The Regional Comprehensive Economic Partnership (RCEP) between ASEAN, China, Japan, South Korea, Australia, and New Zealand was signed on November 15th, 2020 at the 37th ASEAN Summit. This pact will have a considerable economic and political impact on the Asia Pacific Region.

The signing of RCEP with the participation of 15 Asia Pacific economies (photo: VNA)

Formation of RCEP

Grounded on free trade agreement between ASEAN and China, Japan, South Korea, Australia, New Zealand, and India, in 2011, ASEAN member states proposed the construction of a larger-scale free trade agreement with a view to overcoming the shortcomings in the bilateral free trade agreements. For that reason, in November 2012, at the 7th East Asia Summit, 10 ASEAN member states and 6 partner countries released a joint statement to initiate negotiations relating to RCEP, which was believed to maintain the centrality of ASEAN in the Asia Pacific Region’s free trade network against strategic competitions between major powers. It is worth noting that the U.S. actively participated in negotiations of the Trans-Pacific Partnership (TPP) in order to gain the right to establish regional trade principles, while there were differences between China and Japan during negotiations on a free trade agreement. Hence, acceleration of negotiations of RCEP would help increase the central role of ASEAN and maintain a balance between major powers.

From the first negotiation round in May 2013 to 2020, participants in RCEP conducted a total of 31 negotiation rounds relating to goods, services, investment, intellectual property, economic cooperation, technology, trade competition, electronic commerce, legal regulations, and so on. In the meantime, the U.S. was strongly encouraging negotiations of the TPP, with emphasis placed on the qualitative goal and high standards; therefore, it obtained many good results especially when the TPP was signed by 12 countries on February 4th, 2016. At that time, it was thought that the TPP would attract more Asia Pacific countries, such as Colombia, the Philippines, Thailand, Indonesia, South Korea, and Taiwan. After negotiations of the TPP ended, the then US President Barack Obama said that TPP would be deal of the 21st century, adding that TPP would let America, not China, lead the way on global trade. That alleviated the urgency of RCEP and political resolve of several countries, especially Japan towards the joining of RCEP. However, 2017 marked an important milestone in negotiations of RCEP as President Donald Trump decided to withdraw the U.S. from the TPP. As a result, a number of participants in the TPP turned their hope towards RCEP. Thus, since November 2017, negotiations of RCEP have been speeded up, even at the highest level between countries. In the last negotiations, India decided to withdraw from RCEP as it did not accept the criteria for opening its market. Finally, RCEP was signed on November 15th, 2020 at the 37th ASEAN Summit.

RCEP’s contents, significance, and prospects

The initial goal of RCEP was to formulate a system of rather uniform trade principles in East Asia and the Asia Pacific Region. Basically, the signed RCEP attained that goal. More specifically, RCEP managed to establish fundamental principles of a free trade agreement, including those concerning goods, services, and investment. Besides, this pact specified electronic commerce, intellectual property, policies for trade competition, and government procurement. RCEP is committed to lifting trade barriers within its member states, creating and improving a freer investment and trade environment, and building new-generation international trade principles. For tariff commitments, the ultimate goal of RCEP will be zero taxation for 90% of goods between state members; the starting point will be only 65% and it will take 10 years to achieve the target. Concerning investment, state members are committed to adopting a substantive open-door policy for foreign investors. Moreover, RCEP employs the rules of origin for products by intra-bloc businesses flexibly in order to speed up the building of an internal production network. Regarding customs procedures, RCEP applies many more transparent and effective principles to reduce or eliminate trade barriers and facilitate the free movement of production factors and goods within the region. In addition, RCEP implements a flexible commercial mechanism as it is comprised of developed, developing, and underdeveloped countries together with a considerable difference in their markets. Thus, all member states will benefit from this mechanism. For example, with reference to cooperation in economic technology, RCEP takes its members’ economic development level and capacity into account so as to create a favourable condition for the most underdeveloped ones, narrow the development gap, and encourage maximisation of benefits for all parties.

