As businesses and economies around the world continue to reel under the pressure of escalating trade tensions and pandemic-induced challenges, Asia is trying to keep its doors open and stay resilient.
The pandemic has affected international trade, with countries responding in different ways. Amid all the tensions, Asia fared relatively well, thanks to the foundational steps it took to keep trade open and growing before the outbreak. The signing of the Regional Comprehensive Economic Partnership (RCEP) is an example of this move.
The RCEP involves the ten member states of the Association of Southeast Asian Nations (ASEAN) and its six Free Trade Agreement (FTA) partners - Australia, China, India, Japan, New Zealand, and South Korea. It is ASEAN’s biggest free-trade pact, covering a market of nearly 2.2 billion people with a combined size of $26.2 trillion.
The agreement aims to improve access to markets by eliminating quotas and tariffs in more than 65% of goods traded while making business predictable with common rules of origin and transparent regulations. This will encourage more investments in the region, including building supply chains and services, and create more jobs.
According to Dato Lim Jock Hoi, the Secretary-General of ASEAN, “RCEP will give a much-needed boost for a swift and robust recovery for businesses and peoples in our region, particularly during the current COVID-19 pandemic crisis.”
The RCEP also holds the potential to add $209 billion annually to world incomes and $500 billion to world trade by 2030. Moreover, besides offsetting global losses from the US-China trade war, it will allow the Asian economies to be more efficient by connecting their assets in various sectors such as technology, manufacturing, agriculture, and natural resources. These initiatives will also attract new foreign investments and improve access to China's Belt and Road Initiative funds, enhancing gains from market access by strengthening transport, energy, and communications links.
After many years of trade wars and protectionism, the partnership agreement symbolizes integration. It also signals government aid for market integration and is helping countries that are looking for better international cooperation to boost economic recovery. While it may not bring immediate benefits, it will still improve market access to services and goods, manage trade and investments, and gather the participating members together into one production chain.
“Asia Pacific is already a hotbed of a complex maze of free trade agreements. Many of these FTAs have differing rules which are complicated and disincentivize their use. RCEP simplifies this into a single set of rules of origin, standardizing the requirements across the board and leveling the playing field for all,” explained Raymond Yee, the Vice President for Customs and Regulatory Affairs for DHL Express.
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