Indonesia has signed the world’s largest free trade agreement

Indonesia has virtually signed the world’s largest free trade agreement (“FTA”) or known as Regional Comprehensive Economic Partnership Agreement (“RCEP”) after 8 years of negotiations.

 

The RCEP was signed on Sunday, November 15, 2020, by 15 (fifteen) members comprising 10 (ten) of the Association of Southeast Asian Nation (“ASEAN”) - Vietnam, Thailand, Indonesia, Brunei Darussalam, Cambodia, Lao PDR, Myanmar, Malaysia, Philippines, and Singapore - along with five external partners: China, Japan, South Korea, Australia, and New Zealand.

 

RCEP aims to boost investment and promote freer movement of goods between RCEP’s members by progressively lowering tariffs, integrating regional supply chains and countering protectionism. Further, to broaden and deepen ASEAN’s engagement with external partners. Together, these RCEP participating countries account for about 30% of the global GDP and 30% of the world population. The objective of the RCEP Agreement is to establish a modern, comprehensive, high-quality, and mutually beneficial economic partnership that will facilitate the expansion of regional trade and investment and contribute to global economic growth and development.

 

The RCEP comprises 20 (twenty) Chapters relating to trade in goods and services, rules of origin, customs procedures and trade facilitation, sanitary and phytosanitary measures; standards, technical regulations, and conformity assessment procedures; trade remedies, temporary movement of natural persons, investment, intellectual property, electronic commerce, competition, small and medium enterprises, economic and technical cooperation.

After being ratified, RCEP has the potential to increase Indonesia's exports to participating countries by 8-11 percent. Investment in Indonesia also has the potential to increase by 18-22 percent. Through this RCEP, Indonesia may also enjoy the spill over effect of the FTA (which is owned by RCEP member countries and non-member countries). Expanding Indonesia's role through the global supply chain from this spill over effect has the potential to increase Indonesia's exports to the world by 7.2 percent.[1]

 

[1] Ministry of Finance, (2020, November 18), Indonesian Exports Predicted to Increase 7.2 Percent from RCEP, Retrieved from https://www.kemenkeu.go.id/publikasi/berita/ekspor-indonesia-diprediksi-meningkat-7-2-persen-dari-rcep/