The Regional Comprehensive Economic Partnership, or in short "RCEP", is a free trade agreement (FTA) that was signed during the 37th ASEAN Summit in November 2020 between the 10 ASEAN Member States (AMS) and their five FTA Partners, namely the People's Republic of China, Japan, Republic of Korea, Australia and New Zealand.
Once RCEP is fully implemented, the 15 signatory countries will form a trading bloc representing more than 2.1 billion consumers, with a combined GDP accounting for approximately 30 per cent of global GDP and about 27 per cent of global merchandise trade, thus making it the largest trade deal ever signed. It also accounts for over 18 per cent of services trade and 19 per cent of foreign direct investment outflows.
The main objectives of RCEP are to lower tariffs; open up trade in services; and promote investments to help emerging economies catch up with the rest of the world. It also aims to help businesses grow by allowing them to export their products within the member countries using a unified Certificate of Origin (COO) which would help to reduce cost and time, therefore facilitating trade between signatory countries.
Benefits of RCEP to its members
1. RCEP boosts Asian economies - As one of the largest trade pacts covering a third of the world's population and economic output, the Peterson Institute for International Economics have forecasted that RCEP will add almost US$200 billion to the global economy and an average of 0.2 per cent per year to the GDP of its members, therefore creating employment and improving the standards of living of member countries.
RCEP is hoped to help revive economic growth post-COVID-19, boost foreign investment and provide a framework for further regional cooperation.
RCEP can potentially help ASEAN Member States (AMS) to further integrate and move up the global value chains through diversifying supply sources and more resilient supply chains, which could therefore help shift FDI towards the AMS. For producing countries, having access to better quality raw materials at competitive prices provides a good platform for businesses to expand and grow, in turn making it attractive grounds for investors to build alternative supply chains.
In keeping with the advancements of digitalization, RCEP's provisions for e-commerce, innovation and technology are expected to bring about new opportunities and growth.
2. RCEP increases efficiency in trading, innovation and SME involvement - Rules and procedures used in past bilateral trade agreements will be simplified within a single rules of origin arrangement, thereby reducing costs and processes required to export. The reduced bureaucracy would allow more SMEs to participate and move up the value chain. In addition, technical cooperation with advanced industrialised nations also mean that SMEs can have the opportunity to develop better and more competitive products.
3. RCEP widens market access and facilitates further trading - RCEP is the first multilateral trade deal for China; the first bilateral tariff reduction arrangement between Japan and China; and the first time China, Japan and South Korea have been in a single free-trade agreement. This will in turn also benefit those countries that do not have any pre-existing bilateral trade deals with the three countries. Therefore, RCEP will significantly open up more markets, increase economic activities and strengthen global and regional supply and value chains.
Potential benefits for Brunei Darussalam
With all of the RCEP participating countries already a trade partner for Brunei Darussalam, the signed agreement further signifies Brunei's commitment to heighten trade relations and flows.
With the agreement in place, Brunei is working to ensure that its infrastructure is up to date and on par with the standards of other RCEP countries. In line with this effort, Brunei has launched the Brunei Darussalam National Single Window (BDNSW), a one-stop portal enabling applicants to submit standardised information and documents to meet legal import, export and customs-transit requirements.
One big beneficiary of the agreement would be the local SMEs, as RCEP will help to improve market access thus creating more opportunities for local SMEs to enter the global market and export their products internationally. This is especially beneficial for small countries such as Brunei whose local businesses and investors face many challenges in tapping onto the global market.
RCEP can also enhance knowledge-sharing, which would benefit Brunei greatly in terms of keeping up with international trade standards and product safety requirements.