The Japanese government has approved the world’s largest trade deal.
The Regional Comprehensive Economic Partnership (RCEP) could come into force next January.
Deborah Elms, Executive Director of the Asian Trade Centre in Singapore, explains what it is, how it differs from other trade deals and what has to happen next.
RCEP is a big deal, literally and metaphorically. When it’s signed off, the Regional Comprehensive Economic Partnership will create a free trade zone covering about 30% of the world’s gross domestic product, trade and population.
It also marks the first time Japan has had an agreement with China and with South Korea.
The Japanese government approved the deal at the end of April – and expects it to boost GDP by 2.7% and create more than half a million jobs, according to Kyodo News.
RCEP – which has been over a decade in the making – will eliminate tariffs on 91% of goods as well as introduce rules on investment and intellectual property to promote free trade.
It covers 15 member countries, but there’s also some overlap with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Here, Deborah Elms, Executive Director of the Asian Trade Centre in Singapore, explains what RCEP is, how it differs from other trade deals and whether it will come off.
What actually is the Regional Comprehensive Economic Partnership?
It’s a trade deal that sets up trade in Asia, for Asia. We’ve had a lot of trade in Asia, of course, we’ve had a lot of raw materials, parts and components that move back and forth. And they’re often given final assembly [in Asia], but they’re typically then shipped to the US or Europe. We don’t have as much final production that ends up in Asia. One of the reasons we don’t have that is because trade in the region, especially for finished goods, is too difficult, too expensive – tariffs in place, non-tariff challenges, etc – and so you have less trade in the region than you should have. It’s not a perfect agreement, but RCEP makes it more likely that firms will create supply chains in Asia, for Asia. As the agreement comes into force and becomes more meaningful for firms, then it will accelerate over time.