Trade exchange is the lifeblood of the global economy, and at the end of 2020, a new Regional Comprehensive Economic Partnership (RCEP) was signed, which became the largest trade bloc in history.
Who is in RCEP and why was it created?
RCEP is a free trade agreement between 15 countries in the Asia-Pacific region, formalized after 28 rounds of discussions over eight years. Member countries that are part of RCEP will benefit from reduced or completely eliminated tariffs on imported goods and services within the region over the next 20 years.
The signing of the agreement is the initial sign of support for the trade agreement, but it now also needs to be ratified. This means that these nations still need to give consent to be legally bound by the terms within RCEP. Once three-fifths of its signatories ratify RCEP, it will activate within 60 days.
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So far, it has been ratified by China, Japan, Thailand, and Singapore, and at the current pace of signing, RCEP is expected to come into effect in early 2022. as all member states have agreed to complete the ratification process within a year.
Interestingly, during the negotiations in 2019, India withdrew from the agreement. This occurred after potential concerns about the impact of the trade bloc on its industrial and agricultural sectors affecting "the lives and livelihoods of all Indians." India retains the option to rejoin RCEP in the future if circumstances change.
The Largest Trade Blocs, in Comparison
When we say that the Regional Comprehensive Economic Partnership is the largest trade bloc in history, we truly mean it, and the facts confirm this.
RCEP will not only surpass existing Asia-Pacific trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in size and scope but also other key regional partnerships in advanced economies. This includes the European Union and the Agreement between the United States, Mexico, and Canada (USMCA, formerly known as NAFTA).
