The European Single Market vs. RCEP Mega Trade Agreement

One of the European Union’s (“EU”) most important achievements has been the creation of a single market. The single market refers to “one territory without any internal borders” or other trade obstacles.^[1] As a result of the single market, the European Union has become one of the largest economies in the world.^[2] The single market has been successful because it has reduced the direct costs of trade between member states by abolishing border formalities and national regulations.^[3] The single market also optimized the potential for companies to access a bigger market.^[4] While enterprises experience a wide range of benefits under the single market, consumers benefit as well. Over 450 million consumers in the EU benefit from lower prices, more innovation, and faster technological development, as well as higher standards of safety and environmental protection.^[5]

Considering the significant economic benefits from the single market, one may question why other regions do not implement the same trade strategy. However, the single market has not been an easy accomplishment.^[6] A single market requires international and regional harmonization in regard to economic and political goals. Certainly, this is not a simple endeavor. In fact, the EU continues to create projects and initiatives to further harmonize between member states and facilitate standardization.^[7]

Other regions across the globe have made bilateral or multilateral agreements on a different scale. In lieu of a single market, other regions participate in free trade agreements (“FTA”). FTAs can include the elimination of tariffs, product standard requirements, and protections for investors and intellectual property rights.^[8] However, FTAs do not require the same levels of commitment as a single market.

In Asia, FTAs have become increasingly important. In light of China’s growing economic power, cooperation in East Asia has intensified.^[9] However, an institution similar to the single market has not been realized. This is largely attributed to unstable political relations as well as competitive economic strategies.^[10] Thus, the Asia-Pacific region has been subject to extremely complex trade conditions due to various FTAs and overlap between institutional structures.^[11]

To remedy the complex trade environment, Asian countries began negotiations to create a regional FTA in 2013.^[12] After 30 rounds of negotiation, on November 15, leaders from the Asia-Pacific region signed the largest trade agreement in the world. The Regional Comprehensive Economic Partnership (“RCEP”) encompasses 15 countries including China, Japan, and South Korea.^[13] The new trade agreement will reach an immense consumer market. Member states make up one-third of the world’s population and 29% of global domestic product.^[14] The RCEP is expected to eliminate tariffs on designated imports within the next 20 years.^[15] The agreement will lower costs for companies and supply chains and harmonizes many of the existing FTAs.^[16] While the RCEP is projected to enhance the prosperity of the region, the agreement is far from an institution such as the single market.^[17]

The agreement eliminates tariffs for trades in goods but does not address non-tariff barriers (i.e. quality control, standardization etc.).^[18] Additionally, the agreement does not include protections for services, agriculture, labor rights, and strict environmental standards.^[19] While the RCEP will certainly create more economic opportunities in the region, it is unclear how beneficial the agreement will be. Issues such as consumer welfare, labor rights, and environmental impact will have to be monitored. The future and potential success of the agreement could push the region towards more integration and harmonization. Perhaps the RCEP could be the first step towards an integrated single market in Asia.

1. European Commission, The European Single Market, European Commission: Internal Market, Industry, Entrepreneurship and SME’s, (2016) https://ec.europa.eu/growth/single-market_en (last visited Dec 2, 2020). ↑

2. European Commission, EU position in world trade, European Commission: trade, (2016) https://ec.europa.eu/trade/policy/eu-position-in-world-trade/#:~:text=The%20EU%20is%20the%20largest,of%20manufactured%20goods%20and%20services) (last visited Dec. 2, 2020). ↑

3. Shang-Chul Park, Can Trade Help Overcome Economic Crisis? Implications for Northeast Asia Creating Regional FTA between Korea, China, and Japan and Mega FTAs such as RCEP and TPP, 12 International Organizations Research Journal, 104–128 (2017). ↑

4. Id. at 107. ↑

5. European Commission, The European Single Market for goods, European Commission: Internal Market, Industry, Entrepreneurship and SME’s, (2016) https://ec.europa.eu/growth/single-market_en (last visited Dec 2, 2020). ↑

6. European Commission, supra, note 1. ↑

7. European Commission, supra, note 1. ↑

8.  Dep’t of Commerce, Free Trade Agreement Overview, International Free Trade Administration, https://www.trade.gov/free-trade-agreement-overview (last visited Dec 2, 2020).  ↑

9. Park, supra, note 3, at 111. ↑

10. Id. at 117. ↑

11. Id. at 115. ↑

12. Id. at 118. ↑

13. Kristin Hopewell, 15 countries just signed the world’s largest trade pact. The U.S. isn’t one of them, wash. post: Monkey cage (Nov. 16, 2020), https://www.washingtonpost.com/politics/2020/11/16/15-countries-just-signed-worlds-largest-trade-pact-us-isnt-one-them/. ↑

14. Tim McDonald, What is the Regional Comprehensive Economic Partnership, bbc News, singapore (Nov. 16, 2020), https://www.bbc.com/news/business-54899254. ↑

15. Id. ↑

16. Josep Borrel, The Regional Comprehensive Economic Partnership – what does it mean for the EU?, EEAS Blog (Nov. 19, 2020), https://eeas.europa.eu/headquarters/headquarters-homepage/88997/regional-comprehensive-economic-partnership-%E2%80%93-what-does-it-mean-eu_en. ↑

17. Id. ↑

18. European Commission Blog, supra, note 16. ↑

19. Id. ↑