Following eight years of negotiations, the Regional Comprehensive Economic Partnership [RCEP] was officially signed by 15 Asia-Pacific countries in November 2020. Significantly, it creates a new economic bloc that covers about a third of the world’s population, and almost a third of global GDP and trade. To put this in context, it is bigger than both the US-Mexico-Canada Agreement and the European Union.
The pact will progressively remove both tariff and non-tariff barriers on trade in both goods and services. According to the Center for Strategic and International Studies, it will lower tariffs on imports by up to 90% within 20 years. On top of this, the RCEP also sets common trade rules within the bloc.
The RCEP unites the 10 members of ASEAN [Association of South-East Asian Nations] – which first proposed the RCEP idea about a decade ago – along with China, Japan, South Korea, Australia and New Zealand as free trade agreement [FTA] partners.
Chinese growth will have global impact
China is likely to benefit strongly from the deal, as it will face fewer barriers to exports into the rest of Asia. But other members within the RCEP may benefit even more. The ASEAN countries, together with South Korea and Japan, will likely find it easier to build their value chains.
According to a recent report from the Peterson Institute for International Economics, Japan and South Korea are also the two countries most likely to benefit in real GDP terms, each enjoying a near 1% boost to GDP. China and ASEAN members meanwhile are forecast to see a smaller 0.3% impact. The report also predicts that by 2030, the RCEP will boost global GDP by USD 186 billion.
What does this mean for investors?
The RCEP represents an important step towards broader regional integration within Asia, helping to strengthen the regional supply chain over the medium-term and setting the stage for closer economic integration. This translates into several key implications for investors:
- The RCEP should foster deeper trade integration – and bring associated economic benefits. As a result, the systems involved in a cross-border production network will likely become more flexible, helping to enhance productivity, accelerate structural shifts and spur growth across the region in the medium term.
- The closer relationship between trade and investment is expected to deepen financial market integration in the Asia-Pacific region. This should help ensure China’s trade with ASEAN member nations continues to outpace trade with other regions. ASEAN members will likely become further integrated into China’s supply chain.
- The world’s dependence on Asia – and mainland China in particular – for components of all sorts, has only increased; simplified trade will mean both Chinese and US importers may import more from third parties such as ASEAN member states.
- A unified “rules of origin” system under the RCEP should help reduce time and transaction costs as producers need fill out only one document to certify the origin of their products. This could also encourage firms to outsource some production to other countries within the RCEP for cost savings.
Perhaps most significantly, the RCEP signals that Asia is moving ahead with trade liberalisation. And from a global perspective, it reinforces the trend of the world’s centre of economic gravity continuing to shift eastward.
Chart: RCEP vs existing trade deals
Asia-Pacific countries sign world’s biggest free-trade deal
1439160
A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organization, where barriers to trade [tariffs and others] are reduced or eliminated among the participating states.
Trade blocs can be stand-alone agreements between several states [such as the North American Free Trade Agreement] or part of a regional organization [such as the European Union]. Depending on the level of economic integration, trade blocs can be classified as preferential trading areas, free-trade areas, customs unions, common markets, or economic and monetary unions.[1]
Monetary unions
Customs unions worldwide
Free trade areas worldwide
Mercosur
Stages of economic integration around the World [each country colored according to the most integrated agreement that it participates in]:
Economic and monetary union [CSME/EC$, EU/€, Switzerland–Liechtenstein/CHF]
Economic union [CSME, EAEU, EU, GCC, MERCOSUR, SICA]
Customs and monetary union [CEMAC/XAF, UEMOA/XOF]
Common market [EEA–Switzerland]
Customs union [CAN, EAC [out of date], EUCU, SACU]
Multilateral free-trade area [AANZFTA, ASEAN, CEFTA, CISFTA, COMESA, CPTPP, DCFTA, EFTA, GAFTA, PAFTA, RCEP, SADCFTA, SAFTA, USMCA]
- v
- t
- e
Historic trading blocs include the Hanseatic League, a Northern European economic alliance between the 12th and 17th centuries, and the German Customs Union, formed on the basis of the German Confederation and subsequently the German Empire from 1871. Surges of trade bloc formation occurred in the 1960s and 1970s, as well as in the 1990s after the collapse of Communism. By 1997, more than 50% of all world commerce was conducted within regional trade blocs.[2] Economist Jeffrey J. Schott of the Peterson Institute for International Economics notes that members of successful trade blocs usually share four common traits: similar levels of per capita GNP, geographic proximity, similar or compatible trading regimes, and political commitment to regional organization.[3]
Some advocates of global free trade are opposed to trading blocs. Trade blocs are seen by them to encourage regional free trade at the expense of global free trade.[4] Those who advocate for it claim that global free trade is in the interest of every country, as it would create more opportunities to turn local resources into goods and services that are both currently in demand and will be in demand in the future by consumers.[5] However, scholars and economists continue to debate whether regional trade blocs fragment the global economy or encourage the extension of the existing global multilateral trading system.[6][7]
A common market is seen as a stage of economic integration towards an economic union[8] or possibly towards the goal of a unified market.
