The Regional Comprehensive Economic Partnership (RCEP) was signed on November 15, marking the formal launch ofthe world’s largest free trade zone (FTZ) after eight years of negotiations.

RCEP has the largest participating population in the world, the most diverse membership, and the greatest development potential. How significant is the signing of RCEP for the region, the world, and China?

China (Shanghai) Pilot Free Trade Zone, photo taken on November 11 by Fang Zhe, reporter of Xinhua News Agency

A victory for multilateralism and free trade

A total of 15 member states signed RCEP, including ten ASEAN members along with China, Japan, the Republic of Korea (ROK), Australia, and New Zealand, covering a market of 2.27 billion people, GDP USD 26 trillion, export USD 5.2 trillion, accounting for around 30% of the world respectively. The establishment of RCEP would create an integrated super-large market with around one third of the global economy.

Initiated by ASEAN in 2012, RCEP went through 31 rounds of negotiations over the last 8 years. Since the beginning of this year in particular, despite daunting challenges posed by the pandemic, RCEP members fully concluded the market access negotiations, completed legal scrubbing for the over 14000-page text, and eventually signed the Agreement at the Summit as scheduled. This is the most significant outcome of East Asian economic integration in the last two decades.

The signing of the pact shows that all members are committed to cutting down tariffs, opening up markets and reducing barriers of standards. Some ROK media predicted that after RCEP takes effect, the tariffs on auto parts exported by ROK to Indonesia will be reduced from the current 40% to zero.

Container terminal at Shanghai Yangshan Port, photo taken on November 3 by Wang Xiang, reporter of Xinhua News Agency

Ruan Zongze, Executive Vice President of China Institute of International Studies, described the signing of the agreement as "crucial and timely". He noted, against the special background characterized by rampaging pandemic, serious economic decline worldwide, shriveling international trade and investment, and rising protectionism and unilateralism, that the RCEP agreement represents a victory for multilateralism over unilateralism and free trade over protectionism and will strongly boost all parties' confidence in economic growth.

Analysts indicated that RCEP encompasses major countries in East Asia and thus can inject impetus into regional and global economic growth. A world-renowned think tank estimated that RCEP will boost the member states' export, outbound investment stock and GDP to 10.4%, 2.6% and 1.8% above the baseline by 2025.

The world is undergoing profound changes unseen in a century, and Asia Pacific is playing a vital role in world economic development. The signing of RCEP has paved the way for the Free Trade Area of the Asia-Pacific (FTAAP) and is expected to further elevate the position of Asia Pacific in global development landscape, said Ruan Zongze.

Ro/Ro Cargo Ship Laura, the first automobile-carrying foreign trade ship since the policy of China (Hainan) pilot FTZ is implemented, is sailing into the Xiuying Port in Haikou. (Photo taken on February 16 with UAV by Yang Guanyu, reporter of Xinhua News Agency)

High-quality and inclusive development

The Agreement is comprised of Preamble, 20 Chapters (including Trade in Goods, Rules of Origin, Customs Procedures and Trade Facilitation, Trade Remedies, and Trade in Services), and four Market Access Annexes.

What are the features of RCEP? It is a modern, comprehensive, high-quality high-quality large regional free trade agreement that delivers mutual benefits, said Wang Shouwen, Vice Minister of Commerce and Deputy Representative of International Trade Negotiations.

RCEP integrates trade and economic rules within the region. It brings together multiple ASEAN's "10+1" FTAs with China, Japan, the ROK, Australia and New Zealand and existing free trade partnerships among the latter five countries.

Yu Miaojie, Deputy Dean of the National School of Development, Peking University, said that if all countries sign trade agreements in pairs, the different, intertwined rules will lead to the spaghetti bowl effect. Uniform rules can largely reduce the operation cost and uncertainties.

Workers were handling packages at China Post's Guangzhou air mail processing center on November 10 (Photo taken by Deng Hua, a reporter of Xinhua News Agency)

According to an official from the Department of International Trade and Economic Relations, Ministry of Commerce (MOFCOM), RCEP deepens regional industrial and value chains by harmonizing the rules of origin with regional-content rules; it promotes emerging types of cross-border logistics by facilitating customs with new technologies; it enhances transparency of investment policies by adopting the negative list approach to advance investment liberalization. All of these efforts would optimize and harmonize regional trade and economic rules.

"High quality" is a prominent feature of RCEP. For merchandize trade, over 90% of goods will eventually enjoy zero tariff. Services trade and investment are much more open than the "10+1" FTAs. In addition, RCEP also includes a number of modern topics such as high-level intellectual property, e-commerce, competition policies and government procurement.

