New breath for Asian economic growth

RCEP faces many challenges

RCEP has been officially in effect for more than two years and has played an important role in promoting regional economic integration, but it also faces many challenges. These challenges are mainly due to the low application rate of rules of origin. This is due to factors such as the short period of effect, in addition to some structural issues.

First, the low rate of application of rules has become a major constraint to realizing the potential of RCEP. The rate of application of rules of origin by ASEAN member countries is still low. For example, the rate of application of rules of origin by China is not high.

According to preliminary calculations, the rate of application of export regulations by Chinese enterprises in 2022 is 3.56%, the rate of application of import regulations is 1.03% and increases to 4.21 and 1.46% respectively in 2023.

The low application rate of rules of origin has limited the benefits of RCEP. Although the application rate of RCEP in trade relations between China, Japan and South Korea is high, the application rate of rules in trade relations with ASEAN is not high.

RCEP creates important stability for regional cooperation and development... Photo: Pixabay

Second, RCEP has great potential to give full play to the important role of China, Japan and South Korea. China, Japan and South Korea are important driving forces for the comprehensive implementation of RCEP. The GDP and value-added of the manufacturing industry of China, Japan and South Korea account for more than 80% of the RCEP region, and the import and export turnover of these countries accounts for more than 50% of the whole bloc, which is an important driving force for the comprehensive development of RCEP.

Economic and trade cooperation among China, Japan and South Korea is facing serious interference from external factors. From the economic and trade development situation in recent years, some economies in the region blindly listen to the instigation of countries outside the region, which will inevitably increase the cost of economic and trade cooperation in the region and limit the development of regional economic growth potential.

Using the RCEP agreement to promote connectivity between the markets of China, Japan and South Korea. In 2022, the value of Japan's preferential imports under the RCEP framework is almost equal to the total value of imports under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the EU-Japan Free Trade Agreement and the Japan-US Free Trade Agreement, of which 88.5% of preferential imports come from China.

The application rate of Japan's RCEP regulations on imports from China in 2022 and the application rate of South Korea's export rules to Japan in 2023 will reach 57 and 68.1 percent, respectively.

Third, the low rate of rule application shows that there is a lack of comprehensive promotion mechanism. The secretariat has not been established yet. At present, many important issues in the implementation of RCEP cannot be decided and coordinated in a timely manner, including issues such as upgrading the provisions and expanding RCEP, which are difficult to promote the effective implementation of RCEP. There is clearly a lack of coordination in policy implementation.

Forums, channels and mechanisms for comprehensive policy coordination and connectivity of RCEP are still lacking, in addition, there is a lack of adequate intellectual support for the formulation of medium- and long-term development plans. RCEP will enter an important historical period in the next 5-10 years. At present, a comprehensive promotion mechanism has not been established, and there is still a lack of a master plan and overall arrangement for the development of RCEP in the next 10 years.

RCEP creates important momentum for Asian economy

With the vitality and development momentum of Asia, RCEP has great potential benefits. To comprehensively implement RCEP, it is necessary to focus on the goals and prospects of Asian economic integration, accelerate the level of market opening in the region, promote the effective implementation of the provisions that have come into effect...

First, RCEP creates important stability for regional cooperation and development. According to the International Monetary Fund (IMF), from 2023 to 2029, the GDP of the RCEP region will increase by 10,900 billion USD, about 1.4 times the GDP of the US and 2.6 times the GDP of the EU in the same period.

Research by the Asian Development Bank (ADB) shows that if RCEP is fully implemented before 2030, the income of each member economy will increase by 0.6% compared to current levels, creating 245 billion USD in revenue and 2.8 million jobs for the region.

RCEP was signed by 10 ASEAN member countries and 5 ASEAN partners, namely China, Japan, South Korea, Australia and New Zealand, on November 15, 2020 on the sidelines of the 37th ASEAN Summit chaired by Vietnam. Photo: Pixabay

RCEP provides an important impetus to enhance regional economic integration. On the one hand, China-ASEAN economic and trade cooperation has been further deepened under the RCEP framework. In 2022, among ASEAN's imports and exports from China, intermediate consumer goods accounted for 63% and 70% respectively; components, materials, and capital equipment used for domestic production and export accounted for over 80%. Products with the largest import and export turnover from ASEAN to China, such as electric motors, electrical equipment, and components, accounted for 31.7% and 30.7% respectively.

If member countries effectively apply the RCEP cumulation rule of origin, it can significantly increase the proportion of value-added components in the region and expand the scale of intra-bloc trade. On the other hand, there is also a lot of room to promote free trade among China, Japan and South Korea within the RCEP framework.

