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How important is the Regional Comprehensive Economic Partnership (RCEP) to Vietnam and ASEAN as a whole?
|Minister of Industry and Trade Tran Tuan Anh|
With the disruption of global and regional supply chains and the emerging trend of trade protectionism, the signing of the RCEP marks an important milestone in the economic integration process of Vietnam and all negotiating countries.
Firstly, if implemented by all 15 members, the RCEP will create a large market with 2.2 billion consumers, about 30 per cent of the world’s population. This covers a GDP of nearly $27 trillion, accounting for about 30 per cent of global GDP, and will become the largest free trade region in the world.
With commitments to open markets in goods, services, and investment; harmonise of rules of origin among all participants; and strengthen trade facilitation measures, the agreement will provide opportunities to develop new supply chains in the region. Furthermore, the agreement will help establish long-term stable export markets for Vietnam and other ASEAN countries.
In addition, the implementation of the RCEP will create a legally-binding framework in the region on trade policy, investment, intellectual property, e-commerce, and dispute settlement, contributing to creating a fair trade environment across the region.
With the new cooperation frameworks set by the RCEP and previous free trade agreements (FTAs), Vietnam and some other ASEAN countries are becoming a reliable destination for international investors. These benefits often have long-term economic implications for the economy.
The most important significance is that the conclusion of the negotiation and signing of the RCEP will contribute to upholding ASEAN’s central role in the process of shaping the structure of the region.
How do Vietnam’s commitments in the RCEP differ from other FTAs?
Vietnam’s commitments in the RCEP are built on the basis of commitments in the World Trade Organization and FTAs between ASEAN and five of their partners, while the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the deal between Vietnam and the EU are classed as new-generation FTAs.
The RCEP is built to suit the development level of all participating countries, especially for some ASEAN countries that remain underdeveloped. Therefore, although the economic space is larger and the population is larger, the agreement is also more flexible for the participating countries. Those participating in the RCEP also identified this as an initial step towards higher levels of cooperation when those countries are ready.
However, in the process of negotiating the agreement, countries have also attempted and agreed on a number of new areas that have not been committed in previous ASEAN FTAs such as in e-commerce, competition policy, and government procurement with the content and commitment level in accordance with current laws of Vietnam and other ASEAN member states. These new contents have been included and are mentioned to a higher degree in new-generation FTAs.
Will the RCEP be open for other countries to join?
It is a dynamic FTA with a provision that allows other countries to apply for participation 18 months after the entry into force of the deal. Such participation will be decided and based on a common agreement of the country with all members of the RCEP.
In regards to India, the countries participating in the negotiation have agreed to for a more favourable mechanism so that India can soon return to join the agreement when conditions permit.
What are the more challenging requirements that Vietnam has to meet after signing the RCEP?
The agreement will bring competitive pressure on goods and services. The characteristics of economies in the RCEP region show that there are many partners with similar product structures to Vietnam, with stronger competitiveness than Vietnam, while the quality and value-added content of most Vietnamese products are still modest.
In addition, Vietnam’s production inputs still depend on imported sources, while the ability to improve position in the regional value chain is limited. However, the recent experience in international economic integration shows that Vietnam’s ability to participate in newly-established value chains in the region is indeed increasing.
Will the agreement increase Vietnam’s trade deficit with some RCEP member countries?
During negotiations, we were in close consultation with relevant ministries and businesses to achieve the goal of negotiating results to ensure the highest interests of Vietnam.
The tariff liberalisation process with ASEAN member states has already been implemented for more than 20 years and with the five partner countries over the past 15 years. Therefore, implementation of the agreement will not create a tariff reduction shock for Vietnam.
The RCEP is basically an agreement connecting ASEAN’s existing commitments with five partners with ASEAN in an FTA. For instance, an enterprise would have to use only one rule of origin instead of five separate rules of origin as in previous FTAs. Similarly, customs clearance and trade facilitation rules were agreed and strengthened.
Therefore, it will not fundamentally create a commitment to market opening or new competitive pressure but mainly aim at creating favourable conditions for enterprises, especially small- and medium-sized ones.