RCEP will boost regional trade flows

by ASILA JALIL / pic by BLOOMBERG

THE Regional Comprehensive Economic Partnership (RCEP) will significantly boost regional trade flows as it extends the scope of trade and investment liberalisation that will benefit nations that have ratified the agreement.

IHS Markit Asia Pacific chief economist Rajiv Biswas said in a note that RCEP will be the world’s biggest free trade agreement (FTA) measured in terms of GDP, larger than the current membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the European Union, the recent US-Mexico-Canada Free Trade Agreement or Mercosur.

However, if the UK and China are successful in their applications to join the CPTPP, then the expanded CPTPP would become larger than the RCEP as measured by GDP of the member economies.

The 15 Asia-Pacific economies that make up the RCEP membership together account for around 29% of world GDP.

“RCEP significantly extends the scope of trade and investment liberalisation through chapters that create a common rules of origin framework as well as strengthening intellectual property protection, trade in services and reducing barriers to investment.

“The implementation of RCEP will allow the benefits of the trade agreement to commence for those nations that have already ratified the agreement. Amongst the ASEAN nations, those that have ratified RCEP to date include Singapore, Thailand, Vietnam, Cambodia, Brunei and Laos. The other RCEP members that have ratified the RCEP agreement are Australia, China, Japan and New Zealand,” said Biswas.

He noted tariff liberalisation has significantly progressed among the 15 RCEP members over the past decade through a vast network of FTAs. 

RCEP however will further reduce tariff barriers which includes reducing tariffs on trade in goods, as well as creating higher quality rules for trade inc services, including market access provisions for service sector suppliers from other RCEP countries.

The agreement will also reduce non-tariff barriers to trade among member nations, such as customs and quarantine procedures as well as technical standards.

International Trade and Industry Ministry (MITI) deputy secretary-general (Industry) Datuk Seri Norazman Ayob had previously stated Malaysia’s plans to ratify RCEP by the end of this year, or latest by the first quarter of next year.

He said RCEP will come into force 60 days after Malaysia completes its domestic procedures and subsequently submits an instrument of ratification to Asean Secretariat.

Association of Southeast Asian Nations (ASEAN) Secretariat on Wednesday announced that the Regional Comprehensive Economic Partnership (RCEP) agreement, the world’s largest trade deal so far, would enter into force on Jan 1, 2022.

The Secretariat has received instruments of ratification from six ASEAN countries, namely Brunei, Cambodia, Laos, Singapore, Thailand, and Vietnam, as well as from four non-ASEAN signatory states of Australia, China, Japan, and New Zealand, Xinhua news agency reported.

Meanwhile, Rajiv said the latest IHS Markit Asean Manufacturing Purchasing Managers’ Index (PMI) rose from 50.0 in September to 53.6 in October, reflecting the first improvement in Asean manufacturing conditions since May.

The improvement in the data for the region signalled the growth in manufacturing output at a faster rate than recorded by IHS Markit’s PMI surveys in other major economies, including the US, Eurozone, Japan and China, he said.

“In Malaysia, the headline IHS Markit Malaysia Manufacturing PMI registered 52.2 in October, returning to expansion as COVID-19 restrictions were eased. Both production and new order volumes returned to expansion territory in October,” he added.