How will the RCEP affect logistics and commerce companies in the signatories of the agreement after implementation and how can they prepare for trade automation in 2022?
On January 1, 2022, the Regional Comprehensive Economic Partnership came into force after 6 nations from the ASEAN bloc and 4 signatories from non-ASEAN states submitted Instruments of Ratification/Acceptance to the ASEAN Secretariat, by December 26, 2021.
The treaty, which is a free trade agreement between the 10 ASEAN member states and five other countries from the Asia Pacific region, is the world’s largest trade deal. The five Asia Pacific nations are Australia, China, Japan, New Zealand, and the Republic of Korea.
Accounting for 30% of global GDP, the RCEP is the world's largest free trade agreement (FTA), simplifying commerce between Southeast Asian and Asia-Pacific nations. RCEP promises to deliver new business and employment opportunities, strengthen supply chains in the region, and promote the participation of micro, small, and medium enterprises in regional value chains and production hubs through new market access commitments and streamlined, modern rules and regulations that facilitate trade and investment.
The UNCTAD report also noted that tariff concessions will boost intraregional exports of the newly formed trade bloc by approximately US$42 billion. Computer simulations published by Peterson Institute for International Economics (PIIE) also project that US$209 billion will be added to global incomes by 2030. In the same simulations, RCEP is also predicted to increase ASEAN exports by US$514 billion by 2030.
Thus, with RCEP, the ASEAN region will see an increase in trade volume. Trade patterns among the nations in the bloc will also be altered, as most of the nations in the group will see an increase in both imports and exports. Trading companies in the logistics and commerce sectors may thus experience added strain on their current infrastructures, which could lead to bottlenecks and delays.
The challenge for businesses lies in reinforcing their existing FTA operating models to maximize duty saving prospects throughout their supply chain while also operating in a way that ensures compliance and readiness for possible future inspections from authorities. Given the number of FTAs accessible in Asia-Pacific and the number of products and materials that companies would want to use them in their supply chain, it is almost impossible for enterprises to effectively and efficiently manage FTA-related activities with limited internal resources and manual procedures.
The full impact of the expected increase in commerce resulting from the introduction of RCEP will take some time to unfold. Nonetheless, it has already begun, and trade enterprises across the region must prepare for the additional demand and pressure on current logistics networks that the effect of this agreement will entail. Acquiring the correct mix of technology and qualified individuals is a precondition for businesses to stay ahead of the competition through increasing efficiency in FTA utilization and improved FTA compliance.
ASEAN companies in the logistics and commerce sectors should take early steps to be ready for such a massive increase in trade, by digitizing and improving the automation of trade processes as far as possible, and to do so with haste. If trade processes are not automated and digitized quickly, companies may get overwhelmed and be unable to fully reap the benefits of RCEP.
One of the key bottlenecks in the process of international trade has always been customs and borders. With the number of processes and paperwork that surround the customs clearing procedure, significant delays could result.
An added challenge in customs management is its relatively low level of automation and digitization in Southeast Asia, where technology levels vary widely between countries. In some countries, customs processes are still paper-based. Even in countries that have the infrastructure and systems in place for automated customs, many companies have not yet come on board to plug into those systems.
With the increase expected in trade volume thanks to the RCEP, and the increasing expectation for timely shipping and delivery, there is urgency for companies to begin investing in trade automation solutions, ensuring they are as ready as possible to take advantage of, and to handle, the surge.
AEB has a wide range of solutions that will enable your company to automate and digitize its trading processes. The solutions offered by AEB allow companies in Southeast Asia and the world to automate processes and connect to international customs management systems digitally, reducing bottlenecks in the supply chain and accelerating various aspects of the importation and exportation process.
The increase in trade that comes from the implementation of RCEP will take time to reach its full effect. Nevertheless, it has already begun and trading companies around the region need to be aware and take the necessary steps to be ready for the increased demand and strain on existing shipping systems that this agreement will entail.
Trade automation is one of the most fundamental and straightforward steps companies should take in preparation for this increase and they should do so as early as possible to prevent needing to play catch-up later on. The time is now; seize it with AEB.
AEB software supports the smooth flow of goods across borders while generating savings. Learn more about solutions for customs processes including import, export, origin and preferences, broker integration, supplier's declarations, and product classification. In the cloud or integrated in your ERP.
