AJISS-Commentary
The Association of Japanese Institutes of Strategic Studies
NPIRIPS

Nakasone Yasuhiro
Peace Institute

The Japan Institute ofInternational Affairs(Secretariat)

Research Institute for
Peace and Security

No. 295
2 August 2022

RCEP’S GREAT IMPACT ON JAPAN AND
EAST ASIAN ECONOMIES

Kazushi Shimizu

・ The RCEP agreement finally entered intoforce on January 1, 2022. RCEP will havegreat significance for East Asia as theregion’s first mega-FTA.
・ RCEP will have considerable economic
benefits for East Asia and Japan. Manycompanies have been using RCEP since its
entry into force.
・ Member states must further evolve RCEP asa living FTA. RCEP will become more
important in today’s challenging world
economy, so it is essential for Japan tosupport RCEP’s development.
The views expressed in this piece are the author’s own and should not be
attributed to The Association of Japanese Institutes of Strategic Studies.

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The Association of Japanese Institutes of Strategic Studies

The RCEP agreement finally entered into force on January 1, 2022, a little
more than a year after it was signed in November 2020. It initially took effect for ten of
the current 15 signatories – Australia, Brunei, Cambodia, China, Japan, Laos, New
Zealand, Singapore, Thailand, and Vietnam – followed by South Korea on February 1and Malaysia on March 18. Entry into force for the remaining three countries (Indonesia,the Philippines and Myanmar) is now being expedited.
RCEP was proposed by ASEAN in 2011. ASEAN has been a driving force in
East Asian economic integration, having established the ASEAN Economic Community(AEC) and five ASEAN+1 FTAs with Japan, China, South Korea, India andAustralia-New Zealand. RCEP negotiations had been slow to conclude and India
withdrew from the negotiations in 2019. Amidst rising protectionism, the US-Chinaconflict and the Covid-19 pandemic, the agreement was finally signed in 2020 andentered into force in 2022.
RCEP is designed to be a modern, comprehensive, high-quality and mutually
beneficial economic partnership agreement (EPA) for East Asia. RCEP aims to form alarger and more advanced FTA beyond the existing ASEAN+1 FTAs. The agreement
has 20 chapters covering a range of areas regarding trade liberalization and many rules,
including “Trade in Goods” (Chapter 2), “Trade in Services” (Chapter 8), “Investment”(Chapter 10), “Intellectual Property” (Chapter 11), “Electronic Commerce” (Chapter 12),“Competition” (Chapter 13), and “Economic and Technical Cooperation” (Chapter 15). It
updates the coverage of the existing ASEAN+1 FTAs and contains new provisions.
RCEP has great significance for East Asia. It is the first mega-FTA for East Asia,
which is at the center of world growth. There have been no mega-FTAs within East Asia
except for AEC and ASEAN+1 FTAs. RCEP members represent around 30% of theworld’s GDP, population, and trade. Furthermore, RCEP includes the first FTAs between
Japan and China and between Japan and South Korea.
The overall tariff elimination rate for RCEP member countries will eventuallyreach 91% (based on the number of items). RCEP’s rules of origin are also more flexible
and easier for companies to use than those of previous ASEAN+1 FTAs. The
elimination of tariffs on some items will take a long time, and there are some areas
where the rules are not yet agreed on. However, it is important that the agreement hasentered into force in the current challenging world economy, and it is essential formembers to evolve the provisions gradually.
RCEP will have great economic benefits for East Asia. The first benefit ofRCEP is the encouragement of trade in goods and services and investment across East

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The Association of Japanese Institutes of Strategic Studies

Asia, thus contributing to the continued economic development of the region. Second, it
will contribute to the establishment of new and more sophisticated rules. Third, it will
facilitate the establishment of production networks or supply chains in East Asia. Fourth,RCEP will help narrow the economic gaps between advanced and developing countries
within the region.
RCEP will also be very significant for Japan. RCEP accounts for half of Japan’s
trade value. It is most compatible with the production networks of Japanese companies.
Moreover, RCEP eliminates many of the tariffs between Japan and China and between
Japan and Korea, as RCEP has produced the first FTAs between Japan and China as
well as between Japan and Korea. Thus, RCEP will gradually increase China's share oftariff-free items vis-à-vis Japan in industrial products from 8% to 86%, and Korea'sshare of tariff-free items vis-à-vis Japan from 19% to 92%. As for China's auto parts
tariffs against Japan, about 87% of items will be tariff-free. These items include criticalparts for electric vehicles and gasoline-powered vehicles as well.
Many companies have been using RCEP since its entry into force in January.
For example, the use of RCEP is rapidly expanding in Japan, and RCEP has become
the most used EPA in Japan. According to METI, the number of RCEP certificates oforigin issued by the Japan Chamber of Commerce and Industry (JCCI) is rising rapidly –671 in January, 3,450 in February, 6,371 in March, 6,834 in April, 7,211 in May, and9,132 in June – overtaking the number of Japan-Thailand Economic Partnership
Agreement (JTEPA) certificates (which reached an all-time high in Japan of 8,635 inJune). The use of RCEP is also expanding in China and Thailand.
Member states must further evolve RCEP as a living FTA. It is necessary topromote trade liberalization and increase the rate of tariff elimination. Members must
flesh out the provisions of several chapters. During this process, it is important to hearfrom the users of RCEP. Adding new chapters is also a challenge; for example, somechapters in the CPTPP such as those covering the environment, labor, and state-owned
enterprises are not included in RCEP.
It is also vital to ensure ASEAN centrality in RCEP as it was ASEAN that
proposed RCEP. East Asian economic integration has been balanced by ASEAN
centrality in the face of China's growing influence.
RCEP will become more important in today’s challenging world economy and in
the post-pandemic era. RCEP will promote the economic development of East Asia andthe rest of the world, constituting a positive step toward trade liberalization andhttp://www.jiia.or.jp/en/commentary3

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The Association of Japanese Institutes of Strategic Studies

rulemaking in the current economic straits. It is essential for Japan to support the further
development of RCEP.

Kazushi Shimizu is a professor in the Faculty of Economics at Kyushu University.

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