As COVID-19 continues to wreak havoc around the world and weigh on global economic recovery, the Regional Comprehensive Economic Partnership (RCEP) agreement is to shore up regional trade and investment, a Thai economist said.
RCEP, which groups 10 Association of Southeast Asian Nations (ASEAN) countries, as well as China, Japan, the Republic of Korea, Australia and New Zealand, entered into force on Jan. 1, 2022. As the world's largest free trade pact ever forged, its members cover nearly a third of the world's population and gross domestic product.
Thanks to RCEP's common rules of origin, cross-border supply chains in the region will be treated as intra-bloc supply chains, therefore encouraging and facilitating regional production and trade, said Chinnawut Techanuvat, head of economic and financial market research division at the Siam Commercial Bank's Economic Intelligence Center.
The free trade pact is expected to eventually eliminate tariffs on more than 90 percent of goods. The United Nations Conference on Trade and Development (UNCTAD) said last month that RCEP will create "a center of gravity for global trade," expecting the agreement's tariff concessions to boost exports within the region by 42 billion U.S. dollars.
In an interview with Xinhua, Chinnawut said RCEP will strengthen regional supply chain integration.
"The supply chain bottleneck that is usually caused by a combination of lack of resources or components and lengthened delivery time period could be mitigated through localized production at source and better cross-border trade facilitation," he said.
High trade volumes would also bring in much-needed investment in transport infrastructure that is comparatively lacking in less developed economies, Chinnawut added.
RCEP seeks to promote e-commerce and digital economy which would be increasingly relevant in the post-pandemic world. "This will have implications not only on trade and economic growth, but also on promoting digital inclusiveness and a more level playing field," Chinnawut said.
Small enterprises which took a big hit from the pandemic could emerge stronger from the improved access to a larger universe of the RCEP market, he said.