The Regional Comprehensive Economic Partnership (RCEP) agreement will officially come into force from January 1, 2022, as per the Ministry of Industry and Trade (MoIT). It comes as Australia and New Zealand became the latest member states to ratify the agreement.
Other countries that have ratified RCEP include Brunei, Cambodia, Laos, Singapore, Thailand, Vietnam, China, and Japan.
Prior to that, 15 countries, including all ASEAN members, Australia, China, Japan, South Korea, and New Zealand signed the RCEP on November 15, 2020. The free trade agreement is seen as the world’s largest trading bloc. The deal has been in the works for over eight years and was signed virtually at the ASEAN Summit. The RCEP leaves the door open for India, which withdrew from the trade pact due to disagreements over agricultural tariffs.
Just like the EU-Vietnam free trade agreement (EVFTA), the UK-Vietnam free trade agreement (UKVFTA), and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership CPTPP, the RCEP will reduce tariffs and set trade rules, and help link supply chains, particularly as governments grapple with COVID-19 effects. The FTA is expected to cover all aspects of the business including trade, services, e-commerce, telecommunications, and copyright though negotiations over some aspects still need to be finalized. Tariffs are expected to be reduced within 20 years.
The RCEP sets the tone for future trade in ASEAN. It will further build on previous trade agreements within ASEAN but also include first-time agreements with other countries such as Japan and South Korea. In this context, trade within ASEAN may be negligible.
The RCEP covers a market of 2.3 billion people and US$26.2 trillion in global output. This accounts for about 30 percent of the population worldwide and over a quarter of world exports.
Like several of Vietnam’s FTAs, the RCEP is a modern trade agreement taking countries of different sizes, populations, and GDP into account. Documents from the World Bank forecast that countries part of the RCEP will see GDP increase by 1.5 percent. Economists note that the deal could add almost US$200 billion to the global economy by 2030. Nevertheless, it is important to note that it will take years to see the benefits of the RCEP and it may not be as significant as the CPTPP and EVFTA for Vietnam.
The RCEP was signed at the ASEAN Summit hosted by Vietnam. Fitch Solutions notes that for Vietnam, major export categories that are expected to benefit include IT, footwear, agriculture, automobiles, and telecommunications. The FTA would help Vietnam access large consumer markets double the size of those included in the CPTPP.
As Vietnam moves to become a high-tech manufacturer, the RCEP can help local firms increase exports and attract high-quality goods for its consumers. In addition, with the demand for Vietnam’s exports like agriculture and fisheries products, Vietnam is set to benefit.
This article was first published by AseanBriefing which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to [email protected]