By 2030, RCEP would increase global real income by $186 billion. The bulk of the income increase from RCEP (about $164 billion) is expected to come from Asia, with China, Japan, and South Korea expected to see income gains of $156 billion.

Second, RCEP is an important force in promoting and reshaping the economic globalization landscape. The official implementation of RCEP will lay a solid foundation for further promoting regional cooperation, building an Asia-Pacific free trade area, and realizing regional economic integration, and will also create important conditions for promoting negotiations on the China-Japan-Korea Free Trade Agreement. RCEP is both based on practical development needs and takes into account the development needs of developing countries and least developed countries.

RCEP has great trade and investment potential, and the potential return from improving the rate of rule application is large. Preliminary calculations show that, based on the current trade scale, if the rate of RCEP rule application in China's imports and exports can reach 50% at the current level of Japan and South Korea, the total value of preferential import and export goods will reach 3.94 trillion yuan, and the amount of tariff reduction will reach about 79 billion yuan, which is 9.9 and 11.3 times higher than the current level, respectively. If China's rate of RCEP rule application can reach the current level of Japan and South Korea, the total value of preferential import and export goods will reach 7.9 trillion yuan, and the amount of tariff reduction will reach 157.5 billion yuan, which is 20.9 and 23.6 times higher than the current level, respectively.

Third, RCEP could develop into an important trans-regional free trade organization. Holding high the banner of inclusive development and shared development, RCEP will attract more economies outside the region to join. Currently, Hong Kong (China), Sri Lanka, and Chile have applied to join.

When joining RCEP, with the stimulus of measures to improve the level of trade liberalization of goods and reform more favorable customs procedures, Hong Kong's GDP (China) will increase by 0.87%, improve trade conditions by 0.26%, overall social welfare will increase by 3.440 billion USD and import growth will reach 0.78%. The positive effect of joining RCEP on Hong Kong's (China) macro-economy is very obvious.

RCEP can accommodate additional members across the region. Based on the initial membership structure of RCEP, the expansion of RCEP will be promoted in a timely manner. Any economy that wishes to join and can comply with the rules can be considered a potential member.

In addition, RCEP also reshapes the global economic landscape. The more members there are, the greater the benefits of the RCEP's principle of origin accumulation. The more members there are, the stronger the RCEP's ability to protect free trade. As RCEP continues to expand, the proportion of population density, total economic volume and total trade volume will increase, the benefits of the principle of origin accumulation will become clearer, and the level of preferential treatment for enterprises will also increase.

Fourth, China's high-level opening up will unleash huge potential for regional cooperation. China's high-level opening up will accelerate the implementation of RCEP. China's market opening holds huge potential for the regional economy.

At the 2021 ASEAN-China Trade and Investment Summit to celebrate the 30th anniversary of the establishment of China-ASEAN dialogue relations, China set a target of striving to import 150 billion USD worth of high-quality agricultural products from ASEAN in the next 5 years.

As of mid-2023, cumulative imports have exceeded 55 billion USD, exceeding the expected progress. The high-level opening of the large market with a population of 1.4 billion will "turn the Chinese market into a world market, a common market, a market for everyone", which will provide important impetus for the unified Asian large market and promote regional economic growth. China's proactive high-level opening to ASEAN will create an important leverage effect and enhance the vitality of RCEP.

RCEP was signed by 10 ASEAN member countries and 5 ASEAN partner countries: China, Japan, South Korea, Australia and New Zealand on November 15, 2020 on the sidelines of the 37th ASEAN Summit chaired by Vietnam.

According to the provisions of the RCEP Agreement, the Agreement will officially come into effect 60 days after at least 6 ASEAN countries and 3 partner countries complete the ratification/approval of the Agreement and deposit the document with the ASEAN Secretary General. As of November 2, 2021, 6 ASEAN countries, including Vietnam, and 4 partner countries, namely China, Japan, Australia and New Zealand, have deposited the document of ratification/approval of the RCEP Agreement with the ASEAN Secretary General. Thus, the RCEP Agreement will officially come into effect from January 1, 2022.

The RCEP Agreement coming into effect from January 2022 contributes to the multilateralization of the Free Trade Agreements that ASEAN has previously signed with each partner country, harmonizing the commitments and regulations in these agreements, maximizing economic benefits, especially rules of origin and trade facilitation, contributing to strengthening regional supply chains...

Source: https://congthuong.vn/rcep-hoi-tho-moi-cho-tang-truong-kinh-te-chau-a-348454.html