June 9, 2026
By P. K. Balachandran
Media reports say that Sri Lanka is set to join the Regional Comprehensive Economic Partnership (RCEP), the world’s largest trading bloc, accounting for 30% of global GDP. The 15-member RCEP includes the ASEAN countries plus Australia, New Zealand, China, Japan and South Korea. Sri Lanka had sent its letter of intent to join the RCEP in 2023.
At a roundtable discussion on “Sri Lanka’s Pathway to RCEP and the Emerging Global Trading Order” organised by the Pathfinder Foundation in Colombo, Sri Lanka’s Trade Ministry Secretary K.A. Vimalenthirajah said that the government had submitted responses to the preliminary questionnaire from the RCEP in January, and that the Cabinet had established a high-level policy committee and a working committee to take the matter forward.
Welcoming Sri Lanka’s move, the Indonesian Ambassador to Sri Lanka, Dewi Gustina Tobing, cited Sri Lanka’s strategic location in the Indian Ocean, strong maritime connectivity potential, competitiveness in many products and potential as a regional logistics and service hub as good reasons for joining the RCEP. “Diversification of export market and investment opportunity is, of course, an important benefit that Sri Lanka will get by joining this organisation. Sri Lanka will be able to improve itself and its prospects as a destination of investment,” Tobing said.
Australian Ambassador Matthew Duckworth said that joining RCEP will enable Sri Lanka to undertake overdue reforms as the circumstances arising from its membership will push the island nation towards reform.
What RCEP Was Meant to Achieve
Tracing the history of RCEP, in the “The Diplomat”, Jesslene Lee said that the RCEP was thought of in 2019, at a time when the Asia-Pacific region found itself in the crosshairs of intensifying geoeconomic competition and strategic rivalry. There was a felt need for “plurilateral agreements” to provide safeguards and strategic opportunities to weather the volatility in the global economy.
Being the first and the only pan-Asian trade agreement, the RCEP presented a significant opportunity to enhance the Asia-Pacific’s position in global production networks.
Advantages
By eliminating tariffs on over 90% of goods trade within the bloc, the RCEP unlocked unprecedented preferential access among the member economies. Research done by the Asia Competitiveness Institute (ACI) at the Lee Kuan Yew School of Public Policy, found that, in 2022, China’s merchandise trade within the RCEP amounted to US$ 714 billion in imports and US$ 944 billion in exports, representing nearly a third of its overall trade.
Japan followed with US$ 420 billion in imports and US$ 318 billion in exports, making intra-RCEP trade nearly half of its total trade. Comparable values and shares were observed in the case of South Korea also, Jesslene Lee says.
These linkages were reinforced by investment flows, with China, Japan, and South Korea collectively contributing over 40% of FDI inflows to ASEAN countries. An increase in manufacturing in China, Japan and South Korea complemented ASEAN’s growing role as a major production base.
High-value intermediates from these upstream economies flowed into countries like Cambodia, the Philippines, and Thailand, which served as final assembly hubs for regional consumer markets, Lee points out.
Rules of Origin – the Crown Jewel
RCEP’s unified Rules of Origin (RoO), treats all 15 members as a single market. The RCEP Rules of Origin allows inputs from any member country to count as “regional content” and requires only 40% of a product’s value to be added in order to qualify for preferential tariffs.
Firms whose products meet the above regional cumulation requirement gain preferential access to all 15 markets in the RCEP bloc, creating powerful incentives for firms to restructure supply chains within the region.
These incentives are amplified by the participation of China, Japan, and South Korea, which together account for 40% of global manufacturing, Lee points out.
Further, by locating production or sourcing key inputs from RCEP countries, firms based outside the bloc can qualify their products as “RCEP-originating” and gain zero-tariff access across all member markets.
Challenges Remain
However, there are significant challenges which members face. The real test lies in how effectively the Rules of Origin are implemented.
Elaborating on this, Lee says – Streamlining the RoO process is critical to encouraging firms to leverage RCEP. Harmonizing protocols on the “self-certification of origin” would substantially reduce the burden of time and compliance costs typically associated with complex RoO procedures – costs that often deter firms from using trade agreements.
“This means standardizing operational certification procedures, including origin documentation and self-certification authorization procedures. It means digitalizing customs management systems to enable direct and secure exchange of origin certification data between customs authorities, which will expedite clearance.”
“Also necessary, is creating a centralized portal to help firms navigate complicated regulations by offering guidance and resolving compliance issues.”
“This reality is further reinforced by the growing network of green and digital shipping corridors, which support supply chain integration by improving operational efficiency and interoperable maritime connectivity. Among RCEP members, Australia, China, Japan, South Korea, and Singapore are actively advancing such corridors.”
