The world’s largest trade pact, the Regional Comprehensive Economic Partnership (RCEP), was penned on 15 November 2020. It involves all ten ASEAN members (Indonesia, Thailand, Malaysia, Singapore, Philippines, Vietnam, Brunei, Cambodia, Myanmar, Laos), China, Japan, South Korea, Australia and New Zealand.
The trade pact brings about many benefits for Singapore and businesses that are established here. It eliminated tariffs for 92 percent of goods traded among the members. One of the most striking advantages is that a single rule will apply for a product across all 15 parties to the RCEP. Other than this, the pact also introduced the cumulation of rules of origin (ROO), which describes how much regional content a product must have for it to enjoy lower tariffs.
Businesses will need to do their own research to determine the exact benefits that maybe reaped from the RCEP. It is evident that industries which are subject to traditionally higher rates of customs duties will benefit the most, such as food and agriculture, electronics and automotive.
Mr Alex Capri, a visiting fellow at the National University of Singapore’s business school said that “The RCEP would seem to be beneficial to small and medium-sized enterprises (SMEs), as the digital economy still presents SMEs with significant barriers for cross-border trade,”.
The RCEP however, will only take effect after six ASEAN countries and three non-ASEAN countries ratify it. This means that it may take more than a year before the trade pact comes into effect. Businesses should not push this to the back of their minds as they might ultimately forget about the arrangement when it eventually comes into force.
They could start to review existing supply sources and consider new markets to be able to take full advantage of the RCEP when it comes into effect.