Countries that are strongly connected to RCEP states but are not part of the trade agreement are affected particularly negatively. On the one hand, the RCEP agreement is expected to boost intra-RCEP trade, which might decrease demand from third countries due to trade diversion. Under the current network of bilateral treaties and given the tight linkages in the region through complex value chains, rules of origin constitute a high bureaucratic burden for firms in the region. Only a few additional tariff cuts are expected, but the largest reduction of trade barriers will be due to the harmonisation of the rules of origin.
Unlike most trade agreements, tariffs as well as non-tariff barriers have already been largely eliminated between RCEP states: Except for the country pairs Japan-China and Japan-South Korea, trade agreements for all bilateral links between RCEP countries already exist. Secondly, this article investigates the content of the RCEP agreement and likely changes in trade policy. “Factory Asia” refers to a highly interconnected production process across national borders within RCEP countries that has gained importance with emerging global value chains. The rise of China and the formation of the “Factory Asia” can in part explain the observed patterns. In a first step, it describes the economic linkages between RCEP states, which were already strong before the mega deal was concluded. What topics are included in the recently concluded agreement? What are the expected consequences for intra-RCEP trade? To what extent are third countries affected? This article aims to shed light on these questions. Sources: World Bank UN Comtrade, Gaulier and Zignago (2010) authors’ illustration.
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