RCEP takes effect on January 1 and will likely transform the global economy against all odds
January 1 may bring good news to people for various reasons, but for business leaders such as Wang Zhengbo, chairman of Guangxi TWT Supply Chain Management Co Ltd, the coming New Year’s Day will bring a happy breakthrough. On that day, the Regional Comprehensive Economic Partnership Agreement will enter into force in 10 signatory members out of a total of 15, potentially transforming the global economy and the fortunes of companies like TWT Supply Chain.
The company, based in Nanning, Guangxi Zhuang Autonomous Region, trades in agricultural products. It focuses on the Association of Southeast Asian Nations footprint markets.
For the TWT supply chain, closer China-ASEAN ties under RCEP would mean further reduction in trade costs and expansion of trade items. Moreover, the overall business outlook is likely to get brighter and brighter.
The free trade agreement or FTA, signed by 15 Asia-Pacific economies, including China, South Korea and Japan, and the 10 ASEAN member states last November, has created the largest free trade bloc in the world.
The 10 countries where the FTA will enter into force on January 1 are Brunei, Cambodia, Laos, Singapore, Thailand, Vietnam, China, Japan, New Zealand and Australia.
The RCEP region has a population of approximately 2.27 billion, or approximately one-third of the world’s population. The combined GDP of the 15 members was $26 trillion in 2019 and exports totaled $5.2 trillion, or 30% of global exports, according to China’s Ministry of Commerce.
The RCEP deal, once in force, is expected to further integrate the vast regional market, through trade and investment facilitation and liberalization measures, analysts and business executives said.
This will not only lead to increased trade and investment activities in the region, but usher in a new wave of growth, which could contribute to global economic recovery from the impact of the COVID-19 pandemic, and ward off the effects harmful effects of the rise of protectionism. and anti-globalization sentiment, they said.
“RCEP will spread the rule of commercial law more deeply in the Asia-Pacific region,” Stephen Jacobi, executive director of the New Zealand International Business Forum, said in an email to China Daily.
“Businesses and workers will benefit from better market access and better trade rules. Some economies will be bound by free trade agreements that they have not had before. Other provisions will ensure that trade can be done more easily and more cheaply,” Jacobi said.
He is also Executive Director of the Asia-Pacific Economic Cooperation Business Advisory Council for the period from December 2020 to the end of this year, to coincide with New Zealand’s chairmanship of the Asia-Pacific Economic Cooperation or APEC.
“This will help ensure that goods and services can flow more freely through the region’s supply chains. In this way, increased trade can contribute to increased economic growth and aid recovery from the pandemic.” , did he declare.
Da Hongfei, CEO of Onchain, a Shanghai-based blockchain technology startup, said the company plans to increase its business presence by expanding to more RCEP members from Singapore, where the company already has established its first branch for the ASEAN region.
“As our new business model in Singapore matures, we will expand it to more countries,” Da said, adding that the implementation of the RCEP agreement will bring businesses more opportunities and resources. .
“Through lower tariff levels, easier market access and an improved regulatory environment, companies will not only have broader market access and cheaper raw materials, but, more importantly, wider options for talent and technology,” he said.
According to Wei Jianguo, vice president of the Beijing-based China Center for International Economic Exchanges, the free trade bloc formed by the RCEP deal will become the most diverse economic bloc in the world with its signatory members currently at different stages of development. development, following different political systems and having different social structures.
“The RCEP agreement, reached at a difficult time with the challenges of COVID-19 and anti-globalization sentiment, should lead to a new round of economic globalization by promoting free trade,” Wei said.
“Implementation of the agreement will also accelerate the movement of global industrial technologies, capital and talent to Japan, South Korea, ASEAN and, most importantly, to China,” he said. he declares.
According to the agreement, more than 90% of trade in goods will eventually be duty-free for 20 years once it comes into force.
China has promised to fully open 86-90% of goods. He also promised that zero-duty treatment would account for around 90% of all tariffed items for the 10 ASEAN member states, as well as Australia and New Zealand.
Besides Laos, Cambodia and Myanmar, other countries mentioned above have promised similar or easier access to duty-free treatment for China.
In addition, while FTAs between countries in the region mainly cover trade in goods, the RCEP agreement extends to trade in services, investment and alignment of members’ domestic rules with the agreement. .
According to Wei, the cumulative rules of origin are a remarkable achievement of RCEP, which uses the accumulated regional value to determine the origin of a product in the region, and therefore makes it easier for products to benefit from zero tariffs.
“RCEP is expected to further expand regional industrial and supply chains and help members establish mutually beneficial industrial and supply chain partnerships, as well as stabilize chains,” Wei said.
RCEP members are expected to set high-level customs rules, inspection and quarantine standards, and technical standards. With these rules, the RCEP agreement can significantly reduce the cost of trade in the region, improve product competitiveness, create more business opportunities for businesses, and provide more choice and benefits to consumers, he said. -he declares.
Jacobi, executive director of the NZIBF, said that although New Zealand already has high-quality FTAs with all RCEP economies, including China, and therefore immediate trade gains are unlikely to be significant, the country will still benefit from improvements in market access in some countries. economies and improved trade rules.
One particularly interesting thing is that frozen goods from New Zealand will clear customs faster, which will help perishable food exports, he said.
Sun Shunli, Party Secretary and Chairman of Beijing-based China Construction Second Bureau Installation Engineering Co Ltd, is also confident about the company’s business prospects in the RCEP region.
The company entered the Southeast Asian market as early as 2008. Thanks to growing market demand, its cumulative contract value amounted to 2.2 billion yuan ($345.6 million), with eight projects currently under construction.
“There is great potential for cooperation between China and Southeast Asian countries in the construction industry, given the vigorous local market demand and the advantages of Chinese enterprises in technology and resources. Mr. Sun said.
Da d’Onchain said he believed globalization would be promoted by the RCEP agreement and the applications of technologies such as the Internet of Things, 5G, artificial intelligence and blockchain would also be accelerated to infuse more growth momentum in the regional and global economy.
Advances in the applications of blockchain technology, in particular, will significantly reduce the costs of trade and commerce related to the transmission and verification of information, as well as facilitate economic growth through such blockchain-powered digitization of assets. , did he declare.
According to a recent report by the Chinese Institute for Reform and Development, based in Hainan province, the RCEP agreement is expected to create additional growth for exports, foreign investment stock and GDP in member countries of 10.4%, 2.6% and 1.8%, respectively. , by 2025, relative to the reference scenario.
The report also states that the RCEP deal will boost global GDP growth by an average annual increase of $186 billion.
Jacobi said the RCEP deal also shows the world that trade liberalization is possible even in these difficult times.
“Protectionism should never be the answer to the pandemic or any other crisis. Economies must work together, as they recently did in APEC, to emerge from the crisis and into recovery,” he said. he declared.