The Regional Comprehensive Economic Partnership (RCEP) is a free trade agreement initiated by ASEAN in 2012 and formulated by the total of 15 members, including China, Japan, South Korea, Australia, New Zealand and the 10 ASEAN countries.
RCEP took eight years of negotiations, and on November 15, 2020, the fourth RCEP Summit was held via video link, after which the total of 15 Asia-Pacific countries, including the 10 ASEAN countries as well as China, Japan, South Korea, Australia and New Zealand, formally signed the RCEP. The signing of the RCEP marks the official launch of the free trade area with the largest population, the biggest economic and trade scale and the greatest development potential in the world.
RCEP came into effect on January 1, 2022, covering a population of about 3.5 billion people, with a total GDP of 23 trillion U.S. dollars, accounting for 1/3 of the global total, and the covering region is the world's largest free trade area.
1. The overall situation of RCEP?
RCEP is a modern, comprehensive, high-quality, mutually beneficial and large-scale regional free trade agreement. The RCEP agreement consists of a preamble, 20 chapters (including initial provisions and general definitions, trade in goods, rules of origin, customs procedures and trade facilitation, sanitary and phytosanitary measures, standards, technical regulations and conformity assessment procedures, trade remedies, trade in servicess, temporary movement of natural persons, investment, intellectual property, electronic commerce, competition, small and medium enterprises, economic and technical cooperation, government procurement, general provisions and exceptions, institutional provisions, dispute settlement, final provisions) and 4 market access annexes (including schedules of tariff commitments, schedules of specific commitments for services, schedules of reservations and non-conforming measures for services and investment, and schedules of specific commitments on temporary movement of natural persons).
RCEP is an “Integrator” of economic and trade rules in the region, integrating multiple ASEAN’s “10+1” free trade agreements with China, Japan, South Korea, Australia and New Zealand, as well as the several existing pairs of free trade partnership between China, Japan, South Korea, Australia and New Zealand. New free trade partnerships have also been established between China and Japan and also between Japan and South Korea. Through adopting regional cumulative rules of origin, RCEP has deepened the development of the industrial chain and value chain in the region; taking advantage of new technologies to drive customs facilitation, which has promoted the growth of new cross-border logistics; adopting the negative lists to push forward investment liberalization, which has enhanced the transparency of investment policies, and the above mentioned together will promote the optimization and integration of economic and trade rules in the region.
RCEP has realized the unity of high quality and inclusiveness. The final number of zero-tariff products for trade in goods will be more than 90%, and the overall level of liberalization of trade in servicess and investment will be significantly higher than that of the original “10+1” free trade agreement, and a high level of modernization issues such as intellectual property rights, e-commerce, competition policy and government procurement and others will also be incorporated into the RCEP. At the same time, RCEP also accommodates the national conditions of different countries, giving special and differential treatment to the least developed countries, and meets the actual needs of the developing countries and the least developed countries by setting up regulations for the strengthening of economic and technological cooperation. It can be said that RCEP has accommodated the aspirations of all parties to the maximum extent, and it will promote the inclusive and balanced development of the region, so that all parties can fully share the fruits of RCEP.
2. What is the significance of the signing of the RCEP agreement for China?
The completion of the RCEP free trade area is a major progress in the implementation of China’s free trade zone strategy, which will provide a great help for China to build a new open economic system in the new period, and to form an economic development pattern that takes domestic development as the mainstay, with domestic and international development reinforcing each other.
RCEP has become an important platform for China’s opening-up in the new stage. China’s total trade with RCEP members accounts for about one-third of China’s total foreign trade, and actual investment from RCEP members accounts for more than 10% of China’s total attracted foreign investment. The formation of an integrated RCEP market will release huge market potential and further promote intra-regional trade and investment exchanges, which will help China further optimize the layout of foreign trade and investment through a more comprehensive, deeper and more diversified opening up, and continuously converge with the international high-standard trade and investment rules to build a higher level of new open economic system.
RCEP will help China form a new development pattern of domestic and international dual-cycle. RCEP will promote China’s industries to participate more fully in the market competition, and elevate the ability to allocate resources in both international and domestic markets. This will be conducive for China to expand opening up to drive domestic innovation, promote reform and development, continuously realizing industrial transformation and upgrading, consolidating China’s position in the regional industrial chain and supply chain, providing effective support for the virtuous cycle of the national economy, accelerating the formation of a new advantage in international economic competition and cooperation, and promoting high-quality economic development.
