The world’s largest free trade agreement, the Regional Comprehensive Economic Partnership (RCEP), has been in effect since Jan. 1, 2022. It allows companies in participating countries to engage in cross-border partnerships, tariff reductions and trade simplification. Over the next 20 years, up to 90% of tariffs incurred in the zone are expected to be eliminated.
With RCEP, China can position itself as an economic power in Asia for the first time without the U.S. and India, and influence the ASEAN orientation of Western companies. Because they can gain easier access to the markets of RCEP countries by targeting China with the new agreement, many are considering expanding their production capacity in China or even moving it to China entirely. How this development will affect the IT infrastructure of international companies is still unclear.
Under the FTA, the free movement of data between member states is supposed to be guaranteed, prohibiting demands from countries like China to store data on local servers. With China increasingly regulating the use, localization and transfer of data, RCEP could limit China’s aspirations. That’s because RCEP treaties also bind China to digital commerce requirements.
However, RCEP allows parties to make exceptions, citing “legitimate public policy” and national security. This gives countries the legal ability to implement stricter data controls, which is already becoming apparent in Asia. It remains to be seen how China’s increasingly strict IT compliance regulations will affect the agreement and whether there will be any long-term disputes between the partner countries.