RCEP marks many a first as giant FTA

The Regional Comprehensive Economic Partnership that was inked on Sunday has created several “firsts” in the world.

The RCEP is the world’s largest free-trade agreement in terms of the number of signatories, GDP aggregate, total trade and investment volume and total population. Other large FTAs in the world include the EU-Japan FTA, the US-Mexico-Canada Agreement (which succeeded the North American Free Trade Agreement) and the Comprehensive Progressive Trans-Pacific Partnership.

The Trans-Pacific Partnership, which preceded the CPTPP, was earlier the largest FTA, but the volume fell sharply following the United States’ withdrawal.

The RCEP is the first giant FTA that China is participating in. FTAs have emerged in a big way in the 21st century, especially after the 2008 subprime mortgage crisis. They are called giant FTAs if at least two of the world’s four largest economies — the US, China, the European Union and Japan — are involved.

With the world’s multilateral trading systems increasingly coming under impact, giant FTAs remain a future development trend.

The RCEP will enable China and Japan to be part of an FTA for the first time, making it also the first time East Asia has succeeded in promoting regional economic integration. So far, China and Japan have only had investment agreements, never an FTA. There is also no FTA among China, Japan and the Republic of Korea.

For historical and political reasons, it is difficult to establish a bilateral FTA between China and Japan. The FTA talks between China, Japan and the ROK are also fraught with twists and turns. However, the RCEP has, for the first time, given birth to an FTA between China and Japan and between China, Japan and the ROK. The FTA between China and Japan marks the first time China inked an FTA with one of the world’s top 10 economies.

The RCEP has also enabled some other economies to be part of an FTA. The standards the RCEP conforms to are higher than other FTAs China has inked. Given the scale of differences among the joining parties, the signing of the RCEP is a hard-won achievement. Also, the RCEP is China’s first FTA in which investment chapters are in the form of a negative list. China’s previous bilateral investment treaty with the US, too, had a negative list, as has the China-EU bilateral investment treaty, but those negotiations are yet to be completed.

The RCEP also has the longest tariff reduction schedule in the world and signing it is of great significance to China, Asia and the world at large.