These steps contribute to ASEAN's central role in regional connectivity and strongly promote East Asian economic integration. However,
due to some limitations and obstacles in implementation, the ASEAN+1 agreements have not yet reaped the full benefits for all parties. These FTAs are primarily concerned with liberalizing trade in goods. Tariff reduction ambitions in these agreements vary significantly, while the ability to meet the rules of origin in these agreements is also not entirely uniform. The existence of many ASEAN+1 free trade agreements has led to an increase in the effect of overlapping relations between them, causing increased transaction costs, hindering the use of trade preference systems, thereby reducing the effectiveness of existing free trade agreements. In order to achieve better FTA standards and stronger regional integration, ASEAN has come up with the idea of building a regional comprehensive economic partnership agreement. RCEP is one of the alternatives for ASEAN and the six countries that have signed ASEAN+1 free trade agreements, including China, South Korea, Japan, India, Australia and New Zealand.
Thus, the idea of RCEP was formed in the context of both East Asia and, more broadly the Asia-Pacific region in the process of promoting trade and investment liberalization in a positive way. Since the launch of the first round of negotiations in May 2013 to 2020, the countries participating in RCEP have conducted a total of 31 rounds of talks on topics such as "goods, services, investment, intellectual property, economic cooperation, technology, competition, e-commerce, relevant legal regulations, etc"[1]. Negotiations on the RCEP have accelerated since November
2017. India announced its withdrawal from the talks in November 2019. A short time later, the COVID-19 pandemic impacted negatively on global supply systems and economic growth. Nonetheless, in November 2020, at the 37th ASEAN Summit, hosted online by Vietnam as 2020 ASEAN Chair, the RCEP was officially signed, bringing about a number of significant implications.
2. Contents and main features of the RCEP agreement
The initial goal of RCEP is to form a fairly unified system of trade principles, and basically, the signed RCEP has achieved that goal. More specifically, the RCEP has managed to establish the fundamentals of a free trade agreement, including the principles relating to goods, services, and investment. With regard to tariff commitments, the ultimate goal of RCEP will be zero tariffs on 90% of goods between member countries [2]. Regarding investment, member states are committed to applying a substantive open-door policy to foreign investors. Moreover, RCEP applies rules of origin to the products of enterprises in the bloc flexibly to accelerate the construction of internal production networks. In terms of customs procedures, the RCEP applies more transparent and practical principles to reduce or remove trade barriers and facilitate the free movement of production and commodity elements in the region. As such, all member states will benefit from this mechanism. From the main content of the RCEP Agreement, we can generalize some following basic features.
First, the modernity of this agreement must be mentioned. The RCEP is an agreement that is not only built for the present but also an agreement for the future. The agreement sums up the scope of existing ASEAN+1 free trade agreements with five dialogue partners.
Second, the RCEP is comprehensive, both in terms of the scope and depth of its commitments. The contents signed in the RCEP have 20 Chapters and cover many areas previously not mentioned in ASEAN+1 free trade agreements. For example, the RCEP has specific provisions relating to "trade in goods, rules of origin; customs procedures and trade facilitating; food safety and quarantine measures"; "financial services, telecommuni-
cations services, and the temporary movement of individuals."; "investment, intellectual property, e-commerce, small and medium enterprises (SMEs); economic and technical cooperation; public procurement; and areas of legal institutions, including dispute resolution" [3].
An important feature of RCEP is its focus on development issues, and mutual benefits for its members. RCEP countries have economies with diverse levels of development. The RCEP's agreement is designed to accomplish that goal in a variety of ways, with flexibility for ASEAN's least-developed members.
3. Prospects for RCEP implementation
The RCEP is intrinsically linked to the process of regional integration, rather than being a competitive initiative for influence. The RCEP is expected to establish a unified set of rules, accompanied by a series of commitments to all ASEAN member states. This will assist in mitigating the effects of FTA overlap and optimizing governments' efforts to establish a highly competitive manufacturing network in East Asia.
Regarding the economic aspect, capital and human resources in the region will be efficiently allocated by fulfilling commitments, facilitating increased international trade, and attracting investment and increase the level of integration of member states. When the RCEP officially takes effect, with a total real GDP of about 25 trillion dollars, accounting for nearly 30% of the world's GDP [4] - on par with the North American Free Trade Agreement (NAFTA) and more significant than the European Union, RCEP would create a large consumer market with about 30% of the world's population, thereby then increasing the GDP of the Asia-Pacific region by 2.1% and the world GDP by 1.4%, bringing in an additional 209 billion dollars in global sales annually and 500 billion dollars in world trade by 2030 [5]. More specifically, the initiative will boost China's GDP growth by about 0.55%, Japan by 0.1%, and South Korea by 0.5% [6].
From the perspective of the five countries outside ASEAN, when they join the RCEP, they all benefit. Australia and New Zealand will have the opportunity to achieve results
that are superior to those of bilateral agreements through the RCEP. Joining the RCEP is also a catalyst for China and Japan to implement domestic economic and institutional reforms. Southeast Asian countries also enjoy certain benefits of about 19 billion dollars annually from the time the agreement takes effect until 2030 since China, Japan, and South Korea all give ASEAN a higher level of market openness than they afford each other [7]. The RCEP is projected to support ASEAN countries in their economic recovery. Forecasts suggest that ASEAN is expected to become the world's fourth-largest economy by 2030, with domestic consumption doubling to 4 trillion dollars [8].
On the other hand, the fact that RCEP has become a reality has a great impact on the economic and political situation in the Asia-Pacific region. The RCEP will increase its members' influence on the world stage. It will assist China in consolidating relations with neighboring countries and promote economic integration in Northeast Asia. Negotiations on a trilateral free trade agreement between China, Korea, and Japan, which have been stalled for years, will regain momentum once the RCEP is signed.
The establishment of RCEP helps ASEAN maintain its role as the center of the economic cooperation network in East Asia, and further in the Asia Pacific region. Besides, RCEP also helps ASEAN in particular and East Asia, in general, reduce dependence on Western economies, which are currently facing many difficulties in recovering growth. In short, the RCEP is an agreement aimed at expanding and deepening the solidarity between ASEAN and Australia, China, Japan, South Korea, and New Zealand.
4. Challenges to the implementation of RCEP
The RCEP is the free trade agreement that converges a distinct diversity of economies: the world's largest economies (China and Japan), high-income-per-capita economies (Singapore, New Zealand, Brunei, Australia), industrialized economies (Japan, South Korea, Singapore, China), middle-income economies with vast natural resources (Malaysia, Indonesia, Thailand, Philippines, Vietnam) and low-income, underdeveloped economies
(Cambodia, Laos, Myanmar). The disparities between economies in RCEP result in contradictory benefits and the process of its cooperation is also complicated. This poses a challenge for RCEP.
Although RCEP is a new-generation trade agreement, the requirements and standards in this agreement are lower than recent implementation agreements such as CPTPP and EVFTA. Therefore, there may be concerns that the non-strict standards in the RCEP could cause some member states to lose motivation for institutional reform.
The benefits of initial liberalization may be limited by the fact that RCEP members are parties to a large number of international trade agreements, including the ASEAN+1 free trade agreement. This has resulted in RCEP member states lacking momentum and devoting less attention to the immediate implementation of the RCEP's contents and commitments.
The RCEP agreement could increase the pressure on the goods and services of each member to enter a significant common market. Many RCEP members have similar products, but some have a more significant competitive advantage. For example, Japan is often praised for its high-quality electrical products. At the same time, China is considered a global factory due to its low processing costs, resulting in lower product prices than other countries. As a result, after the implementation of RCEP, the competitive pressure will increase.
Besides, issues such as political instability, low and unstable growth rates in some countries continue to thwart RCEP implementation. It can be said that only when countries' internal problems are resolved will governments devote sufficient attention and effort to effectively fulfilling the RCEP's commitments.
5. Conclusion
In conclusion, the RCEP Agreement's implementation has a plethora of positive outcomes. This initiative established the world's largest free trade area, fostering cooperative development among member states. The RCEP's effective implementation will have a beneficial effect on regional peace and security. The signing and implementation of the
RCEP agreement, in particular, are expected gional economy's recovery following the to make a significant contribution to the re- COVID-19 pandemic.
References
1. Hua, T. (2021). A look at the RCEP from a Customs perspective. - URL: https://mag.wcoomd.org/magazine/wco-news-96/rcep-from-a-customs-perspective/
2. UNCTAD. (2021). Asia-Pacific partnership creates new "centre of gravity" for global trade. - URL: https://unctad.org/news/asia-pacific-partnership-creates-new-centre-gravity-global-trade
3. Tan, I., Hong, K. (2020). Understanding the Regional Comprehensive Economic Partnership Agreement (RCEP). - URL: https://www.bakermckenzie.com/-/media/files/ in-sight/publications/2020/12/bakermckenzie_understandingrcep_dec2020.pdf?la=en
4. Lee, T. (2020). The Details of the RCEP Trade Deal. American Action Forum. - URL: https://www.americanactionforum.org/insight/the-details-of-the-rcep-trade-deal/
5. Huaxia. (2020). "RCEP to bring significant benefits to members, say experts". - URL: http://www.xinhuanet.com/english/2020-11/17/c_139522402.htm
6. Dan, Z. (2020). RCEP poised to be signed at weekend. Global Times. - URL: https://www.globaltimes.cn/content/1206528.shtml
7. Petri, P. A. & Plummer, M. (2020). RCEP: A new trade agreement that will shape global economics and politics. - URL: https://www.brookings.edu/blog/order-from-chaos/2020/11/16/rcep-a-new-trade-agreement-that-will-shape-global-economics-and-politics/
8. Medina, A. F. (2020). Planning Your 2021 Investment Budgets: Opportunities in ASEAN. -URL: https://www.aseanbriefing.com/news/planning-your-2021-investment-budgets-opportunities-in-asean/
ВСЕОБЪЕМЛЮЩЕЕ РЕГИОНАЛЬНОЕ ЭКОНОМИЧЕСКОЕ ПАРТНЕРСТВО (ВРЭП): ПЕРСПЕКТИВЫ И ПРОБЛЕМЫ
Нгуен Куок Фонг, студент
Национальный исследовательский университет «Высшая школа экономики» (Россия, г. Москва)
Аннотация. С момента официального вступления в силу Всеобъемлющее Региональное Экономическое Партнерство (ВРЭП) становится мегарегиональным торговым соглашением, способствующим интеграции и сотрудничеству экономик Восточной Азии и тем самым создающим один из крупнейших торговых блоков в мире. В этой статье описываются формирование и ключевые обязательства соглашения, а также указываются потенциальные проблемы, связанные с осуществлением соглашения государствами-членами.
Ключевые слова: ВРЭП, формирование, торговое соглашение, перспективы, проблемы.
