Vietnamese business urged to gear up for largest global trade deal
Vietnamese business urged to gear up for largest global trade deal
The Regional Comprehensive Economic Partnership (RCEP) agreement will officially come into force on January 1, 2022. As of November 2, six ASEAN nations, including Vietnam, and four other signatories - China, Japan, Australia and New Zealand - had submitted documents ratifying the agreement.
Stable, sustainable export market
The trade pact was signed by 10 ASEAN members and their five partner countries, including China, Japan, the Republic of Korea, Australia and New Zealand on November 15, 2020 on the sidelines of the 37th ASEAN Summit chaired by Vietnam.
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Once it is ratified by all signatories and takes full effect, RCEP will cover a market of 2.2 billion people (accounting for about 30 percent of the world’s population), have a total gross domestic product (GDP) of US$26.2 trillion (representing 30 percent of the global GDP) and become the largest free trade area in the world in terms of population size.
According to the Ministry of Industry and Trade, the RCEP agreement is expected to multilateralize free trade agreements that ASEAN has signed with partner countries, harmonize commitments and regulations in the trade pacts, maximize economic interests, particularly rules of origin and trade facilitation, and strengthen regional supply chains and economic recovery in the post-pandemic period.
At a recent virtual conference “RCEP - What businesses need to know”, Nguyen Thi Thu Trang, Director of the Vietnam Chamber of Commerce and Industry’s (VCCI) Center for WTO and International Trade, said RCEP brings together almost all of Vietnam’s largest import markets, accounting for 70 percent of the country’s total import value. All Vietnam’s leading FDI partners are RCEP members, meaning that the trade pact is expected to greatly boost production and supply chains within the bloc, Trang said. The bloc currently represents 50-55 percent of Vietnam’s foreign trade value, she added.
The agreement is expected to help attract more investment from outside and reduce the pandemic’s impact on RCEP economies. It will not only be an economic recovery tool but will also help ensure market opening and uninterrupted supply chains. Regarding trade in goods, member countries will further open their markets to each other, as well as strengthen cooperation in developing regional supply chains to better prevent risks. Therefore, RCEP is expected to help create a stable and long-term export market for ASEAN countries in general and Vietnam in particular, contributing to Vietnam’s implementation of export-oriented production policy.
Almost all Vietnam’s major import markets are RCEP signatories |
RCEP commitments are harmonized and facilitated through a common set of rules |
Careful preparation needed
RCEP members have different levels of development and different tariffs, making the deal somewhat complex for businesses. RCEP will eliminate tariff barriers and reduce non-tariff barriers so that goods can be traded and circulated most freely. RCEP members will eliminate tariff lines as of January 1, 2022, but the numbers of eliminated tax lines will be different.
Regarding rules of origin, the commitments in the RCEP are harmonized and facilitated by the use of a common set of rules. However, RCEP partners use different tariff preferences, while some categories of product must comply with additional rules of origin. Non-tariff measures, import restrictions, export bans, and specialized inspection procedures for import and export goods will be facilitated and made consistent. All intellectual property commitments under the RCEP are lower or equal to those in other free trade agreements (FTAs).
Tran Thi Hong Minh, Director of the Central Institute for Economic Management (CIEM) said RCEP offers great opportunities but businesses need to prepare carefully if they are to make efficient use of them. Enterprises need to thoroughly understand commitments in the trade pact to develop an appropriate business plan, Minh said.
