Analysis of the effect of RCEP (Regional Comprehensive Economic Partnership) on East Asian economies
In 2021, six ASEAN member countries, including Brunei, Cambodia, Laos, Singapore, Thailand, Vietnam and four non-ASEAN member countries, including China, Japan, New Zealand and Australia, have submitted a RCEP approval letter to the ASEAN Secretary-General to promote the entry into force of the RCEP. According to RCEP, it has entered into force on January 1, 2022 for the above 10 countries. Here comes a word: RCEP. So, what is RCEP? In fact, the full name of RCEP, the Regional Comprehensive Economic Partnership, was initiated by ASEAN in 2012, and the agreement was formulated by 15 members including China, Japan, South Korea, Australia, New Zealand and the ten countries of ASEAN. It was officially signed by the ten ASEAN countries in November 2020, covering a population of more than 3 billion and accounting for more than 30% of the world’s GDP. It is one of the largest trade agreements ever signed in the Asia-Pacific region. The main purpose of RCEP is to reduce tariffs. In fact, according to RCEP, more than 90% of the merchandise trade between RCEP members will eventually be implemented under the new trade bloc with zero tariffs. Taking China as an example, when RCEP officially entered into force in China in January 2022, the proportion of zero tariffs trade between China and South Korea reached about 50%, the proportion of zero tariffs trade between China and Japan will reached about 25%, and the proportion of zero tariffs trade between the remaining members (ASEAN, New Zealand and Australia) reached about 65%.
So, what impacts does RCEP have, which went into effect in January 2022?
From the perspective of trade in goods, we can divide impacts that RCEP has into three parts: lower tariffs, lower tariff barriers and rules of origin. The decline of both tariff barriers and non-tariff barriers will promote a freer flow of goods. RCEP promotes exports from the parties to the Agreement, which is conducive to GDP growth. Meanwhile, RCEP can also meet the needs of consumption and production by expanding imports. Origin will also affect trade costs: more uniform rules of origin will facilitate a freer movement of goods within the region, while goods that would not otherwise be identified as origins will be more likely to be judged as goods of origin after the agreement enters into force, thus enjoying the benefits of tariff reductions.
From the perspective of market opening, we can divide impacts that RCEP has into two aspects: the opening of the traditional commodity market and the service trade, investment, and government procurement market. The discussion of the impacts of the opening of traditional commodity markets have actually been covered in the discussion of the impact of trade in goods, with the latter mainly discussed here. Trade in services, investment, and government procurement all has special market access lists in the agreement. If the tariff reductions in the Tariff Reduction Table and the length of the transition period reflect the opening up of commodity markets, these lists actually reflect the opening of the services, investment, and government procurement markets.
In short, the entry into force of the RCEP will be an important symbol of the process of regional economic integration in East Asia. It will promote the growth of intraregional trade and investment in East Asia, optimize the overall business environment, and stabilize the industrial chain and supply chain in the region.
By Tao Cheng
