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The impact of the RCEP for business in Asia Listen with ReadSpeaker

The impact of the RECP for business in Asia

When 15 nations from the Asia Pacific signed the Regional Comprehensive Economic Partnership (RCEP) free trade agreement in November last year, not only did it create the largest global trading bloc ever, it also set to reshape the future of business within Asia.

The RCEP signatories comprise ten ASEAN markets: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, together with Australia, China, Japan, New Zealand and South Korea.

The RCEP accounts for a gross domestic product (GDP) of over USD 26 trillion or 30 percent of global GDP. It also represents almost a third of the global population of over 2.2 billion people, making this trade deal hugely significant.


Five of the RCEP members: Australia, China, Indonesia, Japan and South Korea, are part of the G20, a forum made up of the largest economies in the world. The Brookings Institute said that the RCEP comprises over 18 percent of global services trade and 19 percent of global foreign direct investment (FDI) outflows. The agreement also marks a clear sign of China’s power and influence within and beyond the region being the biggest economy among the signatories.


The RCEP is the second large-scale trade deal in the region that does not involve the USA. However, regardless of US-China relations, the Centre for European Policy Studies reported that the deal is ASEAN-led rather than being China-centric. Before this agreement, trade negotiations between China, Japan and South Korea have not been successful. This new deal demonstrates that these nations were willing to cooperate while also activating a resurgence of trilateral communication.

The RCEP establishes lower tariffs on products that are sourced and traded in member markets or reductions of non-tariff barriers. There are a low market-of-origin threshold and one certificate of origin produced which is satisfied if 40 percent of a product is from a member market.


The tariff rules encourage RCEP members to source from within the region, ensuring selling within the region will be far easier. As a result, the relationships between member markets will no doubt strengthen trading activities and boost the economies.


With a single set of rules, this will cover cross-border investments, eCommerce and elements of intellectual property. It will help open market access and facilitate the movement of goods and services. Not only will trade be easier but compliance costs are reduced as well. This helps open doors for investors and businesses while creating more inclusive trade potentials and opportunities to become part of the regional value chain.


With economies hit by the COVID-19 pandemic, the RCEP may be a light of multilateralism slowly rising over the horizon. The CEPS calls this “responsible globalization” as markets open and barriers from a more protectionist approach are dropped for global prosperity. 

In 2018, eleven Asia Pacific markets signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). From this, seven are also part of the RCEP: Australia, Brunei, Japan, Malaysia, New Zealand, Singapore and Vietnam.


While the RCEP is less vigorous and covers a more diverse needs of individual markets, the CPTPP is more detailed and has a deeper more Western-style approach. For example, the RCEP does not extensively deal with intellectual property or cover state-owned enterprises, labor standards and the environment. This alone makes it less specific than the CPTPP. How both these FTAs will work together remains to be seen.

While the RCEP focuses on creating greater liberalization between its member nations, the hope is that this sense of harmony will positively impact the rest of the world. Certainly, global value chains will strengthen and stronger regional supply chains will benefit businesses shipping across the region.


The single certificate of origin effectively unites the RCEP members into a unified production chain and avoids market-of-origin challenges. This cutting of bureaucratic red tape should lower business costs and benefits supply chain management. This is advantageous for foreign businesses presently affected by these mechanisms within and across the region.


This deal is a powerful tool for business connectivity as better integration and more robust networks elevate business transactions between members and the rest of the world. The Peterson Institute for International Economics predicted that the RCEP will raise global annual national incomes by more than USD 186 billion within the next ten years.