A single market is a type of trade bloc in which most trade barriers [for goods] have been removed
Selection of GDP PPP data [top 10 countries and blocs] in no particular order
| EMU | 324,879,195 | 10,685,946,928,310 | 12,225,304,229,686 | 14.41% | 37,630 |
17
|
| OECS | 593,905 | 3,752,679,562 | 3,998,281,731 | 6.54% | 6,732 |
6
|
| OII | 504,476 | 12,264,278,329 | 14,165,953,200 | 15.51% | 28,081 |
3
|
| CCCM | 6,418,417 | 39,616,485,623 | 43,967,600,765 | 10.98% | 6,850 |
12
|
| EEA | 499,620,521 | 14,924,076,504,592 | 17,186,876,431,709 | 15.16% | 34,400 |
30
|
| CEMAC | 39,278,645 | 51,265,460,685 | 58,519,380,755 | 14.15% | 1,490 |
6
|
| UEMOA | 90,299,945 | 50,395,629,494 | 58,453,871,283 | 15.99% | 647 |
8
|
| CAN | 96,924,486 | 281,269,141,372 | 334,172,968,648 | 18.81% | 3,448 |
4
|
| EAC | 127,107,838 | 49,882,030,443 | 61,345,180,041 | 22.98% | 483 |
5
|
| EUCU | 574,602,745 | 15,331,827,900,202 | 17,679,376,474,719 | 15.31% | 30,768 |
33
|
| GCC | 36,154,528 | 724,460,151,595 | 802,641,302,477 | 10.79% | 22,200 |
6
|
| MERCOSUR | 271,304,946 | 1,517,510,000,000 | 1,886,817,000,000 | 12.44% | 9,757 |
5
|
| SACU | 58,000,000 | 1,499,811,549,187 | 1,848,337,158,281 | 23.24% | 6,885 |
5
|
| AANZFTA-ASEAN+3 | 2,085,858,841 | 10,216,029,899,764 | 11,323,947,181,804 | 10.84% | 5,429 |
15
|
| ALADI | 499,807,662 | 2,823,198,095,131 | 3,292,088,771,480 | 16.61% | 6,587 |
12
|
| AFTZ | 553,915,405 | 643,541,709,413 | 739,927,625,273 | 14.98% | 1,336 |
26
|
| APTA | 2,714,464,027 | 4,868,614,302,744 | 5,828,692,637,764 | 19.72% | 2,147 |
6
|
| CARIFORUM-EUCU-OCTs | 592,083,950 | 15,437,771,092,522 | 17,798,283,524,961 | 15.29% | 30,060 |
67
|
| CACM | 37,388,063 | 87,209,524,889 | 97,718,800,794 | 12.05% | 2,614 |
5
|
| CEFTA | 27,968,711 | 110,263,802,023 | 135,404,501,031 | 22.80% | 4,841 |
8
|
| CISFTA | 272,897,834 | 1,271,909,586,018 | 1,661,429,920,721 | 30.62% | 6,088 |
11
|
| DR-CAFTA-US | 356,964,477 | 13,345,469,865,037 | 14,008,686,684,089 | 4.97% | 39,244 |
7
|
| ECOWAS | 283,096,250 | 215,999,071,943 | 255,784,634,128 | 18.42% | 904 |
15
|
| EFTA-SACU | 68,199,991 | 1,021,509,931,918 | 1,139,385,636,888 | 11.54% | 16,707 |
9
|
| EAEC | 207,033,990 | 1,125,634,333,117 | 1,465,256,182,498 | 30.17% | 7,077 |
6
|
| USMCA | 449,227,672 | 15,337,094,304,218 | 16,189,097,801,318 | 5.56% | 36,038 |
3
|
| TPP | 25,639,622 | 401,810,366,865 | 468,101,167,294 | 16.50% | 18,257 |
4
|
| SAARC | 1,567,187,373 | 1,162,684,650,544 | 1,428,392,756,312 | 22.85% | 911 |
8
|
| SPARTECA | 35,079,659 | 918,557,785,031 | 1,102,745,750,172 | 20.05% | 31,435 |
21
|
| Pacific Alliance | 218,649,115 | 1,371,197,216,140 | 1,525,825,175,045 | 11.28% | 6,978 |
4
|
