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The Regional Comprehensive Economic Partnership (RCEP) is a historic agreement that brings together 15 Asia-Pacific countries, generating nearly a third of the global economy of more than 2.2 billion people and a GDP of $26 trillion.
The agreement itself is quite detailed and spans over 20 chapters. Some of the important chapters of the agreement are Trade in Goods; Rules of origin; Customs Clearance and Trade Facilitation; Sanitary and phytosanitary measures; Technical regulations and conformity assessment procedures; Trade in Services; investment; Intellectual Property; Ecommerce; competition rules; Small and medium enterprises; Economic and Technical Cooperation; and Government Procurement.
1. Effectively reduce tariffs, unify trade rules and strengthen supply chains among member countries.
Under RCEP, customs and trade procedures have been simplified with convenient certification that reduces clearance times. For example, Japan and South Korea do not have a trade agreement, but under RCEP they have free access to each other's markets.
2. The first joint trade agreement between Korea, Japan, and China.
It shows that RCEP has great potential to create tangible benefits for all its members. The RCEP's "Rules of Origin" chapter is one of the most important parts of the agreement. RCEP is also expected to reduce production costs so that there is no need to import equipment and materials in RCEP with taxes and other additional costs. Furthermore, countries such as China, Japan, and South Korea will enjoy similar benefits from participating in infrastructure projects across the region.
3. Income development of member countries
According to Asian Development Bank data, RCEP will increase members' income by 0.6%, adding $245 billion annually to regional income. It is also expected to create nearly 3 million jobs by 2030. The region's population is young and the country has huge potential for startups and SMEs.
So, access to the larger economic market is very important for businesses and startups. The future of the deal largely depends on China's economic policies toward the remaining 14 countries. ASEAN becomes China's largest trading partner by 2020. China has been ASEAN's largest trading partner since 2009.
RCEP is expected to have a positive impact on economies. China, as the world's second-largest economy, is very strong in manufacturing, innovation, and, more importantly, consumption. On the one hand, China has a strong position in the high-tech sector, so its high-tech products will be able to access regional markets at competitive prices. On the other hand, China's high consumption is an advantage for the producers of the RCEP region.
RCEP also provides an e-commerce collaboration platform. China's strength in e-commerce digital infrastructure is an opportunity for countries in the region to catch up with the latest digital information technology trends. This situation could help China lead the e-commerce network of RCEP countries. Finally, RMB internationalization policies could underpin renminbi growth in the region.
The total value of the RCEP is greater than the US-Mexico-Canada Trade Agreement (USMCA) and the European Union. Many policymakers, economists, and scholars have focused on future geopolitical balances and alignments. RCEP covers the world's second-largest economy, so its economic impact extends beyond the region; The deal could also trigger geopolitical shifts.
Due to economic concerns, India did not join the RCEP. India's attitude is important to regional geopolitics. If the US goes back to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), it could cause a conflict of interest to some extent with the RCEP. Although China has submitted a formal application to join the CPTPP in 2021, there has been no result yet. Currently, the US is trying to protect its national interests under President Joe Biden's new Indo-Pacific strategy. But the Indo-Pacific Economic Framework for Prosperity (IPEF) is neither a free trade agreement nor provides free market access without tariffs like the RCEP.
ASEAN and Southeast Asian countries show great promise in the areas of development and economy. Realizing this potential is only possible with an agreement like the RCEP. RCEP will push countries to implement domestic reforms such as improving their intellectual property and e-commerce infrastructure. It also wants to bring members closer together both economically and politically as they will have closer partnerships and create markets for each other. The duty-free network brings more connectivity to ASEAN and the region.
Source: Công Thương News