RCEP has significantly enhanced the “power” of China's free trade zone network. Accelerating the implementation of the free trade zone strategy is an important part of China’s new round of opening up. Through RCEP, China and Japan have established a free trade relationship, which is for the first time that China has signed a free trade agreement with one of the world’s top ten economies, and it is a major breakthrough brought by China’s implementation of the free trade zone strategy, which has increased China’s trade coverage rate with its free trade partners to about 35%, greatly enhancing the “power” of China’s free trade zone network.
3. What is the role of RCEP signing in promoting economic growth in the East Asia region?
RCEP has strongly boosted the confidence of all parties in economic growth. In the current context of struggling global economy, the completion of the RCEP free trade area sends a strong signal against unilateralism and trade protectionism, support free trade and the maintenance of the multilateral trading system, which will be a strong boost to the confidence of all parties to economic growth. According to the estimation of internationally renowned think tanks, by 2025, RCEP can be expected to drive member countries' exports, outward investment stock, and GDP to grow by 10.4%, 2.6%, and 1.8% more than the baseline respectively.
RCEP will significantly enhance the level of regional economic integration in East Asia. The completion of the RCEP free trade area is a new milestone in East Asian regional economic integration, evidently optimizing the overall business environment in the region, significantly reducing the institutional costs for enterprises to take advantage of free trade agreement, and further enhancing the trade creation effect brought about by the free trade agreement. The RCEP will also gradually bridge the differences in development levels among its members by increasing the economic and technical assistance to the developing and the least developed economies. Vigorously promote coordinated and balanced development in the region, and push forward the establishment of a new pattern of open regional economic integration development.
RCEP promotes the integration of the regional industrial chain, supply chain and value chain, and the economic structures of RCEP members are highly complementary, with a complete range of capital, technology and labor factors in the region. RCEP further liberalizes market access in goods, services, investment and other areas among member countries, gradually unifies rules of origin, customs procedures, inspection and quarantine, and technical standards etc., thus facilitates the free flow of economic factors in the region and strengthens the division and cooperation of production among members. It boosts the expansion and upgrading of the consumer market in the region, and promotes the further development of the industrial chain, supply chain and value chain in the region.
4. What important consensus has RCEP reached on market opening-up?
In terms of trade in goods, the 15 parties made arrangements for the liberalization of trade in goods by means of bilateral pairwise bids, and after the agreement comes into force, more than 90% of goods trade in the region will eventually achieve zero tariff, and mainly reduce tariffs to zero immediately and within 10 years, so that the RCEP free trade area is expected to fulfill all goods trade liberalization commitments in a relatively short time. It is foreseeable that with the implementation of unified rules of origin, customs procedures, inspection and quarantine, technical standards and other rules, the effect of eliminating tariffs and non-tariff barriers will gradually release the trade creation effect of RCEP, significantly reduce intra-regional trade costs and product prices, improve the competitiveness of products in the region, and benefit enterprises and consumers of all parties.
In terms of trade in services, seven members, including Japan, South Korea, Australia, Singapore, Brunei, Malaysia and Indonesia, adopted the negative list commitment, while the remaining eight members, including China and the other member countries, adopted the positive list commitment and will be converted to the negative list within six years after the agreement enters into force. Regarding the level of opening-up, all 15 parties have made opening-up commitments that are higher than the level of their respective 10+1 free trade agreement. China’s commitment to opening up its trade in servicess has reached the highest level in the existing free trade agreements. On the basis of the approximately 100 sectors pledged by China’s WTO accession, 22 sectors including research and development, management consulting, manufacturing-related services, air transport and other sectors have been added, and 37 sectors including finance, law, construction, shipping and other sectors have been raised to the level of commitment. Other members have made high-level opening-up commitments in the construction, medical care, real estate, finance, transportation and other service sectors that China focuses on.
In terms of investment, all the 15 parties have adopted the negative list to make relatively high level open up commitments for investment in five non-service sectors, including manufacturing, agriculture, forestry, fishery and mining, which has greatly improved the policy transparency of all parties. China’s investment negative list has reflected the latest progress of domestic reform, and this is also for the first time that China has committed to the investment field in the form of a negative list under the free trade agreement, which is of great significance to improving the domestic pre-establishment national treatment plus negative list foreign investment management system, locking in the domestic negative list reform results of reducing foreign investment, and realizing the expansion of foreign investment market access.
In terms of movement of natural persons, the parties committed that, for the investors in the regional member countries, intra-company persons in mobility, contract service providers, accompanying spouses, family members and other related persons from commerce field will be granted a certain period of residence, enjoy visa convenience and carry out various trade and investment activities if they meet the conditions. Compared with previous agreements, the scope of application of RCEP commitments extends to all types of natural persons, other than service providers, including the ones who may move across borders under the agreement, such as investors, accompanying spouses and family members etc., and the overall level basically exceeds the commitment level of members in the existing free trade agreement contracting practice.
