On 15 November 2020, and after a reported eight-year period of negotiations, 15 countries have joined together to sign one of the largest ever free trade agreements, known as the Regional Comprehensive Economic Partnership (“RCEP”). In its simplest form, RCEP may be considered as a framework for facilitating free and more streamlined trade arrangements between RCEP countries, recognizing that the countries comprizing RCEP consist of both developed and developing countries. It is also highly symbolic, coming at a time of recent trade tensions and tariffs.
RCEP brings together the 10 ASEAN1 states (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) with five other partner countries (Australia, China, Japan, New Zealand and South Korea). According to the Joint Leaders’ statement signed on 15 November 2020, RCEP will “cover a market of 2.2 billion people, or almost 30% of the world’s population, with a combined GDP of US$ 26.2 trillion or about 30% of global GDP, and accounts for nearly 28% of global trade (based on 2019 figures)”.2
At an earlier stage of the negotiating process, India had been a party though it later withdrew, but could potentially re-engage with RCEP in the near future. Interestingly, Hong Kong SAR, China, as a member of the World Trade Organization is not a party in its own right to RCEP as of now, but has expressed a desire to join RCEP as its first new member economy.3
The global pandemic has heightened the need for many businesses to reconsider their supply chains, with a number of key trends emerging such as regionalization, digitalization, near-shoring, reshoring, and rebasing of manufacturing all being evident features. Customs and tariffs, government subsidies, the changing costs of and access to labor, and taxation are all having an impact on these decisions. RCEP will play a critical role in this assessment process, and even act as a trigger for supply chain reorganizations.
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1 Source: ASEAN - Association of Southeast Asian Nations. More on asean.org
2 Source: Joint Leaders’ Statement on the Regional Comprehensive Economic Partnership (RCEP), 15 November 2020. Posted on asean.com
3 Source: Comments attributed to the Acting Secretary for Commerce and Economic Development, Dr Bernard Chan, in the Legislative Council, 11 December 2019.