To say that the Regional Comprehensive Economic Partnership (RCEP) is China’s answer to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a little glib. While it’s not a bad way of thinking about the origins of the RCEP, it doesn’t fully explain what is, arguably, the world’s largest ever free trade agreement (FTA).
An Answer to the CPTPP
The CPTPP was partly designed to limit the influence of China in the Pacific sphere. That was more explicitly the point of the Trans-Pacific Partnership (TPP) agreement that went un-signed by former US President Donald Trump. The other countries that were to be a part of the TPP then signed the CPTPP.
Partly in an effort to counter the CPTPP, China helped to craft the RCEP with many of the same nations who are members of the CPTPP. The RCEP consists of 15 nations that represent a combined 2.2 billion people—or 30% of the world’s population—and $26.2 trillion, or 30% of global GDP. Given these mammoth numbers, the RCEP can be considered to be the largest trade bloc in the world.
A Big Bloc with Not-So-Big Impacts?
The RCEP came into effect at the start of the year, though some individual member states have later dates according to when they ratified the deal. It’s unclear how much the RCEP will help the developing nations in the bloc. These nations could see more imports coming in than export goods going out, especially in the near future. And unfortunately, there are no provisions in the agreement to improve labor rights.
In the long-term, businesses might be encouraged to build supply chain networks within the trade bloc, thus creating more jobs. However, in the immediate future, it seems investors will be the primary beneficiaries. Experts have also said limitations in scope will not help RCEP members grow their e-commerce sectors.
Despite the criticisms of the RCEP, more countries want to join. Hong Kong has stated its desire to join the bloc, though it’s difficult to tell if this move is independent of China or rather a Beijing directive. Myanmar is also a signatory, but New Zealand has said they won’t deal with the Southeast Asian nation after the military seized power there last year. It’s unclear how the RCEP will resolve this issue.
Further complicating matters are China’s own application to join the CPTPP. The political ramifications of these deals are confusing, but whatever happens, money will likely flow freely between all these nations’ businesses, investors, and economies.
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