RCEP significance to regional, global economy

Aerial photo taken on Jan. 6, 2018 shows the China-Laos Railway (Huaihua-Vientiane) international freight train departing from Huaihua International Land Port in Huaihua, Central China's Hunan Province. (Xinhua)

Embracing multilateralism and free trade, opening up new prospects for global economic cooperation

The RCEP's entry into force is of great significance to global development, as it will help boost economic recovery in the post-pandemic era, improve the global economic governance system, and embrace multilateralism and free trade.

First of all, in 2021, repeated outbreaks of COVID-19 continue to spread its impacts, the industrial chain of countries has suffered a huge blow, and global economic recovery has been disrupted. At the same time, Cold War geostrategic thinking is undermining the general trend of world economic and trade cooperation and hindering global economic development. According to an international think tank, by 2030, RCEP is expected to boost member countries' exports by $519 billion and national income by $186 billion annually. By promoting trade liberalization, investment facilitation, and global supply chain optimization, RCEP will inject strong impetus into global economic recovery in the post-COVID-19 era, and help the world economy avoid risks and develop steadily.

Second, RCEP covers economies at different stages of development, and facilitates sound interaction and win-win cooperation between emerging and developed economies, which is an advantage that other regional agreements cannot match. In addition to unified tariff concession, RCEP innovations on origin cumulation rules, investment negative lists, and ratchet mechanism are setting a new model for global economic and trade cooperation. At present, the contradiction between the global economic governance system and the development of the international situation has intensified. RCEP will promote the development of the global economic governance system in a more just and equitable direction that benefits all.

Third, RCEP is the first regional economic and trade agreement to include differential treatment clauses in its dispute settlement mechanism, taking into account the differences in economic development levels among member states. It embodies the spirit of development featuring fairness, justice, inclusiveness, and mutual benefit. There is a fierce struggle between two orientations in the world today. One is to engage in isolation, monopolization, protectionism of group confrontation; the other is to promote solidarity and cooperation, openness and integration, and win-win results for the benefit of all mankind. History and practical experience tell us that openness rather than isolation, integration rather than decoupling, and mutual benefit rather than self-interest, are the key to overcoming difficulties and the right way to guide the sound development of the global economy. The signing of RCEP demonstrates the faith of member states in multilateralism and free trade. As Chinese Foreign Ministry spokesperson Wang Wenbin stressed, the effective implementation of RCEP is a major victory for multilateralism and free trade. In the face of upheavals and changes unseen in a century, the force of international progress and cooperation has become an irresistible trend.

Facilitating dual-cycle development, promoting the formulation of new systems for an open economy

To stabilize the external cycle and boost the internal cycle, the RCEP's entry into force will promote the establishment of a dual-cycle development pattern in China and the formulation of a new system of a higher-level open economy.

First of all, RCEP will help build a dual-cycle development pattern in China.

On the one hand, RCEP connects resources and markets in the region, connects supply and demand at home and abroad, and enhances the stability of the regional economic development environment through the establishment of integrated rules, thus safeguarding the smooth operation of the external circulation. RCEP member countries are geographically adjacent, with diverse levels of development, diverse resource endowments, complementary industrial strengths, and huge market potentials. These favorable conditions can help China reduce its dependence on the United States and other Western developed economies, enhance the security of China's industrial and supply chains, and improve China's ability to withstand risks of international political and economic turbulences.

On the other hand, RCEP will help Chinese enterprises fully integrate into the big market and inject new impetus into the internal cycle. Through tariff concessions, unified rules of origin, and efficient facilitation measures, goods and manufacturing raw materials in the region have become more mobile, business transaction costs have fallen, and international competitiveness has increased. The high-level opening-up requires Chinese enterprises to directly target international advanced enterprises, adopt international technical standards, improve product quality, and break key technological bottlenecks, to continuously enhance enterprises’ ability to participate in international cooperation and competition. The process will also promote China's manufacturing sector to move to the medium-high end and upgrade its industrial structure.

Second, the RCEP's entry into force will promote the formulation of a new system of an open economy of higher standards.

On the one hand, investment liberalization and trade facilitation will enhance China's openness and promote economic growth. Opening up investment will not only stabilize existing foreign investment at home and attract more foreign investment, but also help domestic capital to better go global and expand and optimize the layout of industrial chains. With the opening of the commodity market, enterprises can obtain better equipment and raw materials at lower cost, improve product quality, meet the upgrading demand of domestic consumption, and improve the overseas reputation of Chinese products. According to an assessment report on the impacts of RCEP on regional economies released by the Academy of International Trade and Economic Cooperation of the Ministry of Commerce, by 2035, RCEP will increase China's exports by $315.4 billion and imports by $306.8 billion, and its economic welfare will increase by $99.6 billion.

On the other hand, by upgrading opening-up, RCEP will promote technological and institutional innovation in China. RCEP covers new areas such as e-commerce and artificial intelligence and carries out new cooperation in global digital and green governance. Technological innovation and digital transformation have promoted the integration of China and ASEAN countries in the era of the digital economy, as well as further technological innovation in China. RCEP's attempts at new international trade rules have helped China better adapt to new changes in international trade rules. These high-standard rules not only reflect China's determination to deepen opening-up and confidence in promoting trade liberalization and globalization, but also provide China with opportunities to adapt to the new rules, accumulate experience in formulating new rules, and point out the direction for future institutional innovation. In addition, the success of RCEP will lay a solid foundation for China's participation in the Comprehensive and Progressive Trans-Pacific Partnership agreement (CPTPP) with higher standards in the next step.

Looking into the future, faced with the overlapping resonance of the changes of the century and the worldwide pandemic, as one of the most active participants in and contributors to RCEP, China will firmly support the centrality of ASEAN and work with other member states to open a new chapter of prosperity.

By Huang Dahui and Shen Chuanxin, from School of International Studies, Renmin University of China

Translated by Zhang Andi