RCEP offers stability amid global uncertainties

When the Regional Comprehensive Economic Partnership was launched in 2022, nobody could have imagined that the global situation would be in so much disarray as it is today.

At that time, the world was still dealing with the impact of the pandemic. Supply chains were disrupted and countries were trying to reopen their economies. But there was still optimism that global trade would gradually stabilize.

Today, the situation is very different. We now face a world marked by deeper geopolitical competition, increased trade restrictions and aggressive industrial policies. There is greater uncertainty in energy and food markets, and concerns over supply chain security are growing.

These challenges render regional economic integration initiatives such as the RCEP more crucial than ever.

In today's increasingly uncertain global trading landscape, where supply chains are easily disrupted and rising protectionism creates greater fragmentation, the RCEP offers a stable and predictable environment.

That means a lot to businesses. A company planning to invest in a new factory not only asks about labor costs or infrastructure, but also whether markets will remain accessible, if inputs will be available, whether exports will face new tariffs and if rules might suddenly change.

Regional economic integration, especially a comprehensive agreement such as the RCEP, provides three essential functions. It brings certainty by establishing a rules-based framework for trade and investment.

It enhances resilience by supporting diversified regional supply chains. And it injects confidence by signaling that East Asia still believes in openness and integration.

But these benefits can only be realized if the RCEP delivers concrete benefits to businesses. Currently, the full potential of the agreement is underutilized.

A recent ASEAN Business Barometer Survey by the Centre for Strategic and International Studies found that while around 70 percent of companies are aware of ASEAN free trade agreements and RCEP, only about 48 percent actually utilize the facilities under the agreement. Even among those companies, many only use it occasionally.

During the RCEP leaders' meeting in Kuala Lumpur last year, a general review of the RCEP was scheduled for 2027. This presents a good opportunity for member countries to upgrade the agreement to RCEP 2.0 to strategically respond to the current global uncertainty.

There are two important questions related to such an upgrade.

First, what should the upgrade focus on? The upgrade should be ambitious, yet focused. It should not become a long wish list. The "Christmas tree syndrome", where too many issues are added, risks collapsing the upgrade process.

The upgrade should focus sharply on a few high-impact areas. The first priority should be implementation and utilization. Before adding new issues, the unfinished business of RCEP 1.0 should be addressed. This includes eliminating tariff differentials, simplifying rules of origin, implementing full cumulation, and addressing non-tariff measures.

These may sound technical, but are vital for reducing confusion, costs and uncertainty. If a company faces different tariff rates for the same product depending on its origin, that creates confusion.

If rules of origin are too complex, that pushes up costs. If regulations in member countries are too divergent, it creates uncertainty.

The second priority should be strengthening institutional capacity. The RCEP has institutional elements such as committees and the RCEP Support Unit, but their current form has insufficient impact.

For instance, it's difficult to know the current utilization of the agreement. The RCEP should have proper monitoring mechanisms and transparent processes.

Economic and technical cooperation often does not address the real issues. It must be linked to real capacity gaps, especially for SMEs. If they need support for customs digitalization, RCEP should help. If they need help with standards, certification, or rules of origin, RCEP cooperation should respond directly.

The third priority should be introducing new areas of cooperation and rules. Some of the most urgent areas are in the digital economy, sustainable trade and green transformation. Those areas open opportunities for members, but also carry risks.

The second key question is: how can the upgrade be carried out in the context of the 2027 general review?

The upcoming general review should be treated as more than just a routine procedural exercise. This requires political direction, not just a technical analysis. Leaders and ministers must set the direction by defining the objectives, scope, priority areas, expected deliverables and timelines.

The CSIS has prepared a practical guide for next year's review and upgrade. The process should start this year for officials to identify gaps and propose the scope of the review so that next year the process and negotiations can address more substantial matters.

Here I would like to emphasize the role of think tanks in this process. Think tanks can help identify the most impactful and feasible areas for upgrade to help policymakers avoid an overloaded agenda.

By bridging policy with business needs, think tanks can ensure that the upgrade delivers practical benefits.

Amid the current uncertainty, the RCEP can provide a platform for effective responses but only if it is upgraded in a focused and practical way.

The goal is not to create the most ambitious agreement, but to make the RCEP more development-oriented, more relevant and more useful in today's world.

The author is the executive director of the Centre for Strategic and International Studies, Indonesia.

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