On November 15, 2020, after eight years of negotiating, 15 countries came together and signed the Regional Comprehensive Economic Partnership (RCEP). These countries consisted of the ten ASEAN countries as well as five regional partners. India and the United States were both supposed to be members of the agreement, but withdrew under the Trump and Modi governments.
The implementation of the RCEP sets up stronger economic relations between north and southeastern Asia, incentivizing supply chains across the region while still catering to political sensitivities. According to the Brookings Institution, RCEP could add $209 billion annually to world incomes, and $500 billion to world trade by 2030. It is also believed that the new trade agreement may offset losses from the U.S.-China trade war—for everyone but China and the United States, as well as connect about 30% of the world’s population while generating significant gains.
RCEP will also attract foreign investment, with favorable characteristics such as excluding rules on labor, environment, and state-owned enterprises. This makes it significantly less rigorous than the previously established Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
The new open trade policy stimulates more integration between Asian countries and strengthens Asia in a global economic perspective. With the United States opting out of the agreement, we lose economic presence in the region that will most likely become the world’s primary growth hub.
To learn more, check out the following podcast by the Brookings Institution: