The RCEP was signed last week in Hanoi, via phone call, by 15 countries (ASEAN and 5 non-ASEAN members being Australia, China, Japan, New Zealand and South Korea).
Negotiations started in 2012, and needs further ratification by each country and RCEP will not become effective until this is done by at least 6 ASEAN and 3 Non ASEAN member countries. In line with other FTA’s it covers not only trade in goods and services but also investment, rules for e-commerce, intellectual property, government procurement, competition and SME’s. One notable fact is that the Agreement, which includes China creates one the worlds’ largest trading blocs accounting for over 30% of the world’s population.
The big question is whether this Agreement will actually bring significant additional benefits, as Vietnam already has a trade deal with ASEAN, and overlapping trade deals with ASEAN plus One (being ASEAN plus 1 being China, India, Japan, Australia and New Zealand). The belief is that although the RCEP will increase competition the RCEP can help Vietnamese companies increase exports and bring more high quality goods to consumers[1]. One fact to support this is that the RCEP does not set the bar too high for import standards, as it is built to suit the development level of all participating countries, including those ASEAN countries that are still under- developed. Raymond Mallon[2] warned that whilst RCEP will enable Vietnam to woo more foreign investment, much needs to done for the country to benefit from the Agreement. He also commented “Vietnamese authorities need to remain aware of the progress being made in other countries and continue to strive to further improve the business climate and protect Vietnam’ natural environment”.
Overall, this Agreement may not bring significant benefits to Vietnam, unlike the EU- Vietnam FTA and the CPTPP, as most countries that are signatories are major trade competitors to Vietnam and also wooing foreign direct investment. However, it does bring together countries in the Indo-Pacific region and demonstrates the significance of this group of countries and helps with the harmonisation of trade rules amongst the member countries, as well as sending a signal of the growing importance of ASEAN.
[1] VN Express International November 16th 2020
[2] Senioe Economic Adviser to the Australian-Vietnam economic reform program
By Kenneth Atkinson, Founder and Senior Board Adviser @ Grant Thornton (Vietnam)
Ken Atkinson, founder and senior board adviser, Grant Thornton Vietnam and vice chairman of Vietnam Tourism Advisory Board