The World’s Biggest Trading Bloc Will Soon be in Asia-Pacific

Photo by Denys Nevozhai on Unsplash
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In late 2020, the Regional Comprehensive Economic Partnership (RCEP) was signed, officially creating the biggest trade bloc in history.

Who’s in the RCEP, and Why Was it Created?

The RCEP is a free trade agreement between 15 nations in the Asia-Pacific region, and has been formalized after 28 rounds of discussion over eight years.

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Member nations who are a part of the RCEP will benefit from lowered or completely eliminated tariffs on imported goods and services within the region in the next 20 years. Here are the countries which have signed on to be member nations:

Country Population (M) Nominal GDP ($B)
🇦🇺 Australia 25.7 $1,359
🇧🇳 Brunei 0.5 $12
🇰🇭 Cambodia 15.7 $26
🇨🇳 China 1404 $14,723
🇮🇩 Indonesia 270.2 $1,060
🇯🇵 Japan 125.8 $5,049
🇰🇷 South Korea 51.8 $1,631
🇱🇦 Laos 7.3 $19
🇲🇾 Malaysia 32.9 $338
🇲🇲 Myanmar 53.2 $81
🇳🇿 New Zealand 5.1 $209
🇵🇭 Philippines 108.8 $362
🇸🇬 Singapore 5.8 $340
🇹🇭 Thailand 69.8 $502
🇻🇳 Vietnam 97.4 $341
RCEP Total 2,274.2M $26,052B

Source: IMF

But there is still some work to do to bring the trade agreement into full effect.

Signing the agreement, the step taken in late 2020, is simply an initial show of support for the trade agreement, but now it needs to be ratified. That means these nations still have to give their consent to be legally bound to the terms within the RCEP. Once the RCEP is ratified by three-fifths of its signatories—a minimum of six ASEAN nations and three non-ASEAN nations—it will go ahead within 60 days.

So far, it’s been ratified by China, Japan, Thailand, and Singapore as of April 30, 2021. At its current pace, the RCEP is set to come into effect in early 2022 as all member nations have agreed to complete the ratification process within the year.

The Biggest Trading Blocs, Compared

When we say the Regional Comprehensive Economic Partnership is the biggest trade bloc in history, this statement is not hyperbole.

The 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 U.S.-Mexico-Canada Agreement (USMCA, formerly known as NAFTA). How does the trio stack up?

Nominal GDP, 2020 Population, 2020
EU $15.2 trillion 445 million
USMCA $23.7 trillion 496 million
RCEP $26.1 trillion 2.27 billion
World $84.5 trillion 7.64 billion

With the combined might of its 15 signatories, the RCEP accounts for approximately 30% of global GDP and population. Interestingly, the total population covered within the RCEP is near or over five times that of the other trade blocs.

Another regional agreement not covered here is the African Continental Free Trade Area (AfCFTA), which is now the largest in terms of participating countries (55 in total), but in the other metrics, the RCEP still emerges superior.

Source: www.visualcapitalist.com

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