The next steps for RCEP - what's its significance?

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The RCEP is on track to come into force by the start of 2022, but what will the coming months hold for the deal?


The Regional Comprehensive Economic Partnership (RCEP) between 15 Asia-Pacific nations has been taking positive steps forward in recent months, with more nations officially approving the terms of the deal and more countries expressing interest in joining the pact.

For instance, the ratification of the deal by Japan at the end of April marked a big step forward for the agreement, meaning that the two largest members of the group by GDP have both approved RCEP.

But what will the coming months hold for the agreement, and what impact is it expected to have on trade in the Asia-Pacific region and beyond?

Why Japan's approval matters

For RCEP to take effect, it must be formally ratified by six of the ten ASEAN member countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam), as well as three of the remaining five nations (Australia, China, Japan, New Zealand and South Korea).

When China ratified the agreement in April, the country's commerce ministry expressed hope that enough countries would do likewise for the RCEP to come into force by the start of 2022, and Japan's approval is a big step towards that.

Deborah Elms, executive director of the Asian Trade Centre in Singapore, told the World Economic Forum that while it should be relatively straightforward for the ASEAN nations to approve something, getting other members on board is more complex due to their different processes and political issues.

"The fact that [China and Japan] have already said yes is a miracle, and especially for Japan to have moved so quickly, because approval through Diet can be time-consuming," she stated. The political issues - the RCEP marks the first time Japan has made an agreement with China and South Korea - also posed potential stumbling blocks, so it is good to see this did not hold up the ratification process.

This should also spur on other nations to push forward with the process. Ms Elms said: "I feel pretty confident now that with China and Japan in place, that we will have the other dialogue partners coming on fast enough to be able to start."

Comparing RCEP to other trade agreements

RCEP is not the only regional multilateral trade agreement to be agreed in recent years - there is also the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which includes several RCEP members, along with several nations in the Americas - and, in the future, the UK. However, RCEP is considered to be a less comprehensive deal than CPTPP, partly due to the vast differences between the member countries.

Me Elms said: "RCEP is really, really diverse. Trying to balance all of those objectives meant that the final agreement in RCEP is, by default, less ambitious, with more loopholes."

For instance, RCEP lacks many rules on areas such as labor, human rights, working conditions or environmental issues, and there are currently few signs this will change. However, in the longer term, it may well be the case that RCEP sees major overhauls as participants become more comfortable and familiar with the deal.

What stumbling blocks may remain?

This does not mean it will be smooth sailing for the RCEP moving forward. While there is expected to be a rush for other nations to ratify the deal, wider geopolitical issues - in particular the growing friction between China and the US and EU may pose additional challenges.

Even though the US and EU are not party to the deal, issues such as the EU's decision to freeze investments in China and US efforts to build support for a multilateral effort to curb Beijing's influence on the global stage may impact other RCEP nations.

Ms Elms noted that once these types of large, multinational trade deals are in place, this creates significant incentives for companies operating within them to align their supply chains and distribution, and once solutions are in place, they can be very hard to undo.

"There will be business changes as a result of RCEP, even among companies that actually aren't using RCEP," she stated.