The Regional Comprehensive Economic Partnership (RCEP), which entered into force on 1 January 2022, is creating the world’s largest trading bloc by economic size and makes it a centre of gravity for global trade, the United Nations Conference on Trade and Development (UNCTAD) said in a study days before the pact was launched.
The ASEAN member states – Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam – plus Australia, China, Japan, South Korea, and New Zealand, signed the RCEP agreement on 15 November 2020.
The RCEP becomes the largest trade agreement in the world as measured by the gross domestic product of its members – almost of one third of the world’s GDP, the UNCTAD study said.
By comparison, other major regional trade agreements by share of global GDP are the United States-Mexico-Canada agreement (28 percent), the European Union (17.9 percent), Africa’s continental free trade area (2.9 percent), and the South American trade bloc Mercosur (2.4 percent).
RCEP’s impact on international trade will be significant, UNCTAD’s analysis shows.
“The economic size of the emerging bloc and its trade dynamism will make it a centre of gravity for global trade,” the report says.
The pact will eliminate 90 percent of tariffs within the bloc, as trade liberalization will be achieved through gradual tariff reductions. While many tariffs will be abolished immediately, others will be reduced gradually during a 20-year period. RCEP will also be a boon to intraregional exports, UNCTAD’s report says.
Trade between the bloc’s 15 economies was already worth about US$2.3 trillion in 2019, and UNCTAD’s analysis shows the agreement’s tariff concessions could further boost exports within the newly formed alliance by nearly 2 percent, or around US$42 billion.
This would result from trade creation – as lower tariffs would stimulate trade between members by nearly US$17 billion – and trade diversion – as lower tariffs within the RCEP would redirect trade valued at nearly US$25 billion away from non-members to members, UNCTAD notes.