Regional Comprehensive Economic Partnership (RCEP)
Updated October 17, 2022
Regional Comprehensive Economic Partnership (RCEP)
The Regional Comprehensive Economic Partnership
several metrics (Figure 2). Its envisioned economic
(RCEP) is a trade agreement, signed in late 2020 after eight
footprint was even larger before India withdrew in 2019
years of talks, among the ten members of the Association of
over various concerns, including reportedly competition
Southeast Asian Nations (ASEAN)—Brunei, Burma
with China. RCEP accession procedures are not restricted
(Myanmar), Cambodia, Indonesia, Laos, Malaysia, the
by geography, and offer an expedited process for India.
Philippines, Singapore, Thailand, and Vietnam, and five
Figure 2. Economic Indicators of Major Trade Deals
ASEAN free trade agreement (FTA) partners—Australia,
China, Japan, New Zealand, and South Korea. RCEP
entered into force in January 2022 after ratification by six
ASEAN and three non-ASEAN countries. To date, it has
yet to be ratified by the Philippines and Myanmar.
RCEP follows the entry into force of “mega-regional” trade
deals, such as the Comprehensive and Progressive
Agreement for Trans-Pacific Partnership (CPTPP), which
includes seven RCEP members and four countries in the
Americas (Figure 1). Although overall RCEP has less
extensive commitments than other recent trade agreements
Source: CRS with data from World Bank and WTO.
(e.g., CPTPP or the U.S.-Mexico-Canada Agreement),
Notes: CPTPP and RCEP include 7 overlapping members; EU-Japan
many analysts view RCEP as an achievement for the
trade does not include intra-EU trade.
multilateral trading system, which faces myriad challenges.
RCEP’s 20
The collective economic weight of its membership gives
chapters cover trade in goods and services,
RCEP the potential to deepen some trade patterns and
investment, government procurement, standards and
supply chains in Asia through lower trade costs and
technical regulations, intellectual property rights (IPR), e-
streamlined rules. Congress may consider how RCEP
commerce, and other issues. Several chapters are new to
affects U.S. commercial and strategic interests, and if it
ASEAN FTAs. RCEP is considered a “living agreement,”
affects the relevance of the United States in shaping trade
with a built-in agenda for further talks in various areas.
rules and economic integration in Asia and globally.
RCEP has a complex tariff schedule. The parties agree to
Figure 1. Asia-Pacific Members of Regional FTAs
reduce or eliminate tariffs by approximately 92% over 20
years, with eliminated tariffs/quotas covering over 65% of
goods traded. There are sizable carveouts in certain sectors,
such as agriculture in the case of Japan. Due to existing
FTAs, tariff reductions are not necessarily substantial for all
of the parties. In services, while seven members agreed to a
“negative list” approach that restricts only those sectors
listed explicitly, eight members (including China)
negotiated to keep a “positive list” approach that only
liberalizes the sectors they list in the agreement—these
countries committed to transition to a negative list within
six years. Some estimates suggest that at least 65% of
services sectors will be fully open, with advanced market
Source: Created by CRS.
access in professional, financial, telecommunications,
History and Scope
computer, and logistics services. These and other provisions
go beyond some other ASEAN FTAs, such as investment
RCEP negotiations began in 2012 as an ASEAN initiative
protections prohibiting more extensive performance
with the stated goal of harmonizing and building on
existing “ASEAN+1” FTAs with regional partners.
requirements than previous commitments (e.g., technology
While
transfer as a condition of market access). RCEP does not
RCEP was conceived by ASEAN, which has long sought to
include investor-state dispute settlement (ISDS), though
create a common trading and manufacturing base, China
parties commit to review its inclusion within five years.
actively shaped the negotiations and views RCEP as a
“victory of multilateralism and free trade.” It marks the first
In e-commerce, members commit not to impose customs
trade deal among some participating economies with China.
duties on electronic transmissions. General obligations to
It is an important first for Japan with both China and South
prevent data localization requirements or cross-border data
Korea, despite a now-stalled attempt at trilateral trade talks.
transfers are subject to broad exceptions for national
RCEP is the world’s largest regional trade agreement by
security and public policy reasons. The e-commerce
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Regional Comprehensive Economic Partnership (RCEP)
chapter, like some others, is not subject to general dispute
States must “set the rules of the road instead of having
settlement. RCEP parties, particularly least developed
China and others dictate outcomes.” China remains one of
countries (Burma, Cambodia, Laos) and ASEAN members
the top beneficiaries of RCEP’s estimated benefits. Chinese
negotiated “special and differential treatment” that
firms, in part due to pressure from U.S. tariffs, reportedly
largely offers transitional periods for various commitments
began shifting manufacturing to ASEAN while maintaining
(e.g., related to e-commerce, trade facilitation, and IPR).
sourcing networks in China, a trend that could accelerate
RCEP in Context
under RCEP. At the same time, some countries aim to use
RCEP to diversify supply chains from China. To this end, a
U.S. withdrawal in 2017 from the TPP as well as increasing
key issue for Congress are prospects for renewed U.S.
