The Regional Comprehensive Economic Partnership (RCEP) aims to strengthen regional economic integration, including tariff-reduction measures. As a mega-regional preferential trade agreement (PTA), RCEP unites 10 ASEAN member states (AMS) and 5 dialogue partners, including Australia, China, Japan, New Zealand, and South Korea. Collectively, their market accounts for roughly one-third of the global population and 30 percent of world GDP. Entering into force in 2022, RCEP introduced a tariff regime to enhance trade efficiency for the region, anticipating substantial economic benefits even from slight adjustments.

Given the existing complex web of FTA frameworks in this region, this study is motivated to compare how different trade agreements approach tariff reductions. Including ASEAN-centric and dialogue partner-structured pacts, numerous bilateral and plurilateral agreements are already in place among RCEP signatories. Consequently, the scope for additional tariff cuts under RCEP appears limited. Thus, a country-specific comparison becomes valuable. This allows trade partners to identify their most advantageous agreements and strategically engage with overlapping trade regimes, particularly regarding tariff reductions. Moreover, this study departs from the existing literature by employing 2021 as a benchmark year to capture the pre-RCEP tariff landscape and by integrating data from both the legal texts of PTAs and comprehensive trade databases to ensure robust data integrity.

RCEP economies are characterized by economic interdependence, but the agreement’s tariff reductions have varying impacts on regional trade. Merchandise trade data from 2022 shows that intra-RCEP trade constitutes approximately 50 percent of total trade among most members. This robust intra-bloc connectivity likely benefits from existing trade agreements. Notably, Japan had previously lacked preferential arrangements with key partners such as China and Korea. The implementation of RCEP bridges this gap, reinforcing existing trade relationships and paving the way for further regional cooperation. However, despite its promising framework, RCEP’s modest average tariff reduction rate (92%) relative to other PTAs has plausibly resulted in fluctuating performance in intra-RCEP trade during its initial two years.

A robust methodology is essential for understanding RCEP’s true tariff benefits, and the authors achieve this by developing a measure known as the “RCEP preference margin.” This metric quantifies the difference between the lowest pre-RCEP tariffs – captured using 2021 as a benchmark – and the tariff schedules implemented under RCEP. Specifically, the analysis computes the average ad-valorem tariff rate across all products for each importer-exporter pair on a country-year basis. This leads to a tailored assessment between the existing tariff concessions and those offered by the new agreement. To ensure uniformity, all tariff rates are converted to the Harmonized System 2012 (HS 2012) classification.

A comprehensive 20-year time-series analysis reveals that RCEP’s tariff reductions yield limited benefits for many ASEAN members. This study examines tariff-imposing countries within AMS and ASEAN dialogue partners respectively. Among the AMS group, only trade partnerships with Japan display a significant tariff advantage under RCEP compared with other PTAs. Similarly, among ASEAN dialogue partners, only China, Japan, and Korea benefit mutually from the RCEP’s tariff reductions. These findings underscore that while RCEP solidifies existing trade networks, its most substantial benefits are concentrated in these three countries, with many AMS seeing limited gains.

Beyond tariff reduction, RCEP expands its scope by incorporating unified rules of origin (RoO) and enhanced non-tariff measure (NTM) provisions. Its RoO framework consolidates the existing regimes under ASEAN and ASEAN+1 agreements into a less restrictive system. In parallel, RCEP strengthens its approach to NTMs by instituting mechanisms for technical consultations and improving the transparency of import regulations. These enhancements are designed to mitigate trade transaction costs and address various non-tariff barriers that have historically impeded market access.

In conclusion, this study argues that throughout RCEP’s multi-decade tariff reduction schedule, the agreement is not uniformly more preferential for its signatories than pre-existing PTAs in this region. RCEP emerged with high expectations to deepen regional economic integration among its 15 members. However, this paper demonstrates that while China, Japan, and Korea achieve more substantial mutual gains, AMS experience mild benefits. Therefore, this study underscores the imperative for policymakers to leverage RCEP’s inherent institutional mechanisms, i.e., the “living nature,” to pursue deeper tariff reductions in future negotiations, thereby more fully realizing regional integration potential.

By LU, Miranda

Researchers: BANH, Thi Hang, XU Ni, Scarlet, Faith Tan