The signing of Regional Comprehensive Economic Partnership (RCEP) in November revives world confidence in multilateralism. Made up of 10 Southeast Asian countries as well as South Korea, China, Japan, Australia and New Zealand, the megadeal shows that the pursuit of free trade and an open world economy is the consensus of the global community.
The significance of RCEP lies in the fact that it will reduce tariffs among countries that account for about a third of the world’s population and 29 percent of global GDP within the next 20 years, while in the meantime adding provisions on intellectual property, telecommunications, financial services, e-commerce and professional services.
According to the Peterson Institute for International Economics, the megadeal can be expected to increase global economy by $186 billion annually by 2030 and add 0.2 percent to the economy of its member states.
Thanks to RCEP, trade within the region is likely to grow faster than trade with other parts of the world, thereby adding weight to the region’s value chain for RCEP countries.
Grappling with the COVID-19 pandemic, the trade bloc will also serve as a game-changer and accelerator for Asian countries recovering from the economic fallout of the coronavirus.
Seang Thay, secretary of state and spokesman for Cambodia's Commerce Ministry said the RCEP will bring a broader market and promote the further development of trade and investment within member states, which will contribute largely to the recovery of countries within the region from COVID-19 and elevate the region’s role in global trade and economics.
“The agreement will not only reinforce ASEAN centrality but also further deepen and broaden economic integration in our region at a very crucial moment as we seek to redouble efforts to reinvigorate our economies from the impact of COVID-19,” said Don Pramudwinai, deputy prime minister and minister of foreign affairs of Thailand in an interview with the People’s Daily.
Pramudwinai said that the RCEP was expected to generate an additional 4 percent for Thailand’s GDP.
Thailand’s GDP growth is driven by an increase of exports of agricultural products like cassava, starch, fruit, seafood and processed food like juice and coconut-made snacks.
As a hub of manufacturing in ASEAN, Thailand will also see a surge of exports of its electrical equipment, plastics, paper, auto parts, clothes, shoes and hats.
With increasing exports, China, Japan, South Korea, Australia, New Zealand and ASEAN will increase investments in Thailand.
RCEP is not a panacea and we can’t wait to gain more benefits, Aksornsri Phanishsarn, Adviser to the Senate Foreign Relations Committee of Thailand told the People’s Daily.
Take the bilateral trade with China as an example, the products exported from Thailand to China won’t increase automatically, Phanishsarn added that this requires the Thai government and private enterprises to make joint efforts to tap more growth points in bilateral trade.
The deal has also prompted member countries to tackle trade barriers.
Indonesia ratified its Omnibus Bill on Job Creation to reduce red tape and improve the ease of doing business, which might open the door to multinationals.
According to a study published by the Brookings Institution, RCEP could add $209 billion to world incomes if implemented as planned.
The agreements will reduce the cost of doing business in East Asia, connecting strengths in technology, manufacturing, agriculture and natural resources.
Not only will the RCEP deal with the challenges brought by COVID-19, but also boost the burgeoning field of digital technologies and e-commerce when social distancing amid the pandemic necessitates the need for working and living “in the cloud.”
With booming development of intelligent technologies in RCEP countries like China, South Korea, Japan and Singapore, tech giants will find it easier to expand their markets in the region with the aid of RCEP.
RCEP is accelerating the shift toward Asia, as Jeffrey Sachs, professor and director of Columbia University's Center for Sustainable Development, said in an interview with Nikkei Asia.
He added that RCEP countries have vastly outperformed their counterparts in Europe and the Americas, with better governance and more social responsibility of the public.
With the implementation of the agreement, RCEP will further move the COVID-plagued world’s economic center toward Asia and “bring a ray of light and hope amid the clouds,” as Chinese Premier Li Keqiang put it, to help the region build its economic future in the post-pandemic recovery.