It is said good things take time, and that is inevitably true of international free trade negotiations. More than eight years after launching, the Regional Comprehensive Economic Partnership agreement was finally signed on 15th November 2020 creating a new rule book for pan-Asia trade[1].
Once it enters into force, RCEP will be the largest Free Trade Agreement (FTA) in the world, covering nearly a third of global GDP and around a third of the world’s population across the dynamic and strategically important Indo-Pacific region. It would have been even bigger had India chosen to join which we hope they will do in future using the RCEP’s fast track provisions. The RCEP is also notable for having created the first FTA between China, Japan and South Korea despite their long history of rivalry.
RCEP saves time and money
The RCEP countries collectively already take over half of New Zealand’s total goods and services exports. This is set to rise once the deal enters into force, likely from 2022 onwards depending on how quickly the deal is ratified by at least six signatories.
The RCEP will save New Zealand businesses time and money by reducing red tape and facilitating trade according to common rules including greater choice over how rules of origin are certified.
The RCEP will save New Zealand businesses time and money by reducing red tape and facilitating trade according to common rules including greater choice over how rules of origin are certified. It will also strengthen regional supply chains, creating potential new commercial opportunities for New Zealand thanks to the rules of origin. Manufacturers across the RCEP will have greater flexibility to source inputs from New Zealand and other RCEP members because those materials can be counted as originating within RCEP. New Zealand exporters of perishable products will benefit from the mandated 6-hour customs clearance time for perishable goods. Other benefits include improved services access including for international education and work towards mutual recognition of qualifications and registration of professional services. RCEP will enable licensing requirements, procedures, technical regulations and other conformity assessment procedures to be more transparent, consistent and non-discriminatory. An expedited process to settle disputes arising from non-tariff measures is another welcome feature.
Strong business input into RCEP
Since 2013, the New Zealand International Busines Forum was pleased to provide the Vice-Chair of the East Asia Business Council’s RCEP Working Group. The Working Group was a forum for business organisations from all the RCEP economies, including India, to reach a common view on what the business community needed from RCEP. The Working Group met formally with RCEP negotiators on numerous occasions between 2014-2019, when the main negotiations took place, to emphasise the importance of securing ambitious outcomes for business across all key areas of the agreement including tariffs and non-tariff barriers, rules of origin, liberalisation of market access for services and investment, competition, intellectual property, e-commerce provisions, trade remedies, government procurement, customs procedures and trade facilitation, standards and conformity assessment and provisions to assist SMEs.
RCEP VS CPTPP
The successful conclusion of the RCEP was a highlight of what has been a difficult year for global trade policy that saw a rise in protectionist sentiment and a weakening of the World Trade Organisation. Nonetheless some people have compared the RCEP unfavourably to the other big regional trade agreement, the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP)[2]. The CPTPP went deeper in some areas of rulemaking and delivered some significant new market access opportunities. For example it created the first FTA between Japan and New Zealand. Two years later, New Zealand already had FTAs with all the other RCEP signatories except India which was to have been the one new FTA relationship for New Zealand had they not withdrawn in 2019. Instead RCEP was an opportunity to seek improvements on existing FTAs, for example some additional valuable market access for primary products into Indonesia, and to bring the region’s trade rules together into one blockbuster agreement.
The RCEP encompasses a more economically diverse range of countries than the CPTPP, including three of the least developed according to the United Nations: Cambodia, Laos and Myanmar as well as two of the three biggest economies in the world – China and Japan. The size of RCEP members also ranges dramatically from the tiny such as Brunei (population just under 440,000) to the small such as New Zealand (5 million) all the way up to Indonesia (over 270 million) and China (around 1.44 billion people). The architects of RCEP recognised the different levels of development of the participating countries at the outset and as a result some flexibility was built into the deal to give the least developed members time to adjust.
Despite their differences, both the RCEP and the CPTPP are modern, comprehensive, high-quality, and mutually beneficial economic partnership agreements. RCEP makes improvements on existing FTAs, , and brings the region’s trade rules together into one blockbuster agreement. It may have taken time butNew Zealand is well positioned to reap the rewards of both in years to come.
This post was prepared by Fiona Cooper, Associate Director, NZIBF. Fiona has worked closely on RCEP in her role as Vice Chair of the EABC Working Group. Fiona, you have the thanks of a trading nation !
[1] The signatories are New Zealand plus Australia, China, Japan, South Korea and the ten countries that make up the Association of South East Asian Nations (ASEAN).
[2] The CPTPP is comprised of eleven countries – New Zealand, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, Singapore, and Viet Nam.
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