On 1 January 2022, the Ministry of Trade and Industry (“MTI”) announced that the Regional Comprehensive Economic Partnership (“RCEP”) Agreement (“Agreement”) entered into force on 1 January 2022, following ratification by 10 parties - Australia, Brunei, Cambodia, China, Japan, Laos, New Zealand, Singapore, Thailand, and Vietnam. Singapore was the first country to ratify the Agreement.
The Agreement will take effect for South Korea on 1 February 2022. Ratification by the remaining parties - Indonesia, Malaysia, Myanmar, and the Philippines - is still pending.
This article sets out some of the key benefits businesses in the countries where the Agreement has come into force can now enjoy. In addition, please read our previous article on RCEP titled “Harnessing opportunities from the Regional Comprehensive Economic Partnership, the world’s largest free trade pact, in South-east Asia and its partners”.
The Agreement is the world’s largest free trade agreement (“FTA”), covering approximately 30% of global GDP (US$26 trillion) and 30% of the world’s population. It builds on existing bilateral agreements between ASEAN and its FTA partners.
Article 1.3 of the Agreement states its objectives as being to:
(a) establish a modern, comprehensive, high-quality, and mutually beneficial economic partnership framework to facilitate the expansion of regional trade and investment and contribute to global economic growth and development, taking into account the stage of development and economic needs of the parties especially of Least Developed Country parties (as designated by the United Nations);
(b) progressively liberalise and facilitate trade in goods among the parties through, inter alia, progressive elimination of tariff and non-tariff barriers on substantially all trade in goods among the parties;
(c) progressively liberalise trade in services among the parties with substantial sectoral coverage to achieve substantial elimination of restrictions and discriminatory measures with respect to trade in services among the parties; and
(d) create a liberal, facilitative, and competitive investment environment in the region, that will enhance investment opportunities and the promotion, protection, facilitation and liberalisation of investment among the parties.
Businesses are now able to enjoy tariff elimination of about 92% for goods traded amongst signatory parties for which the Agreement has entered into force.
Preferential market access
Businesses will also benefit from additional preferential market access for specific products including mineral fuels, plastics, other chemical products, miscellaneous food preparations and beverages in selected RCEP markets such as China and Japan.
Streamlined rules of origin and regional cumulation provisions will provide greater flexibility for businesses to tap on these preferential market access benefits and take advantage of regional supply chains.
Businesses stand to benefit from enhanced commitments above existing ASEAN Plus One FTAs in some sectors, as well as a more transparent approach that would provide greater certainty for businesses. Investors also stand to benefit from commitments to prohibit performance requirements and provisions that lock in future relaxation of measures. RCEP Participating Countries (“RPCs”) also commit to the ratchet mechanism for the first time in an ASEAN Agreement. Under the ratchet mechanism, any future liberalisation by RPCs are automatically locked in by the Agreement and parties would not be able to backtrack on any liberalisation undertaken even after the entry-into-force of the Agreement.
The Agreement creates a more conducive digital trade environment for businesses through enhancements in areas such as online consumer protection, online personal information protection, transparency, paperless trading and acceptance of electronic signatures. It also covers cross border data flows, an emerging area in the digital economy.
With the coming into force of the Agreement, businesses will be able to obtain greater protection for their intellectual property when venturing into RCEP markets, including protection for non-traditional trade marks such as sound marks and industrial designs.
There will also be cost and time savings as a single patent or trade mark application will be accepted across RPCs.
RPCs are committed to maintaining competition law regimes based on international best practices and agreed principles. They will also facilitate cross-border enforcement cooperation including safeguards on the protection of confidential information. This protects businesses from anti-competitive activities when operating in RCEP markets.
Government procurement is a new area of cooperation that has not been previously covered by ASEAN agreements. RPCs are committed to increasing transparency by publishing laws, regulations and procedures regarding government procurement. RPCs have also committed to a review aimed at improving this in future.
The following materials are available on the MTI website www.mti.gov.sg:
- Press release: Regional Comprehensive Economic Partnership enters into force on 1 January 2022
- Regional Comprehensive Economic Partnership (RCEP) Infographic
- Factsheet on the RCEP Agreement