Out-Law News | 26 Nov 2020 | 1:34 am | 1 min. read
15 Asia Pacific countries have signed the world’s largest trade agreement during the 37th Association of Southeast Asian Nations (ASEAN) Summit that was held in Hanoi, Vietnam earlier this month.
The Regional Comprehensive Economic Partnership (RCEP) includes 10 Southeast Asian countries, China, South Korea, Japan, Australia and New Zealand.
The RCEP agreement covers about 30% of the global gross domestic product (GDP), amounting to $26.2 trillion a year of economic activity, and 30% of the world population.
China's total trade with RCEP members accounts for about one-third of the country's total foreign trade, and the actual investment from RCEP members accounts for more than 10% of China's total foreign investment.
China’s finance ministry said the new bloc’s promises include cutting out some tariffs within the group, including some immediately and others over 10 years, a Reuters report said.
The trade agreement covers about 46% of Japan's total trade and will be the Japan's first trade deal with both China and South Korea.
According to the summary of the agreement, it aims to "establish a modern, comprehensive, high quality and mutually beneficial economic partnership that will facilitate the expansion of regional trade and investment and contribute to global economic growth and development". It will support an "open, inclusive, and rules-based multilateral" trading system.
The Agreement covers market access, rules and disciplines, and economic and technical cooperation. Once in effect it will improve market access by removing tariffs and quotas over 65% of goods traded and make business predictable with common rules of origin and transparent regulations, an ASEAN statement said.
The agreement was formed over 30 rounds of negotiations spanning eight years.
Trade law expert Dr. Totis Kotsonis of Pinsent Masons, the law firm behind Out-Law, said that the new arrangement builds on an existing web of bilateral and plurilateral free trade agreements between its signatories. "It is true that given the different stage of economic development amongst its members, ambitious progress on issues such as common standards had to be scaled back. Be that as it may, the Agreement constitutes a major achievement in consolidating and simplifying the rules of origin across its 15 members. In simple terms, this means that products that incorporate components manufactured in different RCEP members would have the benefit of the preferential RCEP tariff arrangements. This is bound to lead to a significant increase in trade flows between RCEP countries," he said.