| EU | in force | in force7 | in force2 | in force 1 | in force | in force [Schengen 1, 7, NPU and CTA 1] |
in force | in force [CFSP/ESDP 1] |
ESA 1, 7 | |
| EFTA | in force | in force2, 7 | in force | in force 1, 7 | in force 1, 7 | ESA 1, 7 | ||||
| CARICOM | in force | in force | in force 1 | in force 1 and proposed common |
in force 1 | proposed | proposed | NWFZ | ||
| AU | ECOWAS | in force 1, 3 | in force 1 | proposed[9][10] | in force 1 and proposed for 2012 1 and proposed common |
in force 1 | proposed | proposed | in force | NWFZ1 |
| ECCAS | in force1 | African Continental Free Trade Agreement [AfCFTA]1 | in force1 | proposed | in force1 | in force | in force | NWFZ1 | ||
| EAC | in force | in force | proposed for 2020s | proposed for 2024 | proposed | ? | proposed for 2023 | NWFZ1 | ||
| SADC | in force1 | in force1 | proposed for 2015 | de facto in force 1 and proposed common for 2016 | proposed[11] | NWFZ1 | ||||
| COMESA | in force1 | proposed for 2010 | ? | proposed for 2018 | NWFZ1 | |||||
| Common | in force1 | proposed for 2019 | proposed for 2023 | proposed for 2028 | proposed for 2028 | NWFZ1 | ||||
| Pacific Alliance | in force | in force | NWFZ | |||||||
| USAN | MERCOSUR | in force | in force | proposed for 2015[12] | in force | proposed for 2014[13] | NWFZ | |||
| CAN | in force | in force 1 | proposed1[14] | in force | NWFZ | |||||
| Common | proposed for 2014 4 | proposed for not after 2019 | proposed for 2019 | proposed for 2019 | in force[15] | proposed for 2019 | proposed | in force | NWFZ | |
| EEU | in force | in force1 | in force | Proposed[16] | in force[17] | in force 1 | ||||
| AL | GCC | in force | in force[18] | proposed | proposed 1 | in force | in force | |||
| Common | in force1 | proposed for 2015 | proposed for 2020 | proposed | proposed[19] | |||||
| ASEAN | in force 5 | proposed for 2015[20] | proposed 8[21] | in force[22] | proposed for 2015[23] | proposed for 2020[24] | NWFZ | |||
| CAIS | in force1 | proposed | ? | in force1 | in force1 | proposed | NWFZ | |||
| CEFTA | in force | RCC7 | ||||||||
| USMCA | in force | in force 1, 7 | ||||||||
| SAARC | in force 1, 6 | proposed | proposed | in force9 | ||||||
| PIF | proposed for 20211 | NWFZ1 |
1 not all members participating
2 involving goods, services, telecommunications, transport [full liberalisation of railways from 2012], energy [full liberalisation from 2007]
3 telecommunications, transport and energy - proposed
4 sensitive goods to be covered from 2019
5 least developed members to join from 2012
6 least developed members to join from 2017
7 Additionally some non member states also participate [the European Union, EFTA have overlapping membership and various common initiatives regarding the European integration].
