Leaders from 15 Asia-Pacific nations have formed the world’s largest trading bloc, covering nearly a third of the global economy, after a virtual signing ceremony for the new Regional Comprehensive Economic Partnership (RCEP) in Hanoi, Vietnam, on 15 November after almost a decade of negotiations.
The RCEP takes most of the existing agreements signed by the 10 members of the Association of Southeast Asian Nations — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam — and combines them into a single multilateral pact with Australia, China, Japan, New Zealand and South Korea.
Members of the RCEP make up nearly a third of the world’s population and account for 29% of global gross domestic product. The new free trade bloc will be bigger than both the US-Mexico-Canada Agreement and the European Union. Economists said the deal could add almost $200 billion to the global economy annually by 2030.
The deal excludes the US, which also withdrew from another large regional trading pact, the Trans-Pacific Partnership (TPP), in 2017. India was also part of the RCEP negotiations, but it pulled out last year over concerns that lower tariffs could hurt local producers. Signatories of the deal said the door remained open for India to join in the future.
“We signed today, after a tough slog of eight years,” said Singapore prime minister Lee Hsien Loong. “This is a major step forward for our region. At a time when multilateralism is losing ground, and global growth is slowing, the RCEP shows Asian countries’ support for open and connected supply chains, freer trade and closer interdependence.”
While the RCEP agreement has all the usual elements included in a free trade deal – such as tariffs, customs administration, sanitary measures, services, investment and others – importantly is also consolidates Rules of Origin definitions and quotas for the first time amongst participating nations. Just one Rule of Origin document is now sufficient to cover all countries in RCEP.
Many of the members have existing trade agreements and RCEP is not expected to lead to large overall reductions in tariffs. But it will combine the existing deals and bring Asia a step closer to being a coherent trading zone like the EU or North America.