On 15 November 2020, the eagerly anticipated Regional Comprehensive Economic Partnership (“RCEP
”) free trade agreement (“FTA
”) was signed via a video link by ASEAN member states – Malaysia, Brunei, Cambodia, Indonesia, Laos, Myanmar, the Philippines, Singapore, Thailand and Vietnam together with five trading partners – Australia, China, Japan, New Zealand and South Korea.
The RCEP agreement is the world’s largest FTA and will cover the world’s fastest-growing trade corridors and economic zones. It encompasses 15 countries with a combined population of 2.1 billion which represents nearly 30% of the world’s GDP.
The RCEP agreement aims to lower tariffs, open up trade in services and promote investment between members states. The agreement includes provisions on intellectual property, telecommunications, financial services, e-commerce and professional services. One of the key terms of the agreement is the creation of a common rules of origin framework. The rules of origin are the criteria that determines where a product is made for the purpose of giving it preferential treatment under trade agreements.
The Minister of International Trade and Industry, Mohamed Azmin Ali stated that FTAs such as the RCEP agreement are “the way forward to help sustain competitiveness through promotion of international trade, encouraging investments and ensuring supply of talent.”
India was originally slated to be one of the signatories but withdrew last year over concerns on market access issues and fears that its domestic producers could be hard hit if the country was flooded by cheaper goods. However, signatories of the deal have said that the door remained open for India to join in the future.
Negotiations on the RCEP began in 2012 and went through 31 rounds in the past eight years. The RCEP agreement will come into force when at least six ASEAN and three non-ASEAN signatory States have deposited their instruments of ratification, acceptance or approval of the agreement with the designated depository. This is expected to take place within two years.
Alert by Lim Koon Huan (Partner) and Manshan Singh (Associate) of Skrine.