5. What are the contents of RCEP in bench-marking international high standard free trade rules?
The RCEP has expanded the scope of the original “10+1” free trade agreement rules, not only bench-mark international free trade rules, brought in intellectual property rights, e-commerce, competition, government procurement and other issues, but also made provisions on strengthening cooperation in small and medium-sized enterprises, economic and technological fields etc.
In the field of intellectual property rights, RCEP covers a wide range of contents, including copyright, trademark, geographical indication, patent, appearance design, genetic resources, traditional knowledge, folk art and others, and has significantly improved the level of regional intellectual property rights protection while taking into account different development level of countries. In the field of e-commerce, in addition to the provisions of electronic authentication and signature, online consumer protection, online personal information protection, cybersecurity, cross-border electronic information transmission and other provisions, for the first time, China has also incorporated provisions on data flow, information storage and others into the free trade agreement in accordance with China’s laws and regulations. In the field of trade remedies, on the basis of WTO rules, RCEP has made detailed provisions on anti-dumping, countervailing and safeguard measures, and for the first time incorporated a “no return-to-zero” clause in the free trade agreement. At the same time, drawing on high-standard international rules, the technical level and transparency of anti-dumping and countervailing investigations are significantly improved by means of a “best practice” list. In the field of competition, RCEP has reached a high level in the fields of promoting antitrust and consumer protection, etc. In the field of government procurement, all parties reached consensus on actively carrying out information exchange and cooperation in government procurement, providing technical assistance and strengthening capacity building. In the field of cooperation, RCEP member countries have highlighted the free trade agreement platforms, strengthened the support and input for small and medium-sized enterprises as well as economic and technical cooperation, so that the contents of the RCEP agreement can better benefit small and medium-sized enterprises and developing economies.
6. What important consensus has been reached on rules of origin in RCEP?
In terms of rules of origin, RCEP uses the regional accumulation principle in the region, so that the product origin value component can be accumulated within the 15-member region, and the value component from any party of RCEP member country will be taken into account, which will significantly improve the utilization rate of the agreement’s preferential tax rates. For example, according to the rules of origin of bilateral free trade agreements between members, a product that cannot be counted as the origin of a country may be identified as the regional origin of RCEP and enjoy RCEP preferential tariffs after regional value accumulation. This will help multinational companies to carry out industry layout more flexibly, establish a more refined and complete division of labor system of industry chain, and reduce the production cost of final products, which will not only help expand trade among RCEP members, but also greatly promote the deep integration and development of regional supply chains and value chains.
At the same time, compared with the previous “10+1” agreement, RCEP has further enriched the types of certificates of origin. In addition to the traditional certificate of origin, it also allows approved exporter declarations and exporters’ self-declaration, marking the transformation of the declaration of origin system from an officially authorized visa agency issuance mode to a self-declaration model of enterprise credit guarantee, greatly saving the administrative cost of the government and the operating cost of the enterprise, and further improving the customs clearance time of goods.
7. What are the rules of RCEP on enhancing intra-regional trade facilitation?
The trade facilitation measures of RCEP mainly include customs procedures and trade facilitation measures, sanitation and phytosanitation measures, as well as measures on standards, technical regulations and conformity assessment procedures. In terms of customs procedures and trade facilitation, RCEP has simplified customs clearance procedures, adopted efficient management measures such as pre-adjudications, pre-arrival processing, and the use of information technology to promote efficient management of customs procedures. When possible, the RCEP aims to release fast express goods and perishable goods within six hours of their arrivals, which has promoted the development of new cross-border logistics such as express delivery etc., and also driven the rapid customs clearance and trade growth of fruits, vegetables, meat, eggs, dairy products and other fresh products. The overall level exceeds the Trade Facilitation Agreement of WTO. In the area of sanitation and phytosanitation measures, a range of measures have been regulated to protect the life or health of human, animal or plant, and to ensure that these measures are not restrictive to trade and do not constitute unjustified discrimination against other RCEP members as far as possible. On the basis of the WTO Agreement on Sanitation and Phytosanitation Measures, RCEP has also strengthened the enforcement of rules on risk analysis, audits, certification, import inspections, and emergency measures etc. In terms of standards, technical regulations and conformity assessment procedures, RCEP promotes all parties to reduce unnecessary technical barriers to trade in the recognition of standards, technical regulations and conformity assessment procedures, and encourages all parties’ standardization institutions to strengthen information exchanges and cooperation on standards, technical regulations and conformity assessment procedures. These measures have greatly facilitated intra-regional trade in goods, reduced trade costs, shortened logistics time, and further promoted the formation of a regional integrated market.
