Focus
and New Zealand. The RCEP bridges the two proposals by giving ASEAN a central role in coordinating regional trade, and adopting an open accession scheme.
Value of RCEP
The RCEP can help regionalise the sophisticated global value chains that make Asia the world’s factory. It will also reduce the overlap among Asian FTAs and the risk that Asia becomes a confusing ‘noodle bowl’ of multiple trade rules. If a comprehensive agreement can be reached, trade barriers in Asia will come down and the new rules will be consistent with WTO agreements. Rules of origin could be rationalised and made more flexible, and be better administered through electronic means. In investment rules, where no WTO agreement exists, RCEP will promote easier foreign direct investment ( FDI) flows and technology transfers by multinational corporations.
Since RCEP will contain three of the largest economies in the world — China, India, and Japan—it is globally important. The RCEP bloc represents 49 per cent of the world’s population and accounts for 30 per cent of global GDP. It also makes up 29 per cent of global trade and 26 per cent of global FDI inflows. Our conservative estimates, using a computable general equilibrium model, suggest that if RCEP was implemented it would bring income gains to the world economy of at least US$260 billion within a decade. Other estimates suggest an even higher figure of around $600 billion. India – the only South Asian economy in RCEP - is projected to gain from the agreement, while outsiders to RCEP like Sri Lanka and the rest of South Asia would lose from trade diversion.