RCEP goes into effect on January 1 and will likely transform the global economy through thick and thin
January 1 might bring good news to people for various reasons, but for business executives such as Wang Zhengbo, Chairman of Guangxi TWT Supply Chain Management Co Ltd, the coming New Year’s Day will herald a happy breakthrough. On that day, the Comprehensive Regional Economic Partnership Agreement will enter into force in 10 signatory members out of a total of 15, potentially transforming the global economy and fortunes of companies like TWT Supply Chain.
The company, based in Nanning, Guangxi Zhuang Autonomous Region, markets agricultural products. It focuses on the markets of the Association of Southeast Asian Nations footprint.
For TWT Supply Chain, closer China-ASEAN ties under RCEP would mean further reduction in trade costs and expansion of trade items. In addition, the overall business outlook will likely become 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 in November last year, has created the largest free trade bloc in the world.
The 10 countries where the FTA takes effect 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 people, or roughly 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 percent of global exports, according to China’s Commerce Ministry.
The RCEP deal, once in force, is expected to further integrate the huge regional market, through trade and investment facilitation and liberalization measures, analysts and business leaders said.
This will not only lead to an increase in trade and investment activities in the region, but will usher in a new wave of growth, which could help the global economic recovery from the impact of the COVID-19 pandemic and avoid the adverse effects of the rise of protectionism. and anti-globalization sentiment, they said.
“RCEP will further disseminate the rule of commercial law 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 did not previously have. Other provisions will ensure that trade can flourish. make it easier and cheaper, ”Jacobi said.
He is also the Executive Director of the Asia-Pacific Economic Cooperation Business Advisory Council for the period from December 2020 until the end of the year, to coincide with the New Zealand Presidency 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 a pandemic. “, did he declare.
Da Hongfei, CEO of Onchain, a Shanghai-based blockchain technology start-up, said the company plans to increase its commercial presence by expanding to more RCEP members from Singapore, where the company has already established its first branch for the ASEAN region.
“As soon 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.
“With reduced tariff levels, easier market access and an improved regulatory environment, businesses will not only have greater market access and cheaper raw materials, but, more importantly, wider options for them. talents and technology, ”he said.
According to Wei Jianguo, vice president of the Beijing-based China Center for International Economic Exchange, the free trade bloc formed by the RCEP agreement will become the most diverse economic bloc in the world with its signatory members currently at different stages of development. , following different political systems and having different social structures.
“The RCEP deal, reached at a difficult time with the challenges of COVID-19 and anti-globalization sentiment, is expected to lead to a new round of economic globalization by promoting free trade,” Wei said.
“The implementation of the agreement will also accelerate the movement of global industrial technologies, capital and talent to Japan, South Korea, ASEAN and, above all, to China,” he said. .
According to the agreement, more than 90 percent of merchandise trade will ultimately be duty-free over 20 years once it takes effect.
China has promised to fully open 86-90% of goods. He also pledged that zero tariff treatment would account for around 90 percent of all tariff items for the 10 ASEAN member states, as well as Australia and New Zealand.
Besides Laos, Cambodia and Myanmar, other countries mentioned above have pledged similar or easier access to zero tariff 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 the alignment of members’ national rules with the agreement. .
According to Wei, 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 industry and supply chain partnerships, as well as stabilize chains,” Wei said.
RCEP members are expected to establish high-level customs rules, inspection and quarantine standards, as well as technical standards. Through these rules, the RCEP agreement can significantly reduce the cost of doing business in the region, improve the competitiveness of products, create more business opportunities for businesses, and provide more choices and benefits to consumers, has t -he declares.
Jacobi, executive director of the NZIBF, said that while New Zealand already has high-quality FTAs with all RCEP economies, including China, and therefore the immediate trade gains are unlikely to be significant, the country will continue to benefit from improvements in market access in some economies and improved trade rules.
One thing of particular interest is that frozen products from New Zealand will clear customs more quickly, making it easier to export perishable food products, he said.
Sun Shunli, Party Secretary and Chairman of Beijing-based China Construction Second Bureau Installation Engineering Co Ltd, is also confident in the company’s business prospects in the RCEP region.
The company entered the Southeast Asian market in 2008. Due to the rapid growth in market demand, the cumulative value of its contracts stood at 2.2 billion yuan (345.6 million dollars), with eight projects currently under construction.
“There is great potential for cooperation between China and Southeast Asian countries in the construction sector, given the strong demand of the local market and the advantages of Chinese companies in terms of technology and resources. “Sun said.
Da of Onchain said he believed globalization would be fostered by the RCEP deal and that applications of technologies such as the Internet of Things, 5G, artificial intelligence and blockchain would also be accelerated to infuse more boost to growth in the regional and global economy.
Advances in blockchain technology applications, in particular, will significantly reduce the trade and commerce costs associated with transmitting and verifying information, and facilitate economic growth with such blockchain-powered digitalization of assets, a he declared.
According to a recent report by the Chinese Institute for Reform and Development, based in Hainan Province, the RCEP agreement is expected to generate further growth in exports, foreign investment stock and GDP in 10 member countries. , 4%, 2.6% and 1.8%, respectively. , by 2025, compared to the baseline.
The report also says 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 have done more recently in APEC, to emerge from the crisis and return to the path of recovery.” , did he declare.