8 Additionally some non member states also participate [ASEAN Plus Three]
9 Limited to "entitled persons" and duration of one year.
- Economics portal
- Regional integration
- Continental union
- ^ Mansfield and Milner 2005, 333.
- ^ Milner 2002, 450.
- ^ Schott 1991, 2.
- ^ O'Loughlin and Anselin 1996, 136.
- ^ Lal, Deepak [1993]. "Trade Blocs and Multilateral Free Trade" [PDF]. Journal of Common Market Studies. 31 [3]: 349–358. doi:10.1111/j.1468-5965.1993.tb00468.x.
- ^ Milner 2002, 458.
- ^ Mansfield and Milner 2005, 330.
- ^ "Stages of Economic Integration: From Autarky to Economic Union".
- ^ "WT/COMTD/N/11". wto.org. Archived from the original on 2009-03-25.
- ^ "WT/COMTD/N/21". wto.org. Archived from the original on 2009-03-27.
- ^ "Prensa Latina". Prensa Latina. February 3, 2007. Archived from the original on September 27, 2007.
- ^ "WT/REG238/M/1". wto.org. Archived from the original on 2009-03-04.
- ^ "Definidos critérios para o Parlamento do Mercosul". Senado Federal – Notícias. February 3, 2007.
- ^ Twelfth Andean Presidential Council Act of Lima Archived 2010-07-07 at the Wayback Machine
- ^ "?". CNN. February 3, 2007.[dead link]
- ^ "Russia, Kazakhstan, Belarus form Eurasian Economic Union". Washington Post. May 29, 2014. Retrieved June 1, 2014.
- ^ //www.itar-tass.com/eng/level2.html?NewsID=2847543&PageNum=0 Archived September 30, 2007, at the Wayback Machine
- ^ "GCC customs union fully operational". The Peninsula. 2016-08-13. Archived from the original on 18 January 2015. Retrieved 11 January 2015.
- ^ Yemen Proposes Replacing Arab League With Arab Union, Agence France-Presse, 11 February 2004
- ^ "Asean Trade Mins Meet To Speed Up Plans For Single Market". Malaysia Dual Lingual Business News. February 3, 2007. Archived from the original on 2007-09-28.
- ^ "Envisioning a single Asian currency". International Herald Tribune. February 3, 2007.
- ^ "ASEAN To Sign Accord On Visa-Free Travel". AHN – All Headline News. February 3, 2007. Archived from the original on 2007-09-26.
- ^ "ASEAN Leaders Sign Five Agreements at the 12th ASEAN Summit, Cebu, the Philippines, 13 January 2007" [Press release]. ASEAN Secretariat. 2007-01-13. Archived from the original on 2012-03-16. Retrieved 2007-01-28. On the first day of the 12th ASEAN Summit, five Agreements have been signed by ASEAN leaders – reinforcing their commitment in the continuing integration of ASEAN and enhancing political, economic and social cooperation in the region.
- ^ "ASEAN defense ministers aim for security community". ABS-CBN. February 3, 2007. Archived from the original on June 27, 2006.
- Mansfield, Edward D. and Helen V. Milner, "The New Wave of Regionalism" in Diehl, Paul F. [2005]. The Politics of Global Governance: International Organizations in an Interdependent World. Boulder: Lynne Rienner Publishers. ISBN 978-1-55587-654-8.
- Milner, Helen V., "International Trade" in Carlsnaes, Walter; Thomas Risse; Beth A. Simmons [2002]. Handbook of International Relations. London: SAGE Publications. ISBN 978-0-7619-6304-2.
- O'Loughlin, John; Luc Anselin [1996]. "Geo-Economic Competition and Trade Bloc Formation: United States, German, and Japanese Exports, 1968-1992". Economic Geography. 72 [2]: 131–160. doi:10.2307/144263. JSTOR 144263.
- Schott, Jeffrey J. [1991]. "Trading blocs and the world trading system". World Economy. 14 [1]: 1–17. doi:10.1111/j.1467-9701.1991.tb00748.x.
Retrieved from "//en.wikipedia.org/w/index.php?title=Trade_bloc&oldid=1070313590"