RCEP nears for key partner improvement

RCEP-illustration photo, source internet

Hirai Shinji, chief representative of the Japan Trade Promotion Organization (JETRO) in Ho Chi Minh City said that Japanese businesspeople welcome the entry into force of the agreement (RCEP). “This is because it is expected to strengthen the relationship between Japan and the region, the centre of global economic growth, and to contribute to the growth of the economy of Japan and the region,” he said.

Shinji added that Vietnam’s economic growth has been enhanced by the active conclusion of free trade agreements (FTAs). The RCEP, the largest free trade agreement Vietnam has ever concluded, is expected to boost the country’s economic growth all the more because the trade between Vietnam and other RCEP member countries amounts to 55 per cent of its total trade. Meanwhile, the investment from those countries amounts to 62 per cent of total foreign direct investment in Vietnam.

The ASEAN Secretariat announced earlier in November that the RCEP will enter into force on January 1 next year, as it has received instruments of ratification and acceptance from member states. The agreement is an unprecedented mega-regional trade arrangement that comprises the 10 member countries of ASEAN along with Japan, China, South Korea, Australia, and New Zealand, and covers nearly 30 per cent of the global population and GDP.

H.E. Joe Nelson, New Zealand Consul-General in Vietnam cum New Zealand Trade Commissioner told VIR, “The RCEP will enable New Zealand to deepen our connection with and facilitate our economic integration in the Asia-Pacific region. Our relationships in this region are vital.”

RCEP markets currently take up more than half of New Zealand’s total goods and services exports and thus it will play a key part in New Zealand’s COVID-19 trade recovery strategy, Nelson added.

Trade between New Zealand and Vietnam has more than tripled since the ASEAN, Australia, and New Zealand deal (AANZFTA) came into force in 2010. With the additional commitments included in the RCEP, Nelson believed that trade and investment between New Zealand and Vietnam would continue to grow further.

According to the Australian Government Department of Foreign Affairs and Trade (DFAT), the other 14 RCEP countries include nine of its top 15 trading partners and account for 58 per cent of Australia’s total two-way trade, and 67 per cent of its exports. As these economies recover from COVID-19, the Australian government wants to ensure that opportunities for their investors and demand for their exports will rise, helping to create jobs.

Australia’s Minister for Trade, Tourism, and Investment Dan Tehan noted, “Australia is currently a partner with Vietnam in three other FTAs, demonstrating a shared commitment to upholding a strong, transparent, and rules-based trading system that allows our businesses to work together and invest with certainty.”

According to a report by London-based information provider IHS Markit, although tariff liberalisation has already progressed significantly among the 15 RCEP members over the past decade through a wide network of FTAs, the new agreement will further reduce tariff barriers. The scope of the RCEP includes reducing tariffs on trade in goods as well as creating higher-quality rules for trade in services, including market access provisions for service sector suppliers from other RCEP countries. The agreement will also reduce non-tariff barriers to trade among member nations, such as customs and quarantine procedures as well as technical standards.

Besides trade, the RCEP will help attract high-quality investment from developed markets like Japan, Australia, and New Zealand. Shinji from JETRO said foreign investors have been looking for opportunities for growth from a long term perspective. Although countermeasures against the pandemic had a negative impact on the Vietnamese economy, a quick recovery is expected, with global financial institutions noting that Vietnam’s economic growth in 2022 is expected to be around 6.6 per cent.

“Keeping the new normal policy of Vietnam on track is essential to attracting more Japanese companies in Vietnam. The disruption of supply chains this year has made Japanese companies aware that the interdependence between Vietnam and Japan has become stronger than ever,” Shinji added.