RCEP’s impact on the global economy
RCEP stands to be not just a driver of growth in the economies of the member economies but also a fillip for global economic recovery post Covid-19. It could also help counter the deglobalization/decoupling narrative by spurring deeper regional integration and a reconstruction or reconfiguration of global supply chains that have been strained or broken by geopolitics and the pandemic. As countries implement its measures, it could stand as a countervailing force against unilateralism and protectionism.
RCEP lays a foundation for real Asia-Pacific economic cooperation. While the Asia-Pacific Economic Cooperation (APEC) forum has been around for decades, a meaningful economic cooperation mechanism has remained elusive. RPEC is comparable to the APEC footprint: It includes all 10 of the ASEAN economies and not just seven and does not include the economies in the Americas, Papua New Guinea, Hong Kong and Taiwan. The key difference is that RCEP commitments are binding, while APEC economy commitments outlined in members’ action plans are not.
Asia-Pacific economic integration will greatly speed up. Before RCEP, China, Japan, South Korea, Australia and New Zealand had signed free trade agreements (FTAs) with ASEAN. But RCEP is not just a simple merger of five FTAs. The agreement has far broader coverage and provides a more integrated framework than would be the case had each of the dialogue-partner FTAs been combined. In addition, RCEP institutionalizes the economic cooperation framework, with a permanent secretariat and a stronger governance plan that includes ministerial meetings, four committees on goods trade, services, investment, and sustainable development. RCEP could well spur other FTAs, including one combining China, Japan and South Korea, which was first proposed in 2002.
RCEP will promote intra-regional trade and capital flows within the region. A report released by the United Nations Conference on Trade and Development (UNCTAD) in December 2021 forecast that the intra-regional trade volume within the RCEP area would expand by 2 percent, a value of about US$42 billion, of which US$17 billion would be new trade. The report also reckoned that due to tariff reductions, Japan would benefit the most among the members, with its exports to the other 14 countries, especially auto parts, steel and chemicals, increasing by 5.5 percent over 2019 figures. According to the Peterson Institute for International Economics (PIIE) in Washington, RCEP members will drive a net increase of US $519 billion in exports and US$186 billion in national income annually by 2030. Over the next five years, services trade in the RCEP area will grow by more than 8 percent a year, predicated on the easing of the pandemic, which will prompt a rebound in tourism, people-to-people and cultural exchange, and education.