RCEP – the role of the world’s largest trading bloc within both the Middle East and the wider global economy
An incredibly significant trade deal, known as the Regional Comprehensive Economic Partnership (RCEP) deal, which covers over a third of the world’s population and their respective GDP’s, was finally agreed upon and signed on the 15th of November 2020. Initial negotiations began in 2012, and the whole process took almost eight years until the ten countries of ASEAN, and five Asia-Pacific countries (China, Japan, Korea, Australia, and New Zealand) finally agreed on terms during a meeting of the 37th Association of Southeast Asian Nations (ASEAN) held in Hanoi, Vietnam. The completion of negotiations resulted in the RCEP becoming the largest trading bloc in the world.
And the sheer reach of the world’s largest free trade zone is phenomenal. Covering a huge area between Kazakhstan to the South Pacific, total trade between members amounted to a staggering $2.3 trillion in 2019.
Who are the signatories?
China, Japan, Australia, New Zealand, South Korea, along with the 10 members of the Association of Southeast Asian Nations (ASEAN): (Brunei, Vietnam, Laos, Cambodia, Thailand, Myanmar, Malaysia, Singapore, Indonesia, and the Philippines) are all members. India was involved in the early stages but decided to leave the process after concerns were raised regarding the negative effect of cheap Chinese imports upon their economy. Similarly, The United States of America withdrew from a rival Asia-Pacific trade pact in 2017, regarding that pact as a massive extension of China's influence in the region. However, any other state or customs territory will still be allowed to join the RCEP in the next 18 months if they wish to do so.
Why is the RCEP important?
The agreement is seen as being vital to the participating members as they attempt to be in the best possible position to emerge from the negative economic impacts of the worldwide COVID-19 pandemic. The ultimate aim of the group is to identify and take advantage of new opportunities for investment, imports and exports, and relevant trade deals, which may provide mutual benefit to all. Significantly, The RCEP is expected to remove over 90% of the tariffs on imports between members over the next 20 years, with a set of simple, common rules in the areas of trade, e-commerce, and intellectual property, and professional services. These common rules of origin aim to create and improve international supply chains and decrease export costs between all 15 members. For example, in the RCEP, parts from all member nations will be treated equally, hopefully encouraging companies to look within that trade region for suppliers.
How will it impact the Middle East?
RCEP is a trade agreement where associating countries agree upon reducing or eliminating tariff and non-tariff barriers to imports and exports. And trade in commodities such as oil, coal, and natural gas, will be central to the success of this huge trading organization. This means that the Middle East and Indian producers who are not part of the deal and export to ASEAN countries may face bigger entry barriers for these exports because they will not have access to the lower or zero import tariff privileges enjoyed by members of RCEP.
The final note!
Some research has been done on this front to layout the possible impacts of the pact. While the deal promotes market development and investment, it lacks provisions for protecting workers and the environment and may hurt smallholder farmers and businesses at a time when they are already suffering from the pandemic, said Arieska Kurniawaty at Solidaritas Perempuan in Indonesia.
Pointing out the impact of RCEP, Rahsmi Banga, a senior economist at the United Nations' development agency UNCTAD said, ‘RCEP was framed at a time when there was no coronavirus. Right now, countries need policy and fiscal space to deal with the pandemic and the economic crisis; RCEP will further limit that space and therefore their ability to manage the crisis.’
On the whole, the agreement must enhance the engagement to make sure the stakeholders’ voice is heard and that the overall regional partnership architecture remains transparent and rules-oriented.
To conclude, the future looks bright for those countries who have joined the RCEP, and represent half the world's population and one-third of the global GDP. It may be somewhat more challenging for economies like India who have decided to opt-out. What is clear is that, after eight long years of negotiation, the RCEP could be a global trading organization with considerable economic power.