Thailand is set to sign the world’s biggest free trade agreement with Japan, China, South Korea and 12 other Asia-Pacific countries at the 37th Asean Summit this week.
Once agreed, the RCEP, known as the Regional Comprehensive Economic Partnership (RCEP) agreement, will create a massive economic bloc representing 32.3% of the world’s gross domestic product (GDP).
The combined population of RCEP member countries totals 3.6 billion or 48% of the global population and the combined trade within the bloc has reached USD 11.4 trillion or 31% of global trade.
The RCEP will cover all 10 Asean member states plus five other countries: China, Australia, Japan, New Zealand, and South Korea . It is scheduled to take effect from the middle of 2021 if at least six Asean members and three partners agree to its terms.
India, which said in November last year it will not take part in further negotiations, expressed concerns over the prospect of cheap and mass-produced Chinese products flooding the Indian market.
But even without India, the trade deal will create an economic bloc representing around a third of the world’s gross domestic product, cutting tariffs and establishing common rules for trade, e-commerce and intellectual property.
No significant changes for Thailand
Given that Thailand already has trade agreements with ASEAN and the other six countries in the RCEP, the agreement may not significantly change Thailand’s trade structure.
More than half of Thailand’s exports went to RCEP countries last year, including cars and parts, chemicals and plastics, refined petroleum, electronics and parts.
Although Foreign direct investment (FDI) from the RCEP countries in Thailand already accounted for over 70% of total FDI, RCEP may challenge Thailand’s local industries if they fail to compete with other RCEP members, especially Vietnam which is emerging as a strong contender to draw foreign direct investment in the region.