Macro Insights Weekly: RCEP and DEPA
- Despite rising trade and investment restrictions, Asia’s exports continue to expand robustly
- The landmark Regional Comprehensive Economic Partnership is heading toward implementation
- Six Asean countries submitted their approval letter for the RCEP last week
- China’s recent request to join the Digital Economy Partnership Agreement is likely consequential
- Between RCEP and DEPA, regional movement of goods, services, and data will be better governed
Commentary: RCEP and DEPA
Global trade’s best years were more than a decade ago; the momentum lost during the 2008-09 global financial crisis never recovered. But a plethora of trade restrictions notwithstanding, Asian economies have entrenched their position as the key source of goods and services trade in the world. As movement and storage of data become a key part of the global economic landscape, Asia’s role in relevant rule-setting is also becoming more central.
Media headlines about elevated energy price, Fed policy and US legislative agenda, as well as geopolitics are probably obscuring the steady improvement in regional trade rules in Asia.
The landmark Regional Comprehensive Economic Partnership (RCEP) is heading toward implementation. Six ASEAN countries submitted their approval letter for the agreement last week.
The potentially far-reaching impact of the agreement can be illustrated in the context of Thailand. As RCEP comes into effect, Thailand will see tariffs on nearly 30,000 commodities it exports to other member economies reduced to zero. This would enhance substantially its trade development among RCEP member states, which already purchase a majority of Thai exports.
With 11 out of 15 member countries completing the process or entering the final stage, there is a good chance that the agreement will take effect in the first half of 2022. Covering 10 Asean economies, as well as Australia, China, Japan, New Zealand, and South Korea, with a market of 2.2bn people and GDP of USD26trln, RCEP will be transformative in its impact on regional wellbeing, in our view.
RCEP is well known, but the Digital Economy Partnership Agreement (DEPA) is less so. Signed in mid-2020 by Chile, New Zealand and Singapore, DEPA aims to build consistency in approaches to the digital economy. From paperless trading to AI, the agreement addresses a wide range of activities in the digital space. DEPA could help build new free trade agreements (FTAs) or upgrade FTA exercises.
The recent submission of China’s application to join DEPA is likely to shine a strong light on the agreement. China has major interest in DEPA-linked issues like electronic payments, personal data protection, digital identities, online consumer protection, fintech, and open government data.
An agreement between three open economies is one thing, having China apply for accession to it is an entirely different matter. China’s massive scale, broad regulatory reach, myriad of restrictions on cross-border movement of capital or data could make it rather problematic to be incorporated in DEPA. Nonetheless, China’s push in this arena should be seen in a positive light, as it can only help reduce the prevailing inconsistent, contradictory or incompatible policies governing the global digital economy.
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