Economic integration

Asia-Pacific Signals Strong Commitment to Economic Integration and Cooperation with Signing of RCEP | K&L Gates LLP

After eight years of negotiations, the Regional Comprehensive Economic Partnership (RCEP) – covering 15 economies in the Asia-Pacific region, representing 30 percent of the world’s population, 30 percent of global GDP and 34 percent of global investment flows —Was finally signed on November 15, 2020. The RCEP is expected to come into force in 2021.

In addition to being the largest free trade agreement (FTA) in the world1, one of the most important achievements is that the RCEP will finally achieve the economic integration of the three geopolitical rivals of Northeast Asia: China, Japan and South Korea. ASEAN2 (comprising Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam) has already concluded FTAs ​​(commonly referred to as ASEAN + FTAs) with the other five parties at RCEP (i.e. Australia, New Zealand, China, Japan and Republic of Korea).

RCEP is an excellent showcase for the art of compromise in international trade negotiations. It not only brings together widely disparate economies with huge differences in living standards and economic conditions, but aims to ensure that RCEP signatories can and will effectively implement the agreement.

RCEP Signatory Total population
(2019, millions)
(2019, billion US dollars)
GDP per capita
(2019, US $)
Brunei Darussalam 0.43 13.47 31 087
Cambodia 16.49 09/27 1643
Indonesia 270.63 1119.19 4,136
Lao People’s Democratic Republic 7.17 18.17 2,535
Malaysia 31.95 364.70 11 415
Burma 54.05 76.09 1,408
Philippines 108.12 376.80 3 485
Singapore 5.70 372.06 65,233
Thailand 69.63 543.65 7,808
Vietnam 96.46 261.92 2,715
ASEAN 660.62 3,173.14 4,803
Australia 25.36 1,392.68 54,907
New Zealand 4.92 206.93 42 084
China 1397.72 14,342.90 10 262
Japan 126.26 5,081.77 40,247
Korea, Rep. 51.71 1642.38 31 762
RCEP 2 266.59 25 839.81 11,400
World 7673.53 87,697.52 11,429

(Data source: World Bank)

The RCEP keeps its doors open to other economies, allowing “any state or separate customs territory” to join 18 months after the date of entry into force of the agreement, subject to the agreement of the current parties. India will be considered an initial negotiating state and may join RCEP at any time. As WTO Members and separate customs territories, Hong Kong and Macao can participate in RCEP and possibly even the separate customs territories of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei).

While some commentators view RCEP as a China-led initiative, seasoned analysts in the region see the hallmarks of ASEAN’s centrality in the deal. ASEAN-centric trade agreements tend to take better account of local sensitivities while providing for improvements over time. As such, there is optimism that RCEP in its current form will be the cornerstone of further economic integration in the Asia-Pacific region.

In the next series of RCEP publications, K&L Gates will focus on three key areas that companies operating in the region should consider.

Value chains and trade facilitation

Market access for goods is not very important under RCEP, as tariffs on most items are already eliminated under other FTAs. However, companies can take advantage of RCEP to consolidate their value chains vertically within the bloc. Imagine: minerals from Australia will be shipped to China, Korea or Japan for processing; then transferred to Thailand for further processing into intermediate products; and finally in Vietnam for assembly and finishing. The final product will then be sold in China. At each stage of the value chain, goods transferred between parts of the RCEP will not be subject to import duties.

What is even more interesting are the trade facilitation arrangements under the RCEP, which will reduce the costs and time of moving goods through the region. The RCEP institutionalizes a mechanism of expedited customs procedures and formalities for “authorized operators”, which will include such elements as low document and data requirements; low rate of inspections and physical examinations; rapid release time; deferred payment of duties, taxes, fees and charges; recourse to comprehensive guarantees or reduced guarantees; a single customs declaration for all imports or exports during a given period; and customs clearance of goods at the premises of the authorized operator or at another location authorized by a customs authority. The RCEP also sets the time limit for customs clearance of goods, including perishable foodstuffs. K&L Gates will take a more in-depth look at the trade facilitation measures that will be put in place under the RCEP.

Dispute settlement

While RCEP may hold great promise for some business gains, foreign investors would be advised to exercise due diligence before finalizing investment plans based on the potential opportunities arising from RCEP.

The RCEP contains a number of treaty obligations with respect to the promotion and protection of foreign investment, but there are also variations from the familiar terms of substantial protections that are used in many other international investment agreements. These terms, as used in the RCEP, may not offer the same level of protection that may be offered under other international investment agreements, including applicable bilateral investment treaties.

In fact, in certain circumstances, the RCEP even provides for the denial of investment protection benefits that would otherwise apply, as in the case of an investor incorporated in one part of the RCEP for the sole purpose of investing in another part of the RCEP. RCEP where the investment entity is owned or controlled by legal entities of a non-RCEP third party. In this regard, foreign investors will also need to consider whether their current or future ownership or control may affect the benefits they might otherwise have received under the RCEP.

More importantly, however, it remains to be seen if and how RCEP can provide a mechanism for resolving disputes between investors and parties to RCEP. For now, the RCEP is content to predict that negotiations in this area will begin within two years of the entry into force of the agreement. Until such an investor-state dispute settlement mechanism is put in place, investors will not be able to initiate proceedings independently, as the need could arise from the violation of substantive obligations for the promotion. and the protection of investments covered under the RCEP.

Ultimately, while RCEP may open doors to exciting business opportunities, foreign investors would be wise to consider the broader context of promoting and protecting investments in specific jurisdictions (including any investment protection. that may exist under other applicable international investment agreements) before entering into investments in RCEP Parties. K&L Gates will explore the implications of RCEP for foreign investors in more detail in an upcoming publication.


RCEP’s e-commerce chapter addresses many causes of friction in cross-border e-commerce transactions, including inconsistent or opaque rules regarding the use and acceptance of electronic signatures, various consumer protection regulations, fraud and deceptive practices, as well as unsolicited e-mail and electronic text messages. messages. However, there are few specific prescriptive provisions, and instead the emphasis in many areas is on better disclosure of rules and practices and on increased cooperation and dialogue between RCEP parties.

There are some key provisions that Parties must comply with. For example, a Party may not require an enterprise to use or locate computer facilities in the territory of that Party to operate in its territory, and Parties must adopt measures to give recipients the option of opting out of receiving unsolicited electronic messages.

Even though most e-commerce regulations are left to the discretion of the parties, there are important steps each party must take to create more transparency and cooperation in cross-border e-commerce transactions. These measures are expected to alleviate some uncertainties and regulatory concerns in these transactions and improve the business environment for all Parties and e-commerce participants.

RCEP presents a means and an opportunity for e-commerce parties and businesses to make meaningful progress towards the goal of transparent cross-border transactions. The real benefits of this chapter of RCEP can be fully realized if e-commerce businesses from all Member Parties work together to help Parties clearly identify the practical and regulatory barriers they face and specific ways to minimize them.

1 With a combined GDP of US $ 2.6 trillion, the RCEP area is larger than the US-Mexico-Canada Agreement, the European Union, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

2 ASEAN refers to the Association of Southeast Asian Nations, a regional grouping comprising 10 member states.