Leaders attend the fourth RCEP Summit, held via video link, on Nov 15, 2020. (PHOTO / YONHAP NEWS AGENCY)

On New Year’s Day, the Regional Comprehensive Economic Partnership agreement took effect in 10 of the 15 signatory countries, including China, Brunei, Singapore, Thailand, New Zealand and Japan.

The economic pact will come into force on Feb 1 in South Korea, and in the remaining countries 60 days after they officially deposit “instruments of ratification, acceptance, or approval” to the Secretariat of the Association of Southeast Asian Nations.

John Yu, general manager of New Zealand-based agricultural produce trader Vitabeez, said: “We used to pay about 15 percent of produce value to export fresh milk to China. Now, with the implementation of the RCEP, the tariff is removed and value-added taxes will also be reduced as a result.”

Other key produce the company trades, including honey and fruit, have enjoyed zero tariffs for years, thanks to the free trade agreement between China and New Zealand.

The RCEP further reduces the company’s tariff and tax costs, helping it offset rising airfreight charges resulting from COVID-19, Yu added.

Signed in November 2020 by 15 Asia-Pacific economies, including the 10 ASEAN member states, the agreement has created the world’s largest free trade bloc by economic size.

The combined GDP of its members comprises nearly one-third the global total, according to the United Nations Conference on Trade and Development, or UNCTAD.

The region covered by the RCEP boasts a population of some 2.27 billion, about one-third the global total. RCEP members’ exports totaled $5.2 trillion in 2019, or 30 percent of those globally, according to China’s Ministry of Commerce.

Research by UNCTAD shows the RCEP will have a significant impact on international trade, and during the pandemic, promote trade resilience.

“It will play a role in creating some degree of confidence that trade integration — at least in moderate terms — will continue,” said Manu Bhaskaran, chief executive of Centennial Asia Advisors, a think tank in Singapore. “In an age of growing protectionism and inward-looking policies, this is welcome.”

Francis Chua, founding chairman of the International Chamber of Commerce in the Philippines, said the RCEP is expected to consolidate the position of ASEAN members within a larger grouping built on “a modern, comprehensive, high-quality, and mutually beneficial economic partnership agreement”.

In an online report, the ASEAN Secretariat said the entry into force of the RCEP “is a manifestation of the region’s resolve to keep markets open; strengthen regional economic integration; support an open, free, fair, inclusive, and rules-based multilateral trading system; and, ultimately, contribute to global post-pandemic recovery efforts”.

“The ASEAN Secretariat remains committed to support the RCEP process in ensuring its effective and efficient implementation,” the report says.

Cui Fan, a professor at the School of International Trade and Economics at the University of International Business and Economics, or UIBE, said, “By significantly improving market access and reducing costs, the RCEP will boost trade and investment.”

According to a report by the Chinese Academy of International Trade and Economic Cooperation in Beijing, the RCEP will add about $857 billion worth of exports and $984 billion of imports to the region by 2035 — respective growth of about 18.3 percent and 9.6 percent.

By 2035, it will increase regional combined GDP growth by 0.86 percent, and for the global economy, it will raise GDP by 0.12 percent and trade by 2.91 percent.

Asian Development Bank economists have estimated that by 2030, the trade agreement will increase incomes in participating economies by 0.6 percent and create 2.8 million jobs. They also see a rise in intra-RCEP investment, as the pact prohibits performance requirements — like specific percentages of domestic content or technology transfer — on investors as conditions for market access.

Wei Jianguo, vice-chairman of the China Center for International Economic Exchanges based in Beijing, said the RCEP free trade bloc will become the world’s most diversified economic grouping, with members at various stages of development, following different political systems and having diverse social structures.

Up to 90 percent of goods traded in the bloc will become tariff-free within 20 years, with many tariffs abolished immediately.

To enjoy lower or zero tariffs, the RCEP’s new rules of origin allow for products to have just 40 percent of their value added within the region. Rules of origin in a free trade area determine if a product originates from a member, so that related provisions can be applied.

