10 questions I keep getting asked about RCEP

There has been a frenzy of activity amongst my colleagues, their clients and my friends in the last week or so because finally… finally, the Regional Comprehensive Economic Partnership Agreement (RCEP) is signed.

After the euphoria, everyone, and I mean really everyone wants to know everything and more about it.

So for the fun of it, I have made a list of the common questions people are asking.

1.      Is India in the RCEP?

Ans: No, unfortunately not. India opted out in November last year and despite lots of reassurances from the other RCEP member countries, has not opted back in. I personally think that the India-China disputes had not been helpful. In the aftermath of the dispute, both India and China have put in place some trade limiting measures on each other and just this week, China has accused India of discriminatory practices that violate WTO rules, because India has blocked 43 China apps. To date, India has blocked 220 Chinese mobile apps.

2.      Is there a possibility that India will re-enter RCEP?

Ans: Everything is possible. However it would depend on how the direction of international economy and India’s relationships with the region. Recently a Straits Times report quoted a policy adviser in India’s Ministry of External Affairs saying that RCEP in its current form is not beneficial to the Indian economy, with misgivings hardening in the aftermath of the COVID. So probably not anytime soon.

3.      Will the RCEP help in the current Australia-China trade tensions?

Ans: For the uninitiated, since the first half of this year, China has stepped up actions against Australian imports including coal, cotton, wine, barley, beef. These actions are diverse and includes formal and non-formal, eg. for lobsters, one shipment was stopped for health concerns. The Chinese foreign ministry claims that Australia’s stance on a variety of issues is to blame. Very simply put, the RCEP while being able to reduce or eliminate tariffs on products based on an agreed schedule, by itself will not provide any assurance that these Chinese actions will stop.

4.       Is Hong Kong in the RCEP?

Ans: No, a blog post by Finance secretary Paul Chan has indicated that Hong Kong will strive to be one of the first economies to join the RCEP when it takes effect.

5.      Is Taiwan a part of the RCEP?

Ans: No, the Taipei Times reported that the Taiwan Ministry of Foreign Affairs has indicated that Taiwan will try to join the CPTPP because it would be challenging to join the RCEP.

6.      How does RCEP change the supply chain relationship in the region?

This is a very interesting and complicated question and I have already seen several news and linkedin articles on this. The simple answer is yes it would change. The difficult answer is how will it change? Would it lead to trade diversion or a consolidation of regional supply chains or both? One thing for sure, the RCEP will provide support to companies trading/moving RCEP made products in the region using a hub-spoke model. The second is benefits for trade flows between Japan and Korea, and Japan and China will be a first. I would be cautious of generalizing the benefits though to all industries, all production and all business structures. Eventually at the end of the day, it depends on the details of the agreement and the most important question is – is your product covered, what extent to which it is covered and what are the specific terms and conditions you need to meet to benefit?

7.      What is in it for me in the RCEP?

Ans: News articles have repeatedly stated how RCEP covers 1/3 GDP and population and the computer simulation calculation from a John Hopkins University professor indicates that RCEP will add US$209 billion annually to world incomes and US$500 billion to world trade by 2030. All this aside, the crucial issue for companies is again -- is your product covered, what extent to which it is covered and what are the specific terms and conditions you need to meet to benefit? The details are in the agreement.

8.      Can I use the RCEP now?

Ans: No. Apparently there are some reports that quoted a need to wait 2 years. I believe this is a targeted deadline. The legal text states that the agreement comes into force after at least six ASEAN members and 3 non-ASEAN members of RCEP have deposited their instrument of ratification.

9.      Which do I use – the RCEP or the ASEAN plus FTAs?

Ans: There is no government requirement that companies have to use one or the other. The choice is yours based on whether your product is covered, what extent to which it is covered and what are the specific terms and conditions you need to meet to benefit?

10.  My products are sourced from EU, can I use the RCEP?

Ans: Perhaps you can look at EU’s FTAs and trade agreements instead?

Please note that the views expressed are mine and do not necessarily represent EY’s position.