8. In addition to the market access commitments, what are the other rules of RCEP on trade in services?
In addition to market opening and related rules, trade in services chapter also contains three annexes on financial service, telecommunication service and professional service, making more comprehensive and high-level commitments on finance, telecommunication and other fields, and making cooperation arrangements for mutual recognition of professional qualifications.
The Financial Services Annex represents the highest level of commitment in the financial field of our country. For the first time, it has introduced rules on new financial services, self-regulatory organizations, financial information transfer and processing etc., and made high-level commitments on financial regulatory transparency, created a more fair, open, stable and transparent competitive environment for all financial service providers on the premise of preserving regulatory space to maintain the stability of the financial system and prevent financial risks. These rules will not only help Chinese financial companies better expand overseas markets, but also attract more overseas financial institutions to operate in China, injecting vitality into the domestic financial market.
The Telecommunication Annex sets out a framework of rules relating to trade in telecommunications services. Based on the existing “10+1” concerted Telecommunication Annex, RCEP also includes rules on regulatory methods, international submarine cable systems, unbundling of network elements, electric poles, access to pipelines and pipe networks, international mobile roaming, flexibility in technology choices and so on. This promotes the coordinated development of the information and communication industry in the region, drives the transfer of regional investment and development focus to the technological frontier field, promotes the innovation and integration of regional industries, and drives the upgrading and reconstruction of the industrial chain and value chain.
The Professional Service Annex sets out a series of arrangements for RCEP members to exchange views on professional qualification issues, mainly including strengthening the recognition of dialogue among professional qualification bodies, encouraging consultation on the qualification, licensing or registration of professional services of common interest, and encouraging the development of mutually acceptable professional standards and guidelines in the areas of education, examinations, experience, codes of conduct and ethics, professional development and re-certification, scope of business, consumer protection and so on.
9. In addition to the investment liberalization rules, what are the other provisions of the RCEP investment chapter?
The RCEP investment chapter mainly includes four aspects. In addition to the related investment liberalization rules, it also includes investment protection, investment promotion and investment facilitation measures. Specifically, the chapter contains investment protection clauses such as fair and equitable treatment, expropriation, foreign exchange transfer, and compensation for losses, etc., as well as the investment facilitation provisions of coordinated settlement for such as dispute prevention, foreign businesses complaints and so on.
The parties also agreed to discuss on dispute settlement mechanism on investor and state investment within two years after the RCEP agreement’s entry into force. The RCEP Investment Chapter is a comprehensive integration and enhancement of several “10+1” investment agreements, creating a more stable, open, transparent and convenient investment environment for investors in the region.
10. What steps has RCEP taken to protect intellectual property rights?
The RCEP intellectual property rights chapter contains 83 articles, transitional arrangements and two annexes for technical assistance, which is the most extensive and longest chapter of the RCEP agreement and the most comprehensive chapter on intellectual property rights included in the free trade agreement that China has signed so far. It covers a wide range of areas such as copyright, trademarks, geographical indications, patents, outlook designs, genetic resources, traditional knowledge and folk art, anti-unfair competition, intellectual property rights law enforcement, cooperation, transparency, technical assistance and so on. It not only covers the main issues of traditional intellectual property rights, but also reflects the new trend of the development of intellectual property rights protection. The relevant provisions on transition period and technical assistance are aimed at bridging different levels and capacity variance of different members, and helping relevant members better fulfill their obligations under the agreement.
In overall, on the basis of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights, the RCEP Chapter has comprehensively improved the overall level of intellectual property rights protection in the region, and while it fully respected the development level of different members in the region, it also provided a balanced and inclusive solution for the protection and promotion of intellectual property rights in the region, which is conducive to the promotion of regional innovation cooperation and sustainable development.
11. What initiatives to promote e-commerce are included in RCEP?
The RCEP e-commerce chapter is the first comprehensive and high-level multilateral e-commerce regulation achieved in the Asia-Pacific region. This chapter covers rich contents to promote the use and cooperation of e-commerce etc., mainly including promoting paperless trade, promoting electronic authentication and electronic signatures, protecting personal information of e-commerce users, protecting online consumer rights, strengthening regulatory cooperation to unsolicited commercial electronic information and other rules. Additionally, the parties have also reached important consensus on cross-border information transmission, information storage and others within the agreement. These contents provide institutional safeguards for strengthening e-commerce cooperation among members, are conducive to creating a favorable e-commerce development environment, enhancing policy mutual trust, regulatory mutual recognition, and business interoperability among members, which will greatly promote the development of e-commerce within the region.