Slow And Limited Progress
However, RCEP has taken time to see some fruition. The bloc came into force in 2022, but little is heard about the RCEP even now, except for the eagerness of several countries to join the RCEP.
In 2025, RCEP leaders met for the first time since its signing. The 2025 Joint Leaders’ Statement reaffirmed the members’ commitment to the full and effective implementation of the Agreement, strengthening supply chain resilience, advancing digital trade cooperation, and supporting greater MSME participation across RCEP markets.
But studies by the Asia Competitive Institute (ACI) have indicated limited utilisation of the RCEP. The main beneficiaries are the three northeast Asian economies of China, Japan, and the Republic of Korea.
RCEP still faces practical constraints that limit its impact. Tariff liberalisation is uneven. Non-tariff measures continue to raise compliance costs. Technology collaboration, though improving, falls behind existing bilateral agreements in depth. Environmental provisions also remain underdeveloped, limiting progress in green trade.
But targeted, short-term reforms can deliver immediate gains. Accelerating tariff reductions and concluding full cumulation of Rules of Origin, which allows firms to combine inputs from multiple member countries, and still qualify for tariff preferences, will directly improve uptake.
Establishing a robust utilisation monitoring mechanism, supported by customs data, will help members track the actual use of the RCEP, identify border bottlenecks, and develop more targeted reforms.
Sustaining these reforms requires stronger institutions. Upgrading the RCEP Support Unit into a full Secretariat would strengthen implementation and provide a more effective institutional backbone for coordination and delivery.
Under this structure, ECOTECH initiatives – programs for economic and technical cooperation – can be expanded to build capacity and support commitments. A dedicated data-sharing platform would enhance transparency, monitoring, and policy alignment.
Strengthening supply chain resilience through interoperable customs systems and faster cross-border processing of trade documents will be critical.
Regulatory cooperation should focus on reducing behind-the-border non-tariff barriers. The RCEP must expand its digital economy scope and strengthen environmental cooperation.
National Security Clauses- A Major Obstacle
The “National Security Exception” clause may impose substantive constraints on the free flow of data. Cross-border data flow is a prerequisite for conducting digital trade, yet the regulatory divergences among countries regarding cross-border data flows are difficult to reconcile.
On the one hand, RCEP advocates the free flow of data to unleash its economic potential. But on the other hand, its text incorporates exception clauses such as “essential security interests” and “legitimate public policy objectives,” providing legal space for member States to implement restrictive measures like data localization and security assessments for data exports.
These restrictive measures may also increase corporate compliance costs, create de facto digital trade barriers, and potentially offset the anticipated trade creation effects of RCEP.
Sense of Urgency Lacking
The global trading system is under growing strain. Multilateral rules are weakening, aggressive unilateral trade measures are expanding, and tariff uncertainty is rising. Concerns over excess industrial capacity are also creating new tensions in global markets.
And yet, the RCEP has been slow in responding says the website “Science Direct”. Evidence from the ASEAN Business Barometer Survey shows that around 70% of firms are aware of RCEP, yet utilisation stood at only 48%. Many firms report uncertainty about how to begin using the agreement or they face a lack of demand from buyers for preferential sourcing, the website says.
RCEP involves a diverse group of economies with different priorities. This again is a challenge to effective governance.
Issues for Sri Lanka
While the RCEP offers great scope for Sri Lanka to expand production and trade, it also requires the adoption of a totally different system which might not be easy.
Writing on Sri Lanka’s prospects in “The Morning” Dr. Dayaratna Silva says that Sri Lanka’s successful accession to the RCEP will require a carefully sequenced, two-track strategy combining sustained political and diplomatic engagement with the development of a coherent and forward-looking trade policy framework.
“On the external front, continuous high-level dialogue with all 15 RCEP Member States will be essential to build confidence, secure support, and navigate the evolving accession process. In parallel, on the domestic front, Sri Lanka must undertake a comprehensive review of its trade, investment, and regulatory regimes to align with RCEP disciplines, while identifying priority sectors for competitive integration into regional value chains.”
“To ensure coherence and continuity, a dedicated national task force – bringing together key Government agencies and private-sector stakeholders – should be established to steer the accession process, formulate negotiating positions, and manage implementation.””
“Given the breadth and complexity of the agreement, covering areas from goods and services to e-commerce, intellectual property, and dispute settlement, Sri Lanka’s approach must be both technically rigorous and strategically calibrated.”
“Ultimately, accession to the RCEP should not be viewed merely as a trade policy objective, but as a transformative step towards embedding Sri Lanka more deeply within the dynamic economic architecture of Asia.”
About P. K. Balachandran
P. K. Balachandran is a senior Indian journalist working in Sri Lanka for local and international media and has been writing on South Asian issues for the past 21 years.
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