RCEP benefits intra-regional exports

Fishery is among industries benefiting from RCEP’s rules of origin - photo: Thanh Nhan

The most important part of the agreement is probably the harmonization of regional origins by applying the unified Rules of Origin (RoO), opening up many opportunities and benefits for intra-regional exports.

The rules of origin in RCEP are generally similar to previous FTAs of ASEAN (Association of Southeast Asian Nations) with partners (except for some more flexible points related to regulations on simple processing stages and more favorable certificates of origin).

The Ministry of Industry and Trade said that for all ASEAN countries, the agreement is not directed to new added value regarding the market opening, as ASEAN has FTAs with partner countries. However, RCEP is basically an agreement that connects ASEAN's existing commitments with five partners in an FTA.

For example, enterprises will only have to use one rule of origin instead of five separate rules of origin in separate FTAs. Similarly, the rules on customs procedures and trade facilitation have also been united and strengthened.

As such, RCEP doesn’t have new commitments on market opening or new competition pressure, but it focuses on creating favorable conditions for enterprises to do business, especially small- and medium-sized enterprises.

Luong Hoang Thai, Director of the Ministry of Industry and Trade’s Multilateral Trade Policy Department, said that RCEP provides consistent rules of origin, which eliminates the need to refer to multiple FTAs and adapt different procedures to different countries in RCEP for the same goods. In addition to rules simplifying import and export processes, simplified rules of origin help reduce time and costs for Vietnamese exporters, thereby increasing profit margins and making Vietnamese goods more competitive in RCEP markets, Thai said. Besides, RCEP also standardizes rules related to trade competition maintenance. Anti-dumping and anti-subsidy tax regulations are permitted and can be implemented consistently throughout the region to replace domestic trade defense measures, he said.

Thus, this agreement is expected to bring great opportunities for Vietnamese goods and help Vietnamese businesses participate more deeply in regional supply chains as soon as it comes into effect. Specifically, some product categories will benefit from RCEP's rules of origin, including textiles and garments, farm produce and seafood, when exported to such markets as Japan and the Republic of Korea. Regarding textiles and garments, while the Vietnam-Japan Free Trade Agreement (VJFTA) and ASEAN-Japan Comprehensive Economic Partnership (AJCEP) all require two-stage rules of origin, meaning that fabric must be produced in the ASEAN region or Japan to be subject to preferential tariffs, RCEP allows Vietnam to import fabric anywhere and must only cut and sew it in Vietnam to enjoy tax incentives when exporting related products to Japan.

Nguyen Anh Duong, Head of the Central Institute for Economic Management’s (CIEM) General Research Department, said that the Asia-Pacific region is facing conflicting scenarios on trade and investment cooperation. In that context, the signing of RCEP shows that member countries are committed to deeper liberalization of trade in goods, services and investment, aiming to cooperate for fairer development, he added.

However, RCEP is expected to cause a number of challenges, including the potential increase in trade deficit. Vietnam is making a trade deficit with many RCEP countries, including Australia, New Zealand and Japan, among others, while in the past, it only suffered from trade deficit with ASEAN economies and China. This could cause the country to face trade defense lawsuits when not properly controlling imported raw materials for production and export to markets outside the region.

Vietnamese businesses need to carefully learn about RCEP commitments, especially the roadmap to reduce and eliminate tariffs on goods from Vietnam and other RCEP countries, rules of origin, commitments to opening markets in the fields of services and investment, and regulations on customs procedures and trade facilitation.