Now we have a new concept in business life: “Regional Comprehensive Economic Partnership” (RCEP). It was translated as “Bölgesel Kapsamlı Ekonomik Ortaklık” in Turkish. It refers a “Free Trade Agreement”. It is an agreement signed online by Brunei, Burma, Cambodia, Indonesia, Laos, Malesia, Philippines, Singapore, Thailand, Vietnam, Australia, China, Japan, South Korea and New Zealand on November 15, 2020 (India withdrew at the last minute).
We were so surprised that we started to ask “where did this come from and how did it happen?” and to report pages of news, and we read with curiosity the news about Asia’s rise, China’s leadership and the EU’s perplexity. And unfortunately, I could not find any work related to the meaning and effects of the RCEP. Therefore, I prepared this short article for you.
First; it was not a surprise agreement; the parties had been working on it from 2012. You can find numerous academic studies related to it in the database. However, this agreement became prominent after USA withdrew from the Trans-pacific Partnership and the discussions and then the agreement had been completed quickly.
So, what is the content of this agreement. This agreement consists of 20 chapters and detailed 4 annexes as provided below:
- Initial Provisions and General Definitions
- Trade in Goods
- Rules of Origin
- Customs Procedures and Trade Facilitation
- Sanitary and Phytosanitary Measures
- Standards, Technical Regulations and Conformity Assessment Procedures
- Trade Remedies
- Trade in Services
- Temporary Movement of Natural Persons
- Intellectual Property
- Electronic Commerce
- Small and Medium Enterprises
- Economic and Technical Cooperation
- Government Procurement
- General Provisions and Exceptions
- Institutional Provisions
- Dispute Settlement
- Final Provisions
Annex 1 – Schedules of Tariff Commitments
Annex 2 – Schedules of Specific Commitments for Services
Annex 3 – Schedules of Reservations and Non-conforming Measures for Services and Investment
Annex 4 – Schedules of Specific Commitments on Temporary Movement of Natural Persons
What should we understand from this agreement in short?
- Rules for origin for the countries party to the agreement. In other words:
- Standardized rules for origin were set forth;
- Standardized direct shipment was provided;
- Calculation with multiple countries for origin determination and benefiting from the preferred customs regimes were enabled;
- Standardized documentation order was provided.,
Within this scope; it was provided for the countries where labour fees are lower such as Cambodia, Laos and Myanmar to produce clothes and to establish regional supply chains without any kind of tariff threats through harmonized rules for origin.
- Reduction of customs and tariff rates in accordance with the country’s own commitments was bounded a plan;
- Rules related to mutual recognition of some professions such as doctors, attorneys and dentists were provided;
- A new organ as an alternative for the dispute resolution mechanism of World Trade Organization was established.
On the other hand, the apparent deficiencies of the agreement are as follows:
- There is no provision related to protection of environment and sustainability;
- The regulations related to protection of intellectual property are insufficient; and
- The agricultural products are not included within the scope of the trade.
I think the effects of the agreement on Turkey will be destructive. Especially China will re-gain its competitive advantage it lost due to increases on the labour fees by providing production in the countries such as Cambodia, Laos and Myanmar. It will not happen today; however, I think it is possible to say that especially Turkey’s ready-to-wear and textile industry will be affected seriously in case the necessary measures are not taken.