According to Ruan Zongze, enterprises in the region are likely to enjoy more preferential policies in a more convenient manner, and people in regional countries will be able to buy imported products at a much lower price, better meeting their aspiration for a good life.

The upper photo shows the Amore store in the Amorepacific's headquarters in Yongsan District, Seoul, ROK on October 27 (Photo taken by Wang Jingqiang, reporter of Xinhua News Agency) The lower photo shows a visitor trying skin care product at Amorepacific's booth in the consumer goods section during the 3rd China International Import Expo (CIIE) on November 8 (Photo taken by Zhang Yuwei, reporter of Xinhua News Agency)

In the first three quarters of this year, ASEAN historically became China's largest trading partner. Besides, China's total trade volume with other RCEP members amounted to 1,055 billion, taking up about 1/3 of China's total foreign trade. The large volume of trade, combined with reduced tariffs, will generate significant "trade creation" effect.

It's worth noting that the signing of RCEP has forged new free trade partnerships between China and Japan, Japan and ROK, two pairs that didn't ink free trade agreement in the past. In this sense, the signing of RCEP further enhances free trade in the region.

RCEP will help advance the China-Japan-ROK economic integration to a higher level and lay the foundation for reaching the free trade agreement among the three countries, said Wang Shouwen.

Taking account of different national actualities, RCEP accords the least developed countries the special and differential treatment and addresses the real needs of both developing and least developed countries by stipulation of stronger economic and technological cooperation. It is fair to say that RCEP accommodates the needs of all parties to the greatest extent. It will drive forward inclusive and balanced development of the region and deliver shared benefits to all.

A visitor is walking out of JETRO's booth at the food and agricultural products section during the 3rd CIIE on November 10. (Photo taken by Chen Yehua, reporter of Xinhua News Agency)

An important platform for China to advance opening-up to a higher level

Accelerating the implementation of the free trade zone strategy is an important part of China's new round of opening up.

The 14th Five-year Plan specifically proposes to build a globally oriented network of high-standard free trade zones, and Chinese President Xi Jinping announced at the 3rd CIIE that "China stands ready to conclude high-standard free trade agreements with more countries in the world. We will work for the early signing of the Regional Comprehensive Economic Partnership…"

According to analysts, the establishment of the RCEP free trade zone will provide a strong boost to China's efforts in making institutional innovations to support an open economy in the new era and fostering a new development paradigm with domestic circulation as the mainstay and domestic and international circulations reinforcing each other.

RCEP is a vital institutional cooperation platform for fostering a new, dual-cycle development paradigm. Under this framework, China can allocate resources and factors of production more efficiently and drive high-quality development, transformation and upgrade of the economy, said Zhang Jianping, Director General of the Center for Regional Economic Cooperation under Chinese Academy of International Trade and Economic Cooperation.

The upper photo shows workers at an ice cream production line in a Baxi plant in New Zealand (File photo by Xinhua News Agency) The lower photo shows a staff member holding an ice cream imported from New Zealand at the G'nature booth during the 3rd CIIE on November 7. (Photo taken by Zhang Yuwei, reporter of Xinhua News Agency)

Two sets of numbers can best attest to the significance of RCEP:

RCEP is the 19th free trade agreement China has signed, bringing the country's free trade partners to 26.

RCEP establishes the free trade relationship between China and Japan, the first time that China has inked a free trade agreement with the world's top 10 economies. With new business ties, China's trade coverage with free trade partners is poised to climb from the current 27% to 35 %.

A livestreamer is promoting goods online at a food company in Danfeng County, Shangluo, Shaanxi Province. (Photo taken on July 20 by Liu Xiao, reporter of Xinhua News Agency)

The signing of RCEP will enable China to build a more comprehensive, in-depth, and diversified opening-up pattern, further refine its foreign trade and investment structure, keep bringing domestic rules in line with high-standard international trade and investment rules, and support an open economy of higher standards, said Bai Ming, Deputy Director of the International Market Research Institute at the Chinese Academy of International Trade and Economic Cooperation, a think tank under the Ministry of Commerce.

It will be some time before RCEP finally takes effect. According to rules, the deal must be ratified by at least six ASEAN countries and three non-ASEAN signatory countries before it can come into effect.

According to Wang Shouwen, the RCEP members will respectively go through their domestic legal procedures to have the agreement come into force as early as possible. The countries have accelerated the domestic procedures, and China will make joint efforts with them to make sure RCEP will benefit the enterprises and people in the region at an early date.

The signing of the agreement is just a starting point. RCEP has provided the region with a platform, on which all parties can further their cooperation and realize trade and investment liberalization and facilitation on a higher level, said Wang Shouwen.

(Reporters: Wang Zhuolun, Yu Jiaxin, and Zheng Mingda)