RCEP in a nutshell

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published on 20 November 2020 | reading time approx. 3 minutes

  

Eight years after the member states of the Association of Southeast Asian Nations (ASEAN) together with Australia, China, India, Japan, New Zealand, and South Korea issued a joint declaration to initiate the negotiations of the Regional Comprehensive Economic Partnership (RCEP), the world's largest free trade agreement in terms of GDP and population has finally been signed on 15 November 2020 during the 37th ASEAN summit.

  

   

 

 

In late 2019, during the 35th ASEAN summit, India had withdrawn from the negotiations due to concerns to further open the market and possible negative effects on the domestic economy, while the remaining parties concluded the negotiations for all 20 chapters of the RCEP.

 

The 37th ASEAN summit, influenced by the COVID-19 pandemic, was organized and held as a digital summit, so the signing ceremony was digital too. During the signing ceremony each country's trade minister signed a separate copy while his or her head of state or government stood nearby and watched. The purpose of the RCEP is to eliminate trade barriers and establish new investment opportunities, which should help to facilitate business operations and promote development in the economies of member countries. It was further acknowledged in a Joint Leaders' Statement that the RCEP Agreement is deemed critical for the region's response to the COVID-19 pandemic and shall play an important role in building the region's resilience through inclusive and sustainable post-pandemic economic recovery process. However, the RCEP does not venture  into divisive issues like protection of intellectual property, independent labor unions and the environment or limiting government subsidies to state-owned enterprises. With only a minimal consensus that could be found by the signatory states the RCEP touches these controversial aspects rather modestly, especially in comparison with the standards that can be seen in EU free trade agreements.

 

Structure of the RCEP

1. Initial provisions and general definition;

2. Trade in goods;

3. Rules of Origin;

4. Customs procedures and trade facilitation;

5. Sanitary and phytosanitary measures;

6. Standards, technical regulation and conformity assessment procedure;

7. Trade remedies;

8. Trade in services;

9. Temporary movement of natural persons;

10. Investment;

11. Economic and technical cooperation;

12. Small and medium enterprise;

13. Intellectual property;

14. Electronic commerce;

15. Competition;

16. Government procurement;

17. Institutional provisions;

18. General provisions and exceptions;

19. Dispute settlement;

20. Final provisions.

 

Trade in Goods 

The Trade in Goods Chapter contains key elements that govern the implementation of goods-related commitments to foster the trade liberalization among the Parties. These include granting of national treatment to goods of the other Parties as well as the reduction or elimination of customs duties and the reaffirmation of commitments in the WTO Ministerial Decision on Export Competition. The Chapter also sets out rules to determine the applicable tariff treatment in cases of different tariff preferences applied by a Party. It further contains provisions on non-tariff measures which include the general elimination of quantitative restrictions, increased transparency on the application of non-tariff measures as well as administration of import licensing procedures and respective fees and formalities. The Parties also agreed on a process to conduct technical consultations on non-tariff measures that adversely affect trade between them.

 

Customs Procedures and Trade Faciliation

The Customs Procedures and Trade Facilitation Chapter moreover targets the simplification of customs procedures and harmonization of customs procedures with international standards, which in some parts go beyond the WTO Trade Facilitation Agreement. The details of the staged implementation of commitment are provided in an annex to the Chapter.

 

Rules of Origin 

EU-companies may only benefit from the new trade rules under certain conditions. The Rules of Origin (ROO) Chapter determines which goods are originating under the RCEP Agreement and therefore eligible for preferential tariff treatment. The ROO Chapter is divided into (i) Section A: Rules of Origin and (ii) Section B: Operational Certification Procedures.

 

It provides articles on originating goods and goods wholly obtained or produced and an Annex on Product-Specific Rules (PSR), which set out requirements to determine the originating status of goods. The Chapter also lists those minimal operations and processes which would be considered insufficient to confer originating status on goods using non-originating materials. Given the geographic configuration of the RCEP, the Parties ensured that the ROO Chapter includes clear direct consignment rules to avoid that originating goods inappropriately lose their originating status. If a good does not satisfy a change in tariff classification rule in the PSR, it could still acquire originating status under certain de minimis rules. Other elements under Section A cover the treatment of packaging materials and containers for transportation and shipment, or the treatment of accessories, spare parts and tools. In Section B we see rules governing procedures to (i) apply for the RCEP proof of origin, (ii) claim preferential tariff treatment and (iii) verify the originating status of a good. The annexes to the ROO Chapter include (i) product-specific rules, that cover all tariff lines at the HS 6-digit level and (ii) minimum information requirements, that list the required information for a certificate or a declaration of origin.

 

Trade in services 

RCEP shall facilitate services trade among the Parties through substantial removal of restrictive and discriminatory measures affecting trade in services. The Services Chapter contains i.a. provisions on market access, national treatment, most favored nation treatment and local presence, which are subject to Parties' Schedules of Specific Commitments or Schedules of Reservations and Non-Conforming Measures, as well as additional commitments. The services commitments are scheduled using the negative list approach, either on the date of entry into force of the RCEP Agreement, or within a defined time period after the date of entry into force of the RCEP Agreement. It should be noted that most Parties made quite comprehensive reservations and it remains to be seen to what extent markets will in practice be further opened to services, particular with regard to the establishment of a local presence.

 

Investment

In this light the tenth chapter of the RCEP covers investments and contains provisions on protection, liberalization, promotion and facilitation. It includes a most favored nation treatment clause, and commitments on the prohibition of performance requirements that go beyond multilateral obligations under the WTO Trade Related Investment Measures (TRIMS) Agreement.

 

Ratification

It should be noted that the RCEP in this stage has only been signed and is neither ratified nor in effect. Prior to the entry into force it shall be subject to ratification, acceptance, or approval by each signatory State in accordance with its applicable legal procedures. The instrument of ratification, acceptance, or approval of a signatory State needs to be deposited with the Depositary (which will be the Secretary-General of ASEAN who is designated as the Depositary for this Agreement). The RCEP shall enter into force for those signatory States that have deposited their instrument of ratification, acceptance, or approval, 60 days after the date on which at least six signatory States which are Member States of ASEAN and three other signatory States have deposited their instrument of ratification, acceptance, or approval with the Depositary.

 

 After the date of entry into force of RCEP, it shall enter into force for any other signatory state 60 days after the date on which it has deposited its instrument of ratification, acceptance, or approval with the Depositary. Entry into force could therefore require some 1-2 years depending on the pace of ratification.

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