On 8 March 2021, Minister of Commerce Wang Wentao said at the second “Ministerial Channel” of the National People’s Congress that the Chinese government had officially approved the agreement. On 22 March, the head of the International Department of the Ministry of Commerce said that China had completed the approval of the Regional Comprehensive Economic Partnership Agreement (RCEP), and had become the first country to ratify the agreement. In addition, Thailand has also ratified the agreement. All RCEP member countries have indicated that they will ratify the agreement by the end of the year and promote its entry into force on 1 January 2022; on 15 April, China formally deposited its instrument of ratification of the Regional Comprehensive Economic Partnership Agreement (RCEP) with the Secretary-General of ASEAN; and on 28 April, the plenary session of the Japanese Senate adopted the “Regional Comprehensive Economic Partnership Agreement” (RCEP).

In October 2021, six ASEAN countries have submitted their instruments of ratification of the RCEP. Australia and New Zealand have completed the domestic approval process for the “Regional Comprehensive Economic Partnership Agreement” (RCEP). The agreement has met the conditions for entry into force and will soon enter into force on 1 January 2022.

The special features of RECP

Focus on lowering taxes, with room for upgrading.

According to the studies, the first difference lies in the fact that the participants in RCEP are mainly developing countries in Asia, highlighting the strong momentum of economic integration in East Asia. ASEAN and China, and ASEAN, Japan and South Korea are becoming more interconnected, and it is time for regional cooperation to reach a certain level of development that requires further expansion of space.

Secondly, precisely because the standards of the RCEP are set according to the actual situation of developing countries, they are not as high as those of the TPP/CPTPP, but show more flexibility and comfort, fully reflecting the maximum convention of the development aspirations of the participating parties, and leaving room for upgrading to a higher level in the future. According to <Foreign Policy> magazine, the RCEP aims to reduce tariffs between member countries, take some measures to open up trade in services and coordinate dispute settlement. But it does not include any strict labour or environmental standards.

The third feature is that the RCEP covers a wide range of countries, making it the largest FTA in the Asia-Pacific region. The main focus is on tariff reduction and tariff exemptions for trade in goods and services, and lowering market access thresholds. Also, according to Singapore’s <Straits Times> website, in 2017 it was agreed on the part of ASEAN that signatories to the RCEP should remove at least 90.3% of barriers to trade in products within five to ten years. In the future, it cannot be ruled out that 95% or even more tariff lines of products will be included in the zero tariff scope.

According to the expert, it should be noted that India’s temporary absence from the RCEP may be based on two points. First, economic factors. India’s economic growth rate has been reduced and protectionist forces are on the rise in the country, fearing that once it joins, a large number of foreign low-priced goods will flow into the Indian market, impacting on domestic industries. Second, domestic political factors. India’s domestic opposition parties are using the RCEP issue to pressure the Modi government to take responsibility for the “economic slowdown, soaring unemployment, agricultural crisis” and other issues, putting pressure on Modi to “lose political points”. But the door to the RCEP is still open to India and India can join when the conditions are riper for opening up.

Professor of economics at the Indian Institute of Public Administration in New Delhi, said the RCEP was a great opportunity for both India and China to take cooperation to a new level in all areas of common interest and to present a united front to the world. Indian industry needs to become more competitive and effectively prepared to cope with the influx of imports from all major trading partners, and the government must make a concerted effort.

IHS Markit analyst Biswas said that while the long-term economic gains from the RCEP in terms of merchandise trade are expected to be relatively modest, India will still benefit from trade in services and investment flows. Other analysts have pointed out that India’s openness to the outside world is warming up in recent years and it is actively promoting the South Asian Association for Regional Cooperation (SAARC), working with countries in this region to push for lower tariffs.

The FTA system encounters a new upgrade.

On one hand, the establishment of the RCEP reflects the upgrading of regional economic integration, the enrichment of East Asian cooperation, and the progress of East Asian countries towards the goal of building an East Asian community.

From a global perspective, the significance of the RCEP also can not be underestimated. According to experts, RCEP is a “heart booster” for the maintenance of the free trade system – a boost to market confidence against the backdrop of the international multilateral trading system being eroded by forces such as counter-globalisation and the increasing downward pressure on the world economy, and a boost to the global economy. The RCEP will also provide a boost to the global economy. In addition, the RCEP will also have a positive demonstration effect on other bilateral and multilateral FTAs being negotiated in Asia and around the world.

The current challenges of RECP

On the challenges facing the RCEP, experts pointed out that,

Firstly, the RCEP agreement has to be adopted by the national authorities of member countries before it can be signed, and the possibility of twists and turns cannot be ruled out.

Secondly, there are many FTAs in the Asia-Pacific region, showing the “spaghetti bowl effect”. The wisdom of all parties will be tested to see if they can form a complementary and facilitating relationship with each other rather than a hedging and competitive relationship.

Thirdly, the United States, as the world’s largest economy, has an interest in India and other countries under the framework of the Indo-Pacific strategy. At present, Europe and the United States all want to negotiate FTAs with India. It is worth observing whether the FTAs constructed under the leadership of Western countries will pose an impact on RCEP.

Experts believe that in recent years, various large and small FTAs have been launched. In this year alone, the construction of an African FTA was launched and a SADC EU FTA was reached. This shows that the more global protectionism rises and trade risks intensify, the stronger the political will of all parties to open up and cooperate, all recognizing that openness and cooperation is the trend of the times. This is the underlying logic behind the RCEP’s leap forward.

By Sherry Song Dhu