Since the 2nd of November 2021, fifteen of the ASEAN Member States have Ratified and provided their Acceptance of the Regional Comprehensive Economic Partnership (RCEP), such as Brunei, Cambodia, Indonesia, Japan, South Korea, Malaysia, Myanmar, Philippines, Lao, Singapore, Thailand, and Viet Nam and from four non-ASEAN countries such as Australia, China, Japan, and New Zealand.
The Regional Comprehensive Economic Partnership (RCEP) is a proposed agreement between the member states of the Association of Southeast Asian Nations (ASEAN) and its free trade agreement (FTA) partners. The pact aims to cover all trades activities in goods and services, intellectual property, dispute settlement, e-commerce development, small and medium enterprises digitalization and economic cooperation on the deployment of best practices.
This agreement ratification by all signatory States is opening the door to a new ASEAN fair trade market corresponding to 30% of the world population (around 2,2 billion people) or 30% of the Global GDP ($26,2 trillion). The RCEP agreement is certainly as well the starting point of a multilateral trading system for the mutual benefits of the ASEAN market countries.
The RCEP will become the largest trade agreement in the world as measured by the GDP of its members. By comparison, other major regional trade agreements by share of global GDP are the South American trade bloc Mercosur (2.4%), Africa’s continental free trade area (2.9%), the European Union (17.9%) and the United States-Mexico-Canada agreement (28%).
The building of this new economical market should certainly boost the economy between the ASEAN countries, by disrupting the rules for import and export of goods and services and by eliminating about 90% of the tariffs taxes between ASEAN members for the two next decade.
The RCEP has also opened up the opportunity to have a trade agreement for the provision of goods and services from any country in ASEAN by working with one local partner in ASEAN who will be able to source and develop production capacity within LCC in ASEAN. The RCEP is certainly closing the Trans-Pacific Partnership (TPP) era, after The USA withdrew from the TPP in 2016.
With the definition of common rules of origin (CRO) under the RCEP, local trading companies will be able to optimally source raw materials and optimized production costs and capacity from member countries, meanwhile benefiting from lower tariff rates.
Moving forward and due to key markets capacity development, the RCEP is also opening the opportunity for the importation of innovation and the deployment of the Industry 4.0 standard and business digitalization.
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