Thailand and the Regional Comprehensive Economic Partnership
How to benefit from the world’s latest and biggest free-trade bloc
On November 15, 2020, China, Japan, South Korea, Australia, New Zealand, and the ten ASEAN countries signed a free-trade agreement to create the Regional Comprehensive Economic Partnership. The RCEP is the largest trading bloc in the world — bigger than the US-Canada-Mexico agreement and bigger than the European Union. Its 15 member countries account for about 30% of the world’s population. The RCEP agreement will enter into force 60 days after six ASEAN member states and three non-ASEAN member states have ratified the agreement.
The Regional Comprehensive Economic Partnership is the first free trade agreement between China, Japan, and South Korea. Unifying the preexisting bilateral agreements between the 10-member ASEAN and five of its major trade partners, RCEP adds to various older free trade agreements. This includes the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or TPP-11), another free trade agreement in the region that includes some of the same countries.
CPTPP: The Comprehensive and Progressive Agreement for Trans-Pacific Partnership has been concluded in 2018 and Thailand is not yet a member state. Members of both RCEP and CPTPP are currently Australia, Brunei, Japan, Malaysia, New Zealand, Singapore, and Vietnam. The CPTPP involves greater elimination of tariffs and also includes provisions on labor and environmental standards, unlike the RCEP. TCEP and CPTPP may be extended and combined in later years into the Free Trade Area of the Asia Pacific (FTAAP).
OBOR: RCEP improves access to the Chinese Belt and Road Initiative and will help China strengthen its relations with neighboring countries. During its negotiation phase its has been often labeled as “China-led,” but it could also be seen as “ASEAN central” free trade agreement. The RCEP agreement also complements the World Trade Organization (WTO), building on the WTO Agreement in areas where the Parties have agreed to update or go beyond its provisions.
Sort summary of the Regional Comprehensive Economic Partnership agreement
The RCEP agreement has 20 Chapters, 17 Annexes, and 54 schedules of commitments covering market access, rules and disciplines, and economic and technical cooperation. It will improve market access with tariffs and quotas eliminated in over 65% of goods traded and make business predictable with common rules of origin and transparent regulations, upon entry into force. This will encourage firms to invest more in the region, including building supply chains and services and to generate jobs.
Trade of goods and services: The RCEP agreement has specific provisions covering trade in goods, including rules of origin; customs procedures and trade facilitation; sanitary and phytosanitary measures; standards, technical regulations, and conformity assessment procedures; and trade remedies. It also covers trade in services including specific provisions on financial services; telecommunication services; and professional services, as well as the temporary movement of natural persons.
In addition, there are chapters on investment; intellectual property; electronic commerce; competition; small and medium enterprises (SMEs); economic and technical cooperation; government procurement; and legal and institutional areas including dispute settlement. In terms of market access, the RCEP Agreement achieves liberalization in trade in goods and services and has extended coverage to investment.
Thailand and its stance regarding free trade in the Asia-Pacific region
Co-existing FTAs: Thailand signed FTAs with China, Japan, Australia, New Zealand, Laos, Chile, and Peru. As an ASEAN member state, ASEAN free trade agreements apply as well. The negotiations on a Thai-EU free trade agreement are currently suspended. RCEP does not supersede pre-existing FTAs but it intends to facilitate an orderly and negotiated convergence of these agreements in terms of trading rules and customs procedures.
In Thailand, the Regional Comprehensive Economic Partnership, which excludes the US, is viewed “as a major coup for China and further evidence that Beijing is setting the agenda for global commerce as Washington retreats.” and as China’s chance to reshape Asia-Pacific trade as the dominant force. The land of smile expects high competitive potential under the RCEP regime, based on a positive trade balance in automotive parts, petrochemicals, tourism, agriculture, food, and retail industries with non-ASEAN trading partners. Foreign investments will also benefit indirectly Thailand’s industrial estates, power plants, and transport facilities.
The government promotes the pact as a vital tool for Thailand’s economic recovery and growth. Therefore, parliament is requested to approve the Regional Comprehensive Economic Partnership trade pact by February 2021 to pave the way for full ratification within 2021. The coming year might also see Thailand as a member of the CPTPP.
RCEP legal services from the Bangkok investment law firm
PUGNATORIUS Ltd. is the Bangkok-based specialist provider of transactional legal and tax advice on foreign investments in Thailand’s manufacturing and service industries as well as property developments and acquisitions. It advises on Thailand’s import/export regulatory framework, cross-border supply chains, and the domestic distribution of goods and services.
RCEP has been signed in a Zoom video conference. If you are not able to meet PUGNATORIUS Ltd. in its Bangkok offices, a Zoom meeting might be the best first step to insights and professional services on how to utilize the world’s biggest free trade agreement.