After several years of negotiation and political posturing, 15 countries signed the Regional Comprehensive Economic Partnership (RCEP) trade agreement on November 15, 2020. The RCEP includes several countries from the Southeast Asia and the Pacific region, including Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, Philippines, Singapore, South Korea, Thailand, and Vietnam. RCEP has the distinction, along with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), of serving as one of two major-multilateral free trade agreements signed during President Trump’s administration. The United States and India were originally slated to be member of both RCEP and CPTPP but withdrew under Trump and Modi. Perhaps the U.S. might see a renewed interest in becoming a member under its next foreign-trade regime.

The RCEP intends to establish a modern, comprehensive, high-quality, and mutually-beneficial-economic partnership to facilitate the expansion of regional trade and investment while contributing to global-economic growth and development. The agreement also espouses the goal of creating a liberal, facilitative, and competitive-investment environment in the region, that will enhance investment opportunities and promote, protect, and facilitate investment among the parties.

The trade agreement contains 20 chapters, which include several arenas ranging from e-commerce to the movement of goods, services, and persons, as well as enhanced economic and technical cooperation among the members. The formative chapters provide a framework to foster international trade relations by virtue of uniformity and decreased tariffs.

The RCEP will directly impact approximately 2.2 billion people in the Southeast Asia and Pacific region, which is home to nearly 30% of the world’s population. The combined gross domestic product (GDP) of the members countries represents upward of US$26 trillion. At a time of economic uncertainty caused by the COVID-19 pandemic, the RCEP offers a new alliance to increase the level of economic activity for the foreseeable future. Although it is mere speculation to predict its precise impact on the global economy, RCEP may bring about positive change to at least regional-international trade through an increase of approximately $210 billion to member trade revenues and a $500 billion trade increase over the next 10 years.

Global economy pundits suggest that the RCEP and CPTPP will offset global trade deficits stemming from the U.S.-China trade and tariff conflict, but not likely for the U.S. and China. The agreements show promise to bolster the international trade and domestic economies of the member countries by increasing trade efficiencies and combining and expanding resources relative to manufacturing, mining, agriculture, and technology. The agreement further hopes to maximize supply-chain integration across member countries. But it falls short of expectation in key areas concerning intellectual property, labor regulation, state-owned enterprise, and the environment.

For assistance understanding international trade agreements and navigating the nuances and complexities of international trade, please contact Stephen Hanemann.