RCEP free trade deal to inject impetus to post-pandemic recovery in Asia-Pacific

Less than a week ahead of the 2021 Asia-Pacific Economic Cooperation (APEC) Leaders Week virtually hosted by New Zealand, the Regional Comprehensive Economic Partnership (RCEP) free trade agreement has crossed the ratification threshold to enter into force in January 2022.

Experts believe the world's largest free trade agreement will inject impetus into post-pandemic recovery in the Asia-Pacific region, by providing strong support for expanding trade and investment.

VICTORY OF MULTILATERALISM

At the Association of Southeast Asian Nations (ASEAN) meeting with its dialogue partners held last month, leaders of RCEP participating countries are in unison for the immediate ratification and entry into force of the RCEP agreement, not only because it will create a stable and robust business environment, but also it is viewed as an important tool in the economic recovery efforts of the region.

As an ASEAN-led Free Trade Agreement (FTA) that consolidates the 10-country bloc's existing regional FTAs with Australia, China, Japan, South Korea, and New Zealand into a modern, comprehensive, high-quality, and mutually beneficial economic partnership agreement, the RCEP "provides an open, inclusive, and rules-based trading system that can serve as a major platform to deepen and broaden regional economic integration," said the leaders.

"To accelerate post-pandemic recovery, we must further strengthen our economic ties through the RCEP," Philippine President Rodrigo Duterte said during the ASEAN meetings.

Philippine Trade Secretary Ramon Lopez said the RCEP "provides for a framework aimed at further lowering trade barriers, and securing improved market access for goods and services for businesses in the region" that makes up almost one third of the world's GDP, global trade, and global inward foreign direct investments.

There is no doubt that the RCEP is "a victory for multilateralism and defeat of unilateralism," said Joseph Matthews, a senior professor at the BELTEI International University in Phnom Penh.

Some Japanese experts believe the RCEP is an important trade arrangement to safeguard free trade and counter protectionism, which is "in line with the historical trend."

CORE FOUNDATION FOR TRADE

As of Nov. 2, the ASEAN Secretariat based in Jakarta, Indonesia, has received instruments of ratification from six ASEAN member states, namely Brunei, Cambodia, Laos, Singapore, Thailand, and Vietnam, as well as from four non-ASEAN signatory states, namely China, Japan, New Zealand and Australia. That means the world's largest free trade agreement to enter into force on Jan. 1, 2022.

"It will become the core foundation for trade and investment in the region, further expand regional value chains and create more employment and market opportunities for peoples and businesses in the region," Cambodian government spokesperson Phay Siphan told Xinhua.

Tran Toan Thang, a high ranking official from Vietnamese Ministry of Planning and Investment, said the FTA will have positive impacts on production structure, production chain and supply chain "because with lower tariffs, FTAs increase import, and bigger import will affect domestic production."

Wichai Kinchong Choi, senior vice president of leading Thai bank Kasikornbank, said the RCEP will further enhance regional industrial cooperation and improve the region's productivity, risk resistance capacity, and international competitiveness.

He said the massive open market to be formed will help consolidate the regional industrial and supply chains, support member states against economic uncertainties, and promote coordinated economic development in the region.

A recent Asian Development Bank (ADB) study said the RCEP "presents strong potential to hold regional trade and investment patterns well into the future and to influence the direction of global economic cooperation at a challenging time."

BOOSTING ECONOMIC RECOVERY

Signed in November last year, the RCEP is the world's largest free trade zone across a wide assortment of indicators, and its 15 member states are home to 2.27 billion people, with a total GDP of 26 trillion U.S. dollars and total exports of 5.2 trillion U.S. dollars.

The ADB study predicted that the RCEP will make significant contributions to post-pandemic economic recovery in the Asia-Pacific region and worldwide.

"By 2030, if the implementation is on track, we estimate that it will increase members' incomes by 0.6 percent, adding 245 billion U.S. dollars annually to regional income and 2.8 million jobs to regional employment," said the study.

Kin Phea, director-general of the International Relations Institute at the Royal Academy of Cambodia, agreed that the RCEP will be vital in regional and global economic recovery.

"RCEP countries will greatly benefit from this important trade deal and can diversify their productions and markets," he told Xinhua, adding that "the RCEP will be a driving force of foreign direct investment to all RCEP countries."

Chris Lipscombe, international business strategist and president of the New Zealand China Cross-border Electronic Commerce Foundation, considered the RCEP as "a tremendous boost" for the region's post-pandemic recovery.

"Speeding up the clearance of goods at the border, streamlining of trade, and the removal of red tape across the ASEAN region will help our existing exporters. More market access, especially for services and investment into China and other ASEAN member states, will create even more business opportunities," Lipscombe said.

ASEAN Secretary-General Dato Lim Jock Hoi said the expeditious ratification process is "a true reflection of our strong commitment to a fair and open multilateral trading system for the benefit of the people in the region and the world."

"The implementation of the RCEP agreement starting from January 1 next year will give a tremendous boost to the post-COVID-19 economic recovery efforts," he said.