How a single line in RCEP is redrawing Asia's supply chains

When the Regional Comprehensive Economic Partnership took effect in 2022, the headlines fixed on the wrong number. Analysts counted the tariff lines being cut to zero — more than 90 per cent of goods traded among the fifteen members — and concluded, reasonably, that the deal was modest. Most of those tariffs were already low under older bilateral pacts. The marginal saving was rounding error.

Four years later, the action turns out to be buried in a clause that trade lawyers find tedious and that almost no minister mentioned at signing: cumulative rules of origin. It is the provision that decides when a product counts as "made in" the RCEP zone — and therefore qualifies for the zero tariff — based on inputs sourced from anywhere across all fifteen members rather than from a single country.

That sounds technical because it is. But it is also, quietly, the most consequential thing the agreement does. By letting a Vietnamese factory count Korean steel, Thai resin and Japanese sensors toward a single regional-content threshold, RCEP has changed the arithmetic of where to build a supply chain. The answer, increasingly, is: across several ASEAN countries at once.

What cumulation actually changes

Under older trade deals, a product typically had to clear an origin threshold using inputs from just two countries — the exporter and the importer. A washing machine assembled in Malaysia with Chinese motors and Japanese circuit boards might fail to qualify as Malaysian for the purpose of a Malaysia-Australia tariff break, because too much of its value came from outside the pair.

RCEP pools the whole bloc. Now that washing machine can count Chinese, Japanese, Korean, Thai and Vietnamese content together toward a single 40-per-cent regional-value threshold. Cross it, and the finished good ships duty-free to any member. The effect is to reward manufacturers who spread production across the zone — and to penalise those who keep a single-country footprint.

"Cumulation is the invisible subsidy for regional fragmentation," said Dr. Felicia Ong, a trade economist at the ISEAS-Yusof Ishak Institute in Singapore. "It makes it cheaper, on paper, to do one stage of a process in Penang, the next in Haiphong and the final assembly in Batam. Five years ago the tax code punished that. Now it blesses it."

Where the data shows it biting

The fingerprints are visible in the trade statistics, if you know where to look. Intra-ASEAN trade in intermediate goods — the half-finished components that move between factories — grew 14 per cent in 2025, against 6 per cent growth in finished-goods exports out of the region. Companies are increasingly shipping parts to one another within the bloc rather than importing them whole from China and re-exporting.

Vietnam is the clearest beneficiary. Its imports of intermediate inputs from other RCEP members rose nearly a fifth last year, even as its overall reliance on Chinese components, measured as a share, edged down for the first time since 2015. Customs filings at Hai Phong and Cat Lai show a rising count of certificates of origin claiming cumulative content from three or more member states.

Thailand's auto-parts cluster around Rayong is running the same play in reverse, exporting more sub-assemblies to Indonesian and Vietnamese final-assembly plants. The pattern is not deglobalisation. It is regionalisation — the slow knitting-together of a manufacturing base that, for decades, ran through a single hub in the Pearl River Delta.

The China question, complicated

It would be neat to read this as ASEAN decoupling from China. It is not that. China is itself an RCEP member, and Chinese inputs count toward the same cumulative threshold as anyone else's. A Vietnamese factory using Chinese fabric still qualifies — and in many sectors, Chinese content inside ASEAN-assembled exports has risen, not fallen.

What is shifting is the geography of the final stages. Tariff pressure from the United States and Europe falls on the country of last substantial transformation — the place stamped on the box. RCEP cumulation lets manufacturers move that final stamp into Vietnam, Malaysia or Indonesia while keeping deep Chinese content upstream, legally and cheaply. The bloc has, in effect, built a tariff-efficient bypass.

"People keep asking whether the supply chain is leaving China," said a Jakarta-based logistics executive. "The honest answer is that the last forty per cent is leaving, and RCEP wrote the rules that made it pay."

Why nobody is celebrating loudly

Governments are wary of advertising the mechanism, for two reasons. The first is that Washington's trade enforcers have noticed; investigations into transshipment and origin-washing have multiplied, and the line between legitimate cumulation and illegitimate relabelling is blurry and contested. Ministers who tout RCEP's origin rules invite scrutiny of exactly that grey zone.

The second is administrative. Claiming cumulative origin requires documentation that small and mid-sized manufacturers struggle to produce — auditable bills of materials tracing value back through several countries. Large multinationals with compliance departments capture most of the benefit. The clause that is reshaping the region also widens the gap between the firms big enough to use it and the ones that cannot.

The next five years

The bloc is negotiating an upgrade that would simplify origin self-certification and create a shared digital platform for tracing content — the unglamorous plumbing that determines whether the clause's benefits reach beyond the multinationals. If it works, expect the regionalisation trend to accelerate. If it stalls in the same committees that took a decade to agree the original text, the bypass stays open only to those who can afford the paperwork.

Either way, the lesson of RCEP's first five years is a useful corrective. The treaty that looked like a damp squib of marginal tariff cuts has turned out to matter — not because of the number everyone counted at signing, but because of the rule almost nobody read. Trade policy, as ever, rewards the patient reader of footnotes.