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RCEP – The victory of multilateralism and free trade

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The signing ceremony of the Regional Comprehensive Economic Partnership agreement (RCEP) was held via video conference in Hanoi, capital of Vietnam recently. In the witness of the Heads of State/Government of the Member States of the Association of Southeast Asian Nations (ASEAN), Australia, China, Japan, Korea and New Zealand, the RCEP Ministers signed the Agreement which is a major boost to regional and global economic recovery under the new normal of COVID-19. Chinese Premier Li Keqiang called it “a victory of multilateralism and free trade”.
RCEP was initially launched by ASEAN in 2012. After 8 years of negotiations, Member States held 31 rounds of arduous negotiations. This year in particular, Member States have overcome enormous difficulties brought about by the COVID-19 outbreak, and finally made the Agreement signed. This is the outcome of the constant economic integration process of East Asia in 2 decades. With 20 Chapters and 4 market access commitment annexes, the modern, comprehensive, high-quality and mutually beneficial RCEP agreement is an unprecedented mega regional trading arrangement comprising diverse economies of developed, developing and least developed of the region.
The RCEP Agreement includes areas and disciplines which have not been previously covered in the existing free trade agreements (FTA) between ASEAN and non-ASEAN countries participating in RCEP. In the Chapter of Trade in Goods, 15 Member States made bilateral tariff elimination commitments between each two of them. More than 90% of trade in goods will get zero tariff treatment after the agreement coming into force. In the Chapter of Trade in Services, 7 Member States adopt negative list making their commitments while other 8 Member States choose positive list and promise to transfer to negative list approach within 6 years when the agreement coming into force. In the Chapter of Investment, negative list approach is adopted by all Member State concerning manufacture, agriculture, forestry, fishery and mining, which drastically improves their policy transparency. Furthermore, Member States will also follow high-standard free trade rules in the areas of intellectual property, e-commerce, competition, government procurement and small and medium enterprises (SMEs), etc.
In accordance with the provisions of the RCEP, after the Agreement is signed, the RCEP Member States will each perform their own domestic legal approval procedures. The entry into force of the Agreement requires ratification by at least nine of the 15 members, including at least six ASEAN members and at least three among China, Japan, South Korea, Australia and New Zealand.
The newly signed agreement has attracted the world attention, featuring the following significance. Firstly, RCEP is now the world’s largest free trade agreement. As an agreement covering 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), RCEP represents an important step forward to formulate an ideal framework of global trade and investment rules. Secondly, RCEP is the integrator of regional trade and economic rules. RCEP combines several “10+1” relationships between ASEAN countries with China, Japan, Korea, Australia and New Zealand respectively, as well as relationships among the above-mentioned five countries, and especially creates new free trade relationships for China-Japan and Korea-Japan. Through its special rules of origin, RCEP deepens regional value chain and industry chain. New technologies are applied for the purpose of promoting customs facilitation, which promotes the development of newly-emerged cross border logistics. Meanwhile, Member States agree on using negative list approach to achieve investment liberalization and to increase the transparency of investment policies. All these measures will strongly support the optimization and integration of regional economic and trade rules. Thirdly, RCEP realizes the unification of high-quality and inclusiveness. Aside from the specific provisions which cover trade in goods and services, and investment, RCEP also includes chapters on intellectual property, electronic commerce, competition, SMEs, economic and technical cooperation and government procurement. RCEP Agreement takes full care of the differences among Member States and their diverse development stage, making sure that the outcomes should be enjoyed thereby by all members. RCEP would also open a vast range of opportunities for businesses located in the region especially in terms of market access given the level of liberalization for trade in goods and services and investment.
Against the background of the current international political and economic situation, the signing of RCEP Agreement demonstrates the great determination of its Member States to maintain free and fair trade and undoubtedly injects new impetus into regional and global economic recovery and development. Firstly, RCEP will push the regional trade and investment liberalization to a new height. RCEP will achieve a high level of openness within the region. With regard to trade in goods, Member States have further opened their markets to each other, and the Member States that have previously established bilateral FTAs will generally accelerate tariff elimination for already covered goods and including new categories of goods pursuant thereto. Those have no bilateral FTAs will achieve significant results in opening up their markets to each other. With the completion of RCEP, enterprises in the region will have a more free, open, stable and transparent market, and will certainly get more opportunities for cooperation and more space for development. Secondly, RCEP will provide a new impetus for regional economic development. RCEP, as a comprehensive, high-quality and mutually beneficial FTA, changes the fragmentation of FTAs in the region and becomes a unified system of trade and investment rules for the first time. It will significantly reduce the operating costs of enterprises, promote them to reconstruct supply chains and value chains in the region, optimize the flow of goods, technology, services and capitals within the region, and help to build a more stable and prosperous East Asian economic circle. The East Asian region has put an end to the “primary stage” model, which has been dominated by bilateral and small-scale regional cooperation, and has made great strides towards a new era of greater regional economic integration, providing a sustained new impetus for regional economic development. Thirdly, RCEP will create a new situation of open world economy. At present, the international pattern has been profoundly adjusted, protectionism and unilateralism have risen, uncertainty and instability have increased significantly, the world economy is depressed and international trade and investment have shrunk significantly. The signing of RCEP has showed strong support to the open, inclusive and rule-based multilateral trading system, in line with the trend of globalization and regional economic integration, as well as the trend of peace, development, and win-win cooperation. It will also boost the global economic confidence and is conducive to regional and global economic recovery and development.
China will intensify efforts to deepen reform and fulfill the commitments as soon as possible. China will work closely with all countries including Pakistan to deepen the existing trade and economic cooperation and contribute to build a community of shared future for mankind.