The Regional Comprehensive Economic Partnership (RCEP) has been ratified by 11 countries as of December 2021, including the six ASEAN countries of Brunei, Cambodia, Laos, Singapore, Thailand, and Vietnam, as well as Australia, China, Japan, New Zealand, and South Korea.
The goal of RECEP is to facilitate trade between those 11 nations and help the economic recovery in 2022 and beyond. The region has been heavily affected by the COVID-19 crisis, as many countries are dependent on tourism and export industries.
The Three Key Pillars of RCEP
RCEP aims at three broad economic goals to speed up economic growth within the regional trading bloc. The first is the free flow of goods. Over a 20-year period, it will reduce roughly 90% of tariffs between the signatories. In 2022, China will eliminate around 70% of its tariffs on products imported from ASEAN, while ASEAN countries will eliminate about 75%.
The second goal is to harmonize non-tariff measures such as product standards for food safety, packaging, and labeling requirements. The best way to do this is to develop common regional standards.
And third, the RCEP aims to stimulate cross-border e-commerce, especially among small and medium-sized enterprises (SMEs) in international trade. Measures include increased protection of online consumers and online personal data and easier cross-border information transfer.
Expectations are high, especially regarding e-commerce. It presents an opportunity for SMEs to participate in international trade and help their post-COVID recovery.
RCEP could add significantly to the regional economic output. However, it is important to note that the benefits will not be automatic. Ecommerce, for example, requires investment in new technologies and adopting new business models as well as acquiring new skills.
ASEAN governments also need to provide a supportive domestic and international operating environment for businesses conducting international trade. The signatories will need to translate the RCEP provisions into national action plans. If they succeed, the partnership could pave the way for more trade and a stronger recovery.
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