12. What are the contents of the RCEP trade remedy chapter?
The RCEP trade remedy chapter includes two parts of “safeguard measures” and “anti-dumping and countervailing duty”. In terms of safeguard measures, on the basis of reaffirming the relevant WTO agreements, RCEP establishes a transitional safeguard measure system to provide relief to the parties who suffer damage due to the implementation of the agreed tax reduction. With regard to anti-dumping and countervailing duty investigations, practices such as written information, consultation opportunities, announcements of decisions and explanations, and others have been standardized to promote transparency and due procedure in trade remedy investigations.
13. What are the main aspects of RCEP in the field of competition policy?
The RCEP competition policy chapter is comprehensive in content, with detailed provisions on competition legislation, competition law enforcement cooperation and consumer rights and interests protection etc., and a series of specific, clear and binding requirements on the standardization of law enforcement being put forward. At the same time, RCEP also takes into account the differences in the level of development among its members, and provides a transition period for Brunei, Cambodia, Laos, Myanmar and other countries to carry out domestic legislation and improve their regulatory systems.
The RCEP competition policy chapter clarifies the principles of competition legislation and law enforcement to be followed by all parties, which is conducive to promoting transparent, fairness and impartial law enforcement by all parties. At the same time, it stipulates various forms of competition law enforcement cooperation, which is beneficial to strengthen exchanges and cooperation in the field of competition policy. These provisions are of great significance for all parties to cooperate to stop monopoly behaviors that harm bilateral trade and investment, create a sound trade and investment environment, and promote trade and investment liberalization and facilitation.
14. What are RCEP’s initiatives in the area of government procurement?
The RCEP government procurement chapter is the first time that China has included rules related to government procurement in a multilateral agreement. This chapter not only contains information exchange and cooperation, provision of technical assistance, strengthening capacity building and other contents, but also adds the review clause, leaving room for all parties to further enrich and improve this chapter in the future. RCEP promotes information exchange and cooperation in government procurement at a higher level and in a wider range of areas, helping to enhance the transparency of government procurement management systems of all parties, and laying the foundation for promoting the gradual opening up of government procurement markets in the region.
15. What measures has RCEP taken to promote the SMEs development and economic and technical cooperation?
In order to promote the balanced development of all members in the region, RCEP has set up two chapters specifically for SMEs and economic and technical cooperation, with a view to facilitating countries to make use of the free trade agreement platform, strengthen support and input for SMEs and economic and technical cooperation, and enable SMEs and developing economies to better share the results of RCEP.
Among them, the SMEs chapter aims to build a broader platform for their cooperation, encourage them to make more active use of free trade agreements and economic cooperation projects created by the agreements, and better and faster integration into the regional value stream and supply chain. The economic and technical cooperation chapter provides for the parties to cooperate in the implementation of technical assistance and capacity-building projects, promotes the more inclusive and efficient implementation of the agreement, in particular to accommodate the development needs of the least developed members to encourage all parties to make full use of the agreement to develop their economies, and continuously narrow the development gap among members.
16. When did RCEP come into effect?
RCEP came into effect on January 1, 2022.
17. How to make good use of RCEP to deepen cooperation?
In the current situation where global economic growth is sluggish, and economic globalization and free trade face severe challenges, implementing open, inclusive, resilient, innovative and practical cooperation measures is an urgent task. To implement the purpose of RCEP requires collaboration among all parties. We should take the effective implementation of RCEP as an opportunity to fully utilize the favorable conditions for cooperation brought by the open market of RCEP, forging a regional development path of cooperation development and addressing challenges.
The effective implementation of the RCEP agreement is of great significance to promoting regional openness, cooperation and development, international stability and global economic growth. All RCEP member countries should attach great importance to, strengthen targets and measures, strive to resolve and break through constraints and obstacles, and work together to explore the potential for regional economic growth and achieve new development.
RCEP member countries should strive to enhance the level of trade facilitation, improve the regional business environment, and accelerate the integration of industrial chains and supply chains. Enterprises should seize the new opportunities for regional opening under RCEP, consciously master and make good use of RCEP rules to develop international markets, grasp the economic and trade complementarity, trade structure, industry structure, and investment structure among RCEP member countries, as well as the consensus reached and action plans being implemented by the member countries, so as to better implement business operations.
