London — The Regional Comprehensive Economic Partnership (RCEP) free trade agreement, signed on November 15, will provide a boost for foreign investment into the Least Developed Countries (LDCs) in the region, officials said.
The RCEP deal includes all ten ASEAN countries, along with Australia, China, Japan, New Zealand, and South Korea.The agrement will benefit Cambodia, Laos and Myanmar, among others.
“The RCEP will connect about 30% of the world’s people and output and, in the right political context, will generate significant gains. According to computer simulations we recently published, RCEP could add $209 billion annually to world incomes, and $500 billion to world trade by 2030,” wrote Peter A Petri and Prof Michael Plummer in Brookings.edu blog. “The new agreements will make the economies of North and Southeast Asia more efficient, linking their strengths in technology, manufacturing, agriculture, and natural resources.”
The members make up nearly a third of the world’s population and account for 29% of global gross domestic product. The new free trade zone will be bigger than both the US-Mexico-Canada Agreement and the European Union. India was also part of the negotiations, but pulled out last year, over concerns that lower tariffs could hurt local producers, the BBC reported.
RCEP is expected to eliminate a range of tariffs on imports within 20 years.
It also includes provisions on intellectual property, telecommunications, financial services, e-commerce and professional services. But it’s possible the new “rules of origin” – which officially define where a product comes from – will have the biggest impact. Already many member states have free trade agreements (FTA) with each other, but there are limitations, the news report said.
“.. For processes that need careful labor-intensive involvement, such as finishing garments, the unified rules of origin regulations under RCEP will motivate an increase of manufacturing investment as concerns finishing of products, such as garments. This will see investment interest increase in countries with lower-cost and lesser-skilled workers such as Cambodia, Laos, and Myanmar, and will be of special interest to manufacturers from Australia, Japan, New Zealand, Singapore, and South Korea where production costs are higher,” wrote in www.aseanbriefing.com
“There is still much work to be done though, and the RCEP deal isn’t yet fully ‘comprehensive’. Agriculture is largely omitted — all nations within RCEP wishing to protect their respective markets, and RCEP does relatively little to set common standards for products. Environmental issues and human rights — including labor — are also unaddressed.”
“RCEP has additionally been unable at this stage to agree on e-commerce regulations, with members unable to agree on any rules on cross-border data flows or a customs moratorium on data transmission. That area will be a major source of interest in future discussions,” Chris Devonshire-Ellis says.
“RCEP provides some flexibility for less-developed members to implement the practical and legislative changes it requires. Cambodia and Laos, for example, have three to five years to upgrade customs procedures. Specifically which areas are open to tariff reductions under RCEP is complex and changes from country to country. Some states have listed what RCEP includes, others have listed what it does not. For countries which already have free trade agreements with each other, an added benefit of RCEP is that it creates a common set of rules of origin, which will facilitate easier movement of goods between the 15 members,” Reuters news agency reported.