While FTAs among countries in the RCEP mainly cover trade in goods, the pact extends to trade in services, investment and alignment of members’ domestic rules with the agreement.

“The RCEP is expected to help members build mutually beneficial industrial and supply chain partnerships, as well as stabilize these chains,” Wei said, adding the agreement can significantly lower trade costs in the region, enhance the competitiveness of products, create more business opportunities for enterprises, and provide additional choices and benefits for consumers.

Wang Tuo, a researcher at the Institute of International Trade in Services, said the agreement will better allocate resources in the region — creating more market potential for members and boosting trade ties.

Cui, from UIBE, said, “The RCEP will strengthen integration of regional industrial, supply and value chains, and accelerate regional economic integration — injecting new impetus to regional and global economic recovery.”

Chris Cai, general manager of Four Seas (Guangzhou) Food Import and Export Trading Co, said the pact will significantly benefit the company in at least two respects — reduced tariffs and increased market access.

A subsidiary of Four Seas Mercantile Holdings, an investment holding company based in Hong Kong mainly engaged in the food sector, Cai’s business has food factories on the Chinese mainland and in Japan. It imports prepackaged snacks, beverages and food materials from Japan and Southeast Asian countries including Thailand and Indonesia, and exports food products to Japan.

Cai said, “As we both import and export, the reductions in tariffs are quite considerable for us, while the simplified customs procedures in the region after the pact takes effect mean reduced costs for the business.”

Zhan Linchang, general manager of the purchasing department and new model propulsion at GAC Mitsubishi Motors Co in Changsha, Hunan province, said the company will save more than 2.73 million yuan ($429,000) this year from reduced tariffs on imported components including hydraulic valves and windshield washer motors. These tariffs will gradually be reduced to zero.

The RCEP rules of origin and other arrangements for trade liberalization and facilitation mean that regional industrial and supply chains will be deeply integrated, boosting exports and imports of related products spanning raw materials, key components and completed products and devices, Zhan said.

Wang, from the Institute of International Trade in Services, said, “As regional economic and trade cooperation will be continuously strengthened and enhanced under the agreement, China is expected to establish stronger and more comprehensive economic cooperation with other RCEP members.”

Hiroshi Hamaguchi, president of pharmaceutical company Astellas’ Greater China Commercial, said that since entering the country in 1994, the business has witnessed China’s significant achievements in economic growth, and is even more confident about business prospects in China with the RCEP coming into effect.

“China’s improving business environment and high-level opening-up will provide more opportunities for Astellas to turn innovative science into value for patients. We aim to become a leader in oncology and specialty medicine in China.”

Zhang Jianping, director of the Institute of International Trade in Services’ Center for Regional Economic Cooperation, said China has made strenuous efforts to create the conditions for implementation of the RCEP over the years — carrying out increased experiments with pilot free trade zones, significantly reducing negative lists (measures regulating foreign investment access), and continuously improving the business environment to align domestic regulations and laws to meet the partnership’s requirements.

“We need to expand international cooperation, while encouraging domestic enterprises to strengthen research and development on core technologies to increase industrial resilience,” said Gao Shiwang, director of the industry development department at the China Chamber of Commerce for Import and Export of Machinery and Electronic Products.

“Chinese enterprises are expected to make good use of the RCEP and adjust their development strategies and improve management of overseas business to better cope with the dual-circulation development pattern and play a better role in the international division of labor and the global value chain.”

Sanjay Mathur, chief economist for Southeast Asia and India at ANZ Bank, cited China’s huge economy and how it will serve as the “pivotal market” for all RCEP members, which “will now have (increased) access to the second-largest economy in the world, so that is a huge step forward”.

Josua Pardede, an industry and regional analyst at the Jakarta-based Permata Bank, said the RCEP will accelerate the entry of smaller Indonesian enterprises into the global value chain.

Danilo Fausto, president of the Philippine Chamber of Agriculture and Food, said he believes the pact will open up markets for Philippine products.

Leonardus Jegho in Jakarta and Xinhua contributed to this story.

Contact the writers at liuzhihua@chinadaily.com.cn