Generally speaking, member states of RCEP will create the largest market in the world with a total of about 2.2 billion consumers, accounting for 30% of the world population, having a combined GDP of 26.2000 billion USD, equivalent to 30% of the world GDP and 28% the world trade (according to statistics in 2019). With its commitments to opening the market for goods, services, and investments, RCEP will provide a legal basis for its participants’ product origin in a harmonious way, while helping develop commercial activities and new supply chains in the region. It is clear to see that RCEP will establish a stable, long-term export market for ASEAN member states when global supply chains are being threatened by the COVID-19 and other detriments. It will also help create a regional legal framework for trade, investment, intellectual property, and electronic commerce, settle disputes, and ensure commercial equality within the region. Once RCEP takes effect, it will be a great boost to the trade development of the region and its members.

RCEP’s impacts on the region

According to Singapore’s Ambassador to Vietnam Catherine Wong, the signing of RCEP sent a message on the central role of ASEAN while solidifying the belief on the stability and economic integration in the region. As the world economy is falling into recession, it is essential for ASEAN to tell the world that the bloc remains focused on doing business and creating favorable conditions for foreign investment and trade, Ms Wong added. At present, ASEAN considers unity, neutrality, centrality, and leadership role as the strategic goal for its foreign and domestic policies, hoping that it will take advantage of these elements to bring more strategic benefits to its members and greatly contribute to regional peace, stability, security, and prosperity.

Although RCEP will raise the central role of ASEAN in the general architecture of the Asia Pacific Region, this pact is a strategic victory of China in its economic diplomacy. The significance of RCEP to China is like its successful establishment of the Asian Infrastructure Investment Bank (AIIB) in 2015 or the event when the International Monetary Fund added Chinese Renminbi to special drawing rights basket. As an important economic cooperation agreement in the Asia Pacific Region, RCEP will be used to step up the rearrangement of global trade on a global scale in favour of China. Free trade principles with zero taxation will enable China and other countries in the Asia Pacific Region to form a new regional economic bloc in a more closely integrated fashion as a pillar for China to respond to the U.S. - China trade competition that is intense without any sign of stopping. The signing of RCEP will develop political and economic relations between China and ASEAN to a new height and allow this country to foster its cooperation with Southeast Asia countries in regional issues. It is noticeable that within the framework of RCEP, China and Japan first reached a bilateral agreement on taxation reduction, marking a historic milestone in the economic relations between the two sides as a free trade region between three East Asia countries is only in the negotiating process. RCEP is the only free trade agreement that both China and Japan joins. Hence, RCEP is not only important to the two countries’ economic relations but also helps stabilise the operation and development of the regional economy. Trade rules set by RCEP will encourage China to keep renewing its market economy more profoundly and establish a system of dual circulation both at home and abroad.

After the signing of RCEP, addressing the 27th Asia Pacific Economic Cooperation (APEC) Economic Leaders' Meeting on November 20th, 2020, Chinese President Xi Jinping stated that China would take the participation in CPTPP into consideration. In that case, China would remove the U.S. influence from the Asia Pacific economic and political space and ruin Washington’s strategy to transform the “Asia - Pacific Century” into the “American Century.” According to many experts, China has been challenging the regional security structure led by the U.S. and it has attained the strategic goals by using its economic tools. Economic programmes recently launched by the U.S. within the framework of the Indo-Pacific Strategy have been overshadowed by China’s financial power and integration into the world economy. To be more specific, both Japan and Australia have participated in RCEP; therefore, quadrilateral relations between the U.S., India, Japan and Australia would hardly bring practical benefits to the implementation of the U.S. Indo-Pacific Strategy.

To conclude, RCEP will not only create a favourable condition for its member states to work with one another effectively to overcome the economic recession caused by the COVID-19 pandemic, but will serve as a victory of multilateralism and free trade over the emerging isolationism and anti-globalisation movement. There is a fact that politics most clearly expresses economic power while military and security power represents a means of achieving economic goals. Thus, it is certain that the effective execution of RCEP will positively impact on regional peace and security.

PHAM BINH - THUY DUONG