The Regional Comprehensive Economic Partnership (RCEP “Ar-sep”) is a free trade agreement in Asia signed on November 15, 2020 by 15 countries to “create new employment opportunities, raise living standards, and improve the general welfare of their peoples.” It was led by Association of Southeast Asian Nations (ASEAN). The pact includes Australia, China, Japan, New Zealand and South Korea, as well as 10 ASEAN members — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. These 15 Asian nations together have GDP of $25 trillion ($20 trillion from China+Japan, $3 trillion from ASEAN, $2 trillion from S. Korea+Australia+N.Zealand)
India excluded itself. However, in January 2020, at the World Economic Forum in Davos, Switzerland, India’s Commerce and Industry Minister Piyush Goyal said “if RCEP nations provide adequate protection against circumvention of product origin rules, adequate transparency is brought in the trading practices, if non-tariff barriers can be addressed, there is scope for discussion.” With India, it would cover 50% of global population and 33% of GDP. Without India it covers 2.3 billion people, which is 30% of global population, and 30% of GDP. US is not a party to it, nor is EU or other western nations. Chinese Taipei is not part of RCEP. The logical reason is that there is conflict over the “One country/two systems” doctrine. Hong Kong is part of RCEP because “it is abiding by one country, two systems”.
While it is very big, and notable in the geopolitical climate, the impact will be incremental as it primarily focuses on lowered tariffs, but they are already low within Asia. Not much else is tackled. There are 469 pages of liberalization of trade in services, but nothing to encourage China to open its internet. It does not include agriculture as a direct topic, though there are mentions of an agriculture export subsidy and customs tax. The projected global GDP growth impact is large, but some argue the projected global GDP growth would be large anyway, despite the agreement, which is why the impact of RCEP is more incremental than truly impactful economically.
RCEP does not have direct mention of technology and video games, though there are chapters on trade of goods, trade of services, IP rights, and telecoms. There is* *a chapter on e-commerce, which may or may not refer to games but does not specifically address games or esports. The agreement includes an import tariff on video game consoles of 0% starting April 1, 2021. However, the current tariff on video game consoles is also 0%, which demonstrates one example that RCEP is not very meaningful at face value for the games industry.
Niko Partners has observed the importance of the China-Japan relationship in video games, and we have observed the political struggle between China and South Korea that has halted S. Korea exports of games to China for 3 years (until 1 game in March, and 2 more games approved December 2, 2020, shortly after the RCEP was signed on November 15). While a slow start, with only 3 of the 98 import game licenses in 2020 being awarded to Korean developed games, this shows potential for more Korean titles to be approved in 2021 and beyond.
To Niko Partners, the most interesting aspect of RCEP for the video game industry is that it was brokered by ASEAN and that China has stated that upon ratification it will then focus on the China-Japan-S.Korea trilateral agreement, as well as a China-EU agreement. Shoring up the inter-Asia partnership of these 15 countries, even if it is symbolic and supplemental to the WTO, sets a tone for Asia to stand tall on its own without the west (ie, the U.S.). This agreement will not significantly change global trade or trade with Asia, but is rather notable for the the Asia-only, large scale aspect. It may encourage more trade within Asia, to the detriment of Asia trade with the US.
It may be wise for western game industry hardware, software and services companies to open regional headquarters in Asia as local entities to take part in the rules and benefits of RCEP – though one should get legal counsel on this matter. The CN-JP-KO agreement could include more specificity on the digital economy, but that is still to be determined. It would be supplemental to the RCEP and to WTO, as those three nations are within the two agreements already.
The next agreement for discussion is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an agreement that evolved from the abandoned Trans-Pacific Partnership (TPP) after the U.S. withdrew from that accord. Chinese Taipei wants to join that one, and the US might too.