What does the Regional Comprehensive Economic Partnership (RCEP) mean to the economic ties of Vietnam and Australia?
|Chau Ta, vice president of AusCham Vietnam |
The RCEP will be the world’s largest free trade agreement, with notable benefits for the 15 signatory countries, including Australia and Vietnam. It is a modern and comprehensive free trade agreement (FTA) covering trade in goods, services, and investment, as well as economic and technical cooperation, with new rules for electronic commerce, intellectual property, government procurement, competition, and small- and medium-sized enterprises.
The agreement will enhance the bilateral economic partnership between both countries and foster post-pandemic recovery. Both nations elevated their relationship to a strategic partnership in 2018 and have signed comprehensive action plans with the goal of becoming mutual top 10 trading partners with doubled two-way investment by 2030.
Australia and Vietnam are currently each other’s 14 largest trading partners, and there is great potential for further growth. FTAs such as the RCEP, as well as the ASEAN-Australia-New Zealand Free Trade Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, will play an important role in helping Australia and Vietnam enhance their economic relationship.
As economies recover from COVID-19, the RCEP will facilitate opportunities for investors and the two-way demand for goods and services, helping to create jobs in both countries.
Moreover, the agreement will help stimulate growth and investment across our region, by consolidating existing trade agreements among participants and facilitating business access to the regional value chains and tariff preferences.
It is also an avenue for tackling non-tariff barriers, particularly in quarantine and technical standards, further promoting compliance with the World Trade Organization’s rules and improving cooperation and transparency. The deal consolidates rules of origin definitions and quotas among participating nations, further facilitating cross-border trade as businesses do not need to consider requirements for each country.
There are also specific rules on intellectual property and e-commerce – sectors that have become more important after the pandemic.
Each of these outcomes will enhance the strong Australian-Vietnamese economic relationship, opening further opportunities for exporters and investors as we rebuild economies after COVID-19.
What are some focus areas in the coming time?
As members of three major regional FTAs, Australia and Vietnam are well-positioned to enhance the economic partnership. The FTAs can improve market access across all areas and help stimulate the competitiveness of Australian and Vietnamese businesses. This also benefits consumers in both countries through access to an increased range of better-value goods and services.
For goods trade, the RCEP will provide a single set of rules and procedures for accessing preferential tariffs across the region. Its rules of origin will be modern and liberal, reflecting contemporary production processes and trade logistics arrangements. The agreement will also promote modern customs procedures and trade facilitation arrangements and provide businesses with greater choice in how they meet origin documentation requirements.
Furthermore, a strong platform will be provided to expand trade in services and promote investment. The RCEP will establish high-quality rules for investment and the supply of services between the parties, including obligations to provide access to foreign service suppliers, to treat local and foreign suppliers and investors equally, and to treat foreign suppliers and investors at least as well as suppliers and investors of any other non-RCEP country.
According to a recent report by the Australia-ASEAN Study Centre, Vietnam has significant opportunities across agricultural goods, resources, services, and Industry 4.0 applications. There will be strengthened economic cooperation in existing areas where Australia has strong export capacity, such as agricultural goods, raw materials and resources, manufacturing and services.
How do you see Australian investment expand in Vietnam in 2021?
The agreement will provide greater clarity and protection for investors – both in Australia and in Vietnam – and will state core investment protections, including rules requiring payment of compensation where an investment is expropriated, guaranteed minimum standards of treatment of investors under international law, compensation for losses, and free transfer of investment-related capital without delay and prohibitions on performance requirements.
The RCEP will contribute to the development of an increasingly attractive investment environment in Vietnam, focused on job creation, local innovation, and global supply chain integration. Australian businesses will likely enhance investments in areas that offer comparative advantages and make use of the robust trade ecosystems with Vietnam, such as in raw material exports, manufacturing, and services. Businesses might also increase investment in sectors that have grown post-pandemic, including the ICT industry, healthcare, and e-commerce.
Digital trade is a notable opportunity for both Australia and Vietnam. Its significance is expected to grow following COVID-19.
There is great potential for the digital marketplace to expand and for Australian and Vietnamese businesses to identify investment opportunities throughout the region. By including commitments to support the flow of data, promote privacy, and consumer protection, the RCEP will help to facilitate digital trade and support consumer confidence in the online environment.