RCEP and Vietnam: what the signed pact means for firms

RCEP and Vietnam are now linked by a signed trade pact. On 15 November 2020, Vietnam and 14 other Asia-Pacific economies signed the Regional Comprehensive Economic Partnership. It is not yet in force, so nothing changes at the border today. Firms should use the wait to prepare.

Who signed the pact

Fifteen economies signed. They are the ten ASEAN members: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Five partners signed with them: Australia, China, Japan, South Korea and New Zealand.

The signing took place at a virtual summit hosted by Vietnam, which chairs ASEAN this year. India took part in the talks but left them in November 2019. The other members have said India may join later.

The talks began years ago and ran through many rounds before the signing on 15 November. That long road shows how hard it is to line up fifteen different economies, from rich to developing, behind one set of terms.

The member list also tells you something about timing. Several countries are still in the middle of the pandemic. Even so, they chose to sign by video link instead of waiting.

Sources: New Zealand Ministry of Foreign Affairs and Trade, RCEP overview page; Wikipedia, "Regional Comprehensive Economic Partnership" (signing date, member list, India).

What the agreement covers

RCEP is a broad deal. It covers trade in goods, trade in services and investment. It also sets new rules for e-commerce, intellectual property, government purchasing, competition and small business.

The big idea is to bring the existing deals between these economies under one frame. Today a firm that ships to several of these markets deals with a different set of terms for each one. RCEP adds unified rules of origin, which should make it easier to build supply chains across the region.

Services and investment matter too. A firm that sells software, logistics or design to another member may meet fewer limits over time. A firm that wants to open an office or plant abroad may find clearer rules. These gains depend on each country's own commitments, so read the actual schedule for the market you care about.

E-commerce rules are part of the text as well. They deal with things like online transactions and consumer trust. Small sellers who use online platforms to reach buyers in the region should watch how these rules are put into practice.

Sources: Australian Department of Foreign Affairs and Trade, RCEP page (areas covered); Wikipedia, "Regional Comprehensive Economic Partnership" (unified rules of origin).

Why the size matters

The 15 members together hold about 30 percent of the world's people and about 30 percent of world output, according to published summaries. That makes RCEP the largest trade bloc by these measures.

For Vietnam, the group includes its biggest partners in the region. China, South Korea and Japan are already key sources of inputs and key buyers. Vietnam already has trade agreements with many members, so RCEP mostly ties those deals into one frame.

Sources: Wikipedia, "Regional Comprehensive Economic Partnership" (share of population and output).

When it takes effect

Signing is only the first step. Each country must now approve the pact under its own laws. The agreement can take effect after six or more ASEAN members, plus three of the five partner countries, finish that step. No start date is set yet.

Tariff cuts are also expected to come in stages, not all at once. Exporters should not plan on lower duties until a start date is confirmed and each country publishes its own tariff schedule.

Sources: Wikipedia, "Regional Comprehensive Economic Partnership" (ratification needed before entry into force).

What exporters should do now

Start with your products. List each item you sell and note the market it goes to. When the tariff schedules are published, check where each item falls.

Next, look at where your inputs come from. Rules of origin decide whether a product counts as made in the region. Records of suppliers and materials will help you prove it later, so tidy them now.

Last, keep using the trade deals that already work for you. Until RCEP is in force, current agreements and certificates of origin still apply. Watch official announcements from the Ministry of Industry and Trade.

Think about competition as well. If duties fall for imports into Vietnam, local producers may face more rivals from other members. If duties fall for exports, local producers may find easier access to others. Both effects can hit one company at the same time, so plan for both sides.

Finally, talk to your buyers and suppliers. Ask them what they expect, and whether they plan to shift orders once the pact starts. Early talks help you spot risks and chances before your rivals do.

This is general information. For trade rules that affect your firm, ask a customs or trade lawyer.

Sources: New Zealand Ministry of Foreign Affairs and Trade, RCEP overview page; Wikipedia, "Regional Comprehensive Economic Partnership".