The Regional Comprehensive Economic Partnership: a new mega trade bloc for Asia
The RCEP is the largest new multilateral trade deal since the 1990s and continues Asia's economic integration in a time of broad deglobalisation. We expect the anticipated positive trade, investment and income effects to benefit the insurance industry.
Article information and share options
This article was written
By
Signed in November 2020 among 15 Asia-Pacific (APAC) countries, the RCEP entered into force in January 2022 and forms the world’s largest free trade agreement (FTA) area, covering about 30% of both global GDP and population. It is in our view the most important new multilateral trade deal since the formation of the European Union single market and North American Free Trade Agreement (NAFTA) in the 1990s.
The RCEP aims to expand trade, create an enabling investment environment and deepen economic cooperation at a time when deglobalisation sentiment is rising. This impact will be gradually achieved, since the tariff elimination schedule is over 20 years.
The RCEP’s removal of tariff and non-tariff barriers should increase the region’s trade and productivity, and strengthen regional supply chains. Most trade gains will accrue to countries that did not have existing FTA relationships, particularly mainland China, Japan and South Korea. The smaller ASEAN countries should benefit from production relocation and wider access to large-consumption markets. In addition to income gains, more foreign direct investment and technology sharing will boost long-term productivity growth.
For most RCEP member countries, we expect the increase in export volumes to directly boost demand for marine and trade credit insurance. We estimate that the RCEP could add approximately 4.5% (USD 720 million) to marine insurance premiums across the Asia Pacific region in 2030, and grow credit & surety insurance business by about 4.4% (USD 1.29 billion) in the same year, with the majority of the incremental business coming from mainland China and Japan.
Additional investment in manufacturing facilities and infrastructure is also expected, as regional supply chains adjust to take advantage of opportunities created by the RCEP. This should generate new business for engineering and liability insurance during the construction phase of these facilities and property lines in the operational phases. Employment and wage increases in trade and construction related sectors will support growth in other non-life and life insurance business as well.
Tags
Contact Get in contact with our experts
John Zhu
