RCEP, the Largest Free Trade Area in the World: What Does the Mega-Deal Entail and What Effects Can Be Expected?

The signing of RCEP will create the world’s largest free trade area, involving the ten ASEAN countries, China, Japan, South Korea, as well as Australia and New Zealand. Regional trade relations in the Asia-Pacific region are already very deep. However, by bringing moderate tariff reductions and harmonizing rules of origin, which until now have represented a high bureaucratic burden for exporters, the new deal will lead to an increase in intra-RCEP trade. Negative trade diversion effects are expected in particular for India, the US, and the South American Mercosur countries; minor negative effects are expected for Europe. At the same time, more resilient supply chains and more efficient production in the RCEP region represent an opportunity for companies operating there as well as for end consumers.