RCEP: world’s largest free trade deal announced
Trade boost

RCEP: world’s largest free trade deal announced

Eight years after the launch of the Regional Comprehensive Economic Partnership (RCEP) negotiations, the world’s largest free trade agreement is now a reality.

Regional Comprehensive Economic Program (RCEP)

Covering a market of 15 countries, 2.2 billion people and accounting for 30 percent of the global GDP, this multination deal is expected to broaden regional integration. It will also deepen the supply chain linkages among participating countries and will eliminate tariffs for more than 92 percent of goods traded, streamline customs and trade processes, and boost competition in a way that drives productivity and sustainability.

RCEP is expected to open more opportunities for business growth. But how can businesses be fully prepared to benefit from RCEP?

A timely boost for ASEAN industries

A strategic economic shift to regionalization provides not only geographic proximity advantage but also cultural, administrative and, to some countries, economic proximity benefits. With the RCEP’s ambitious trade partnership, countries can eliminate a range of tariffs on imports within the next 20 years, making it easier to exchange goods within the region and help jump-start economic recovery post-COVID-19.

Under RCEP, ASEAN countries with smaller economies will have the same supplier category in the trade bloc as China, which for decades has been the global factory exporting the bulk of its products and achieving accelerated economic growth based on exports. This opportunity for other ASEAN economies will enable them to step up to global trade much more aggressively. As for China, this development will allow the country to focus more on domestic consumption as a driver of growth.

The RCEP will also allow industries forced to outsource supplies to meet local demand because of trade tensions or the pandemic to access essential goods found in neighboring countries at a more affordable rate. With safety measures in place, a regionalized trade may offer an economically favorable solution for sourcing and pooling the supply and demand of both essential and non-essential goods.

Additionally, ASEAN member states can open their economy to a much wider market and with much more ease. This increased accessibility to global buyers will help boost countries’ trading potential and accelerate recovery from the pandemic.

Supporting ASEAN economies

For smaller ASEAN economies such as Laos, Myanmar, Brunei, and Cambodia, the RCEP can further strengthen their Free Trade Agreements (FTA) by allowing them to export their goods to partner members of the agreement. This will likewise help reduce the development gap among ASEAN members.

For countries such as the Philippines, which provide manpower and business process outsourcing and service workers such as teachers, IT programmers, and engineers besides key products such as automotive parts and agricultural products, RCEP can help open up new markets like South Korea and Japan where there is a high demand for service workers.

Progressive countries like Singapore will benefit differently from RCEP compared with other ASEAN members. As a preferred location for headquarters and a regional hub for e-commerce, it will be a pivotal player in the regional trade and supply chain. Singapore will have the advantage of ensuring greater transparency and strong discipline on Non-Tariff Measures (NTMs) for preferential market access of their products and obtain a projection of non-traditional trademarks and a wider range of industrial design in the region.

Propelling businesses ready for the global marketplace

But for industries and economies to fully take advantage of this new trade pact, an advanced digital platform must be in place to ensure more automated processing across the supply chain. With the establishment of large trade zones, the need for integrated and automated customs declaration processes becomes even more imperative. E-commerce has created huge volumes of packages shipped from one country to another, which in turn requires accurate product classification and declarations filed to comply with local customs regulations.

Cloud-based platforms that have allowed easy integration into national customs systems and local transport networks have grown in popularity in the past few years. These platforms benefit from a high penetration of internet connectivity and the use of mobile phones in the region. The rollout of 5G will further enhance this supply chain connectivity. Governments in the region have started national digitization projects to improve supply chain and digital payment systems, and this will speed up the implementation of a fully digital economy.

AEB has a long track record of more than 40 years in developing solutions that enable global trade. AEB’s Customs Management software allows companies to improve their cross-border trade by enabling full integration between the business processes in their ERP systems, the forwarders, customs agencies, and customs brokers. This allows the companies to improve and digitize their trade process and provides them with significant reductions in supply chain expenses.

Global Customs Management 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.