RCEP: world’s largest free trade deal announced

Covering a market of 15 countries, 2.2 billion people and accounting for 30 percent of the global GDP, this multination deal is expected to broaden regional integration. It will also deepen the supply chain linkages among participating countries and will eliminate tariffs for more than 92 percent of goods traded, streamline customs and trade processes, and boost competition in a way that drives productivity and sustainability.

RCEP is expected to open more opportunities for business growth. But how can businesses be fully prepared to benefit from RCEP?

A strategic economic shift to regionalization provides not only geographic proximity advantage but also cultural, administrative and, to some countries, economic proximity benefits. With the RCEP’s ambitious trade partnership, countries can eliminate a range of tariffs on imports within the next 20 years, making it easier to exchange goods within the region and help jump-start economic recovery post-COVID-19.

Under RCEP, ASEAN countries with smaller economies will have the same supplier category in the trade bloc as China, which for decades has been the global factory exporting the bulk of its products and achieving accelerated economic growth based on exports. This opportunity for other ASEAN economies will enable them to step up to global trade much more aggressively. As for China, this development will allow the country to focus more on domestic consumption as a driver of growth.

The RCEP will also allow industries forced to outsource supplies to meet local demand because of trade tensions or the pandemic to access essential goods found in neighboring countries at a more affordable rate. With safety measures in place, a regionalized trade may offer an economically favorable solution for sourcing and pooling the supply and demand of both essential and non-essential goods.

Additionally, ASEAN member states can open their economy to a much wider market and with much more ease. This increased accessibility to global buyers will help boost countries’ trading potential and accelerate recovery from the pandemic.

For smaller ASEAN economies such as Laos, Myanmar, Brunei, and Cambodia, the RCEP can further strengthen their Free Trade Agreements (FTA) by allowing them to export their goods to partner members of the agreement. This will likewise help reduce the development gap among ASEAN members.

For countries such as the Philippines, which provide manpower and business process outsourcing and service workers such as teachers, IT programmers, and engineers besides key products such as automotive parts and agricultural products, RCEP can help open up new markets like South Korea and Japan where there is a high demand for service workers.

Progressive countries like Singapore will benefit differently from RCEP compared with other ASEAN members. As a preferred location for headquarters and a regional hub for e-commerce, it will be a pivotal player in the regional trade and supply chain. Singapore will have the advantage of ensuring greater transparency and strong discipline on Non-Tariff Measures (NTMs) for preferential market access of their products and obtain a projection of non-traditional trademarks and a wider range of industrial design in the region.