U.S.-China trade tensions, renewed interest among many
influence in the formation of regional trade rules through
RCEP countries to form a regional trade deal as a potential
the Indo-Pacific Economic Framework for Prosperity
alternative vehicle for developing more open and stable
(IPEF). IPEF, which launched in May 2022, is the Biden
regional trade links. Talks progressed slowly, largely due to
Administration’s first major trade initiative in the region
the disparate levels of economic development and priorities
and involves several RCEP members. It will not be a
among members. Some analyses characterize RCEP rules
traditional U.S. FTA but involves four “pillars,” covering
and commitments as relatively shallow, and lacking on
select trade issues; supply chains; clean energy, de-
nontariff issues. Others emphasize significant progress
carbonization, and infrastructure; and tax/anti-corruption.
compared to previous ASEAN deals, and potential impacts
beyond trade concessions. Many experts view RCEP as
Commercial Interests and Trade Negotiating Strategy.
deepening regional integration, while serving as a “stepping
RCEP could shift regional trade in ways that affect U.S.
stone” for members to join higher-standard FTAs. Many
economic interests and reduce U.S. commercial activity if
businesses operating in the region view RCEP’s most
members shift trade to U.S. competitors, and supply chains
significant component to be common rules of origin, which
reorient to capitalize on RCEP tariff reductions and rules of
govern how much of a product must be produced within the
origin. Further, new trade rules in Asia that may not reflect
region to qualify for tariff benefits. A simplified regime
U.S. negotiating priorities, such as in digital trade, could
could facilitate the deepening of regional supply chains by
disadvantage U.S. competitiveness; though this may be
reducing tariffs on semi-finished goods/inputs across the
offset by existing U.S. FTAs with some RCEP partners and
RCEP bloc. For context, on average, more than a third of
the prospective IPEF. At the same time, U.S. firms with
RCEP exports are to other RCEP parties. Channels of
manufacturing in the region may concentrate operations
RCEP’s expected impact include some reorientation of
further if RCEP rules of origin lower input costs, and
global linkages toward stronger connections in East Asia,
benefit from reduced nontariff barriers. Over concerns that
and helping offset U.S.-China trade frictions. A Peterson
RCEP (and CPTPP) could disadvantage the United States,
Institute study estimated RCEP could add up to $500 billion
some Members urged the Administration to develop a more
in world trade by 2030, with sizable benefits for China,
robust U.S. trade strategy, pressing CPTPP participation, a
Japan, and South Korea.
regional digital trade deal, and expansion of IPEF’s scope
to cover market access. Expiration of Trade Promotion
Comparisons to CPTPP
Authority (TPA), in which Congress sets U.S. negotiating
Congress may have interest in understanding how RCEP
objectives and procedures may shape the scope of
compares to the CPTPP, given the major U.S. trading
congressional influence and U.S. approaches in the region.
partners involved in both and the U.S. original role in
negotiating TPP commitments. CPTPP is effectively the
Strategic Interests. Congress may also have interest in
original TPP text with a limited number of changes, such as
monitoring and responding to RCEP’s geopolitical
the suspension of certain provisions on investment and IPR
implications. Many Asian policymakers argue that U.S.
by the remaining members. Most analysts agree that RCEP
engagement with the region has been largely security-
has less extensive commitments than CPTPP, though they
related, and that the United States has not enunciated a
both seek to reduce trade barriers and establish rules—one
coherent economic strategy since withdrawing from TPP. In
comparative analysis finds 30% of RCEP’s text duplicates
this view, the U.S. absence from RCEP and CPTPP has
CPTPP. In terms of market access, CPTPP will eliminate
limited its ability to pursue other goals, in part because the
tariffs on a greater number of tariff lines (99%) and reduce
U.S. has fewer tools to motivate countries to adopt a more
barriers to services trade for more sectors. This is in part
U.S.-friendly foreign policy outlook. Further, countries in
due to CPTPP’s uniform negative list approach, compared
RCEP may have increased their broader influence in the
to RCEP’s hybrid approach. There are also differences in
region; such influence may further shift should other
rulemaking, with RCEP not covering some CPTPP issues
countries such as India seek to join. Some observers
that had been advanced by U.S. efforts (e.g., state-owned
maintain past trade deals in general have had a limited
enterprises (SOEs), labor and environmental standards), and
impact on security-related dynamics. Many also argue that
RCEP’s conclusion validated ASEAN’s diplomatic
covering other issues, but with less extensive (e.g., IPR) or
enforceable (e.g., investment, digital trade) commitments.
approach of seeking consensus with its disparate partners.
ASEAN officials have long argued that the group exerts
Implications for U.S. Trade Policy
influence as a neutral convener of more powerful countries,
Regional and Global Rules. Some Members of Congress
and that ASEAN-centric diplomacy can achieve results by
saw TPP as a U.S. opportunity to shape trade rules and
“multilateralizing” issues, making them less contentious.
potentially influence some of China’s economic practices of
concern, such as the role of SOEs. In this view, RCEP may
Cathleen D. Cimino-Isaacs, Coordinator, Analyst in
limit U.S. economic influence by having allowed China to
International Trade and Finance
reach an agreement without these TPP disciplines.
Ben Dolven, Specialist in Asian Affairs
Reflecting on RCEP, President Biden said that the United
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Regional Comprehensive Economic Partnership (RCEP)
IF11891
Michael D. Sutherland, Analyst in International Trade and
Finance
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