Regional Comprehensive Economic Partnership (RCEP) is completing its first anniversary as one of the largest trading blocs. This important regional trading agreement came into force on 1 January 2022 and was formally signed on November 15, 2020.
The agreement was signed between ten member states of ASEAN and China, Australia, New Zealand, Japan, and South Korea.
RCEP is regarded as the replacement for the now-defunct Trans-Pacific Partnership (TPP), which ended after the United States withdrew from it in 2017.
Also Read: Report: RCEP, World’s Largest Free Trade Zone
The RCEP, which encompasses 2.3 billion people or 30% of the world’s population, accounts for US $12.7 trillion, or more than 25% of global commerce in goods and services. It also contributes around US$25.8 trillion annually to the global GDP.
The success of RCEP for the ASEAN and China
The RCEP is an agreement allowing cooperation and flexibility without jeopardizing commitments. It encourages supply networks within the region while also considering political sensitivities.
Joseph Matthews, a senior lecturer at the BELTEI International University in Phnom Penh, claims that the RCEP has strengthened regional economic integration while highlighting the member nations’ unshakeable commitment to multilateralism & free trade.
The RCEP has fully realized its benefits over the past year. It is effectively deepening economic ties among Asian economies, boosting confidence in regional investment and trade.
Additionally, it is enhancing the endurance of industrial and supply chains in the region, all against the backdrop of shifting international circumstances and the ongoing global economic downturn.
Increase in Trade
China witnessed a significant increase in trade with other RCEP partners over the last eleven months. From January to November 2022, trade between China and the other RCEP partners totaled 11.8 trillion yuan ($1.69 trillion).
There was a rise of 7.9 percent from the same period the previous year and 30.7% of China’s overall international trade.
Furthermore, China’s exports to the other RCEP partners were 6 trillion yuan, a rise of 17.7 percent from the same period the previous year at a pace that was 5.8 percentage points higher than the overall export growth rate.
Also Read: China Prepared for RCEP Implementation
Additionally, it is touted that China will make the most money from the RCEP ($100 billion) by 2030. This demonstrates how the RCEP has facilitated trade and economic cooperation between China and the other participating nations, as well as the growth of the regional economy.
Advancing Geopolitical Objectives
In addition to being successful economically, the RCEP also helps China advance its larger geopolitical objectives in Southeast Asia. China will be the institutional voice for establishing an economic system in Southeast Asia that is based on rules.
As a result of such extensive cooperation, this agreement is also anticipated to enhance China’s positive perception and relations with Southeast Asian countries.
Tariffs
After the RCEP went into effect last year, tariffs on more than 65 percent of commodities between China and its ASEAN partners were instantly reduced to zero.
China’s imports and exports to and from ASEAN nations were $798.4 billion from January to October last year, up 13.8 percent from the previous year.
As previously mentioned, ten of the RCEP’s fifteen members are ASEAN nations. Even the RCEP idea emerged from ASEAN at the ASEAN Summit in 2011. RCEP has aided in boosting ASEAN’s clout in the Asia-Pacific region.
According to research by the Asian Development Bank, the RCEP is predicted to increase the incomes of its member nations by 0.6 percent by 2030, as well as the regional revenue and employment by $245 billion yearly and 2.8 million jobs, respectively.
The ASEAN countries profited from joining the RCEP by increasing their exports, growing their investment sectors, lowering the cost of imports, and having more opportunities to participate in regional supply chains because of improved market access.
Moreover, the RCEP region has the most active cross-border e-commerce and experiences the highest growth rate globally, thanks to non-tariff measures and the convenience of customs clearance.
Considering the performance of RCEP in Thailand, Thailand’s trade with RCEP members accounted for around 60% of its international trade in the first nine months of 2022.
Also Read: RCEP to boost Thailand’s Economy
An increase of 10.1% from the same period the previous year to 252.73 billion US dollars, according to data from Thailand’s Commerce Ministry.
Case Study of Cambodia
According to Penn Sovicheat, Spokesman for the Cambodian Ministry of Commerce, the RCEP is a “catalyst for our long-term and sustainable trade growth and a magnet to attract more foreign direct investments (FDIs) to our country”.
This claim is supported by the fact that the RCEP has increased investment and job prospects in Cambodia.
According to the most recent report from the Cambodian Ministry of Commerce, commerce between Cambodia and the members of the RCEP totaled US$28.4 billion in the first 11 months of 2022, an increase of 7% over the same period last year.
The RCEP is “not a zero-sum game,” according to the Cambodian government, and is all about “win-win” cooperation.
The Cambodian government is also optimistic that the RCEP will assist Cambodia in achieving its aims of leaving its status as a least developed nation (LDC) by 2028 and becoming an upper-middle income country by 2030.
Also Read: Cambodia hosts 54th ASEAN Economic Ministers Meeting
Another example of the value of constructive interaction in fostering understanding and bridging state divides is the recent RCEP negotiations.
The negotiations pursued, following the idea of ASEAN centrality, creating policies and processes that enabled participants of all capacities to gauge their goals.
With the most significant population, largest economy, and largest scale of commerce, this free trade bloc has infused energy into the growth of the regional economy against the backdrop of lackluster world economic growth.
It also provides a guide for shared growth among nations with various political structures and cultural traditions.
Cooperative Work Programme
Since the RCEP Agreement has come into effect, one element of the agreement needs special attention from the RCEP parties: creating & implementing a cooperative work programme as required by Chapter 15 of the RCEP Agreement, titled “Economic and Technical Cooperation.”
Also Read: ASEAN holds webinar on RCEP regional trade
As the Partnership is not just intended to deepen trade and investment liberalization, pursuing economic and technical collaboration among RCEP member nations must be high on the agenda.
To improve political security in the area, parties might use economic and technological cooperation to foster understanding, encourage collaboration, and defuse tense situations.
As resolving border disputes between China and ASEAN is crucial for regional security, the RCEP Agreement offers a chance to reduce possible conflicts and concentrate instead on shared goals to improve the economic, political, and social welfare of RCEP’s population.
*The writer is a Fellow at The Diplomatic Insight, published by the Institute of Peace and Diplomatic Studies
Disclaimer: The Diplomatic Insight does not take any position on issues and the views represented herein are those of the author(s) and do not necessarily reflect the views of The Diplomatic Insight and its staff.
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