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RCEP: The Future of Trade in Asia

INSIGHTS: Trans-Pacific View author Mercy Kuo regularly engages subject-matter experts, policy practitioners and strategic thinkers across the globe for their diverse insights into U.S. Asia policy. This conversation with Dr. Peter Petri – Carl J. Shapiro professor of international finance in the Brandeis International Business School; non-resident senior fellow at the Brookings Institution and its John L. Thornton China Center; and co-editor of “Toward Northeast Asian Integration” (2020 forthcoming) – is the 250th in “The Trans-Pacific View Insight Series.”

Explain the strengths and weaknesses of the Regional Comprehensive Economic Partnership (RCEP) for the 15 Asia-Pacific member nations.

RCEP is literally a big deal. It will reduce economic frictions among countries that account for about 30 percent of the world’s population and production. According to computer simulations Michael Plummer and I recently published, RCEP promises to add $209 billion annually to world income and $500 billion to world trade by 2030. These gains will mainly benefit RCEP members — China, Japan, South Korea, Australia, New Zealand, and 10 Southeast Asian countries.

RCEP consists of remarkably diverse countries — rich and poor, vast and tiny, highly advanced and those just beginning to industrialize. To accommodate these wide priorities, the terms of RCEP (tariff cuts and trade rules) are less ambitious than those in the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP), the other mainly East Asian agreement concluded in the Trump era. President Trump withdrew from the predecessor of the CPTPP, the Trans-Pacific Partnership, but Japan led the remaining 11 countries to conclude the deal.

How will RCEP shape the future of trade in Asia?

RCEP, along with the CPTPP, will reduce trade costs and create a framework for cooperation among the region’s trade officials. Members will link their strengths in technology, manufacturing, agriculture, and natural resources. Their economies will become more efficient individually and, as a bloc, more competitive globally. East Asia will also become more attractive to investors and trade partners from Europe and Latin America. Deeper agreements, say among China, Japan, and South Korea, may follow. The United States could also return to join the CPTPP agreement, assuming it can overcome domestic political divisions. But America’s influence will be more modest.

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