In a welcome piece of great news, Australia has signed the world’s largest comprehensive free trade agreement, known as the Regional Comprehensive Economic Partnership (RCEP), along with 14 other Indo-Pacific countries.
Collectively, the 15 countries who have signed up to the Agreement make up about a third of the world’s population and around a third of global GDP ($26.2 trillion).
Despite the current political and trading tensions with China, Australian businesses can celebrate this development, which will offer trading and commercial opportunities for Australian companies of all sizes. The RCEP could not have come at a more important time given the scale of global, economic and trade uncertainty.
Eight years in the making, the Agreement covers trade in goods and services, plus investment, economic and technical co-operation. The participating nations are Indonesia (who led the negotiations), Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, Thailand and Vietnam.
Expected to be ratified in early 2021, the Agreement will progressively lower tariffs over the next 2 decades and allow more free movement of goods. It will create new rules for electronic commerce, intellectual property, government procurement, competition, and SMEs.
According to Trade Minister Simon Birmingham, “This agreement covers the fastest growing region in the world and, as RCEP economies continue to develop and their middle classes grow, it will open up new doors for Australian businesses and investors.”
“There will be improved export opportunities for Australian businesses, especially the financial services sector, education, health, engineering and other professional services. It will further integrate Australian exporters into a booming part of the globe.”
So what’s in it for your business? When the Agreement is finalised, the main benefits for Australia will be:
- A new single set of rules and procedures for accessing preferential tariffs in any of the 15 RCEP markets.
- New scope for trade in services throughout the region including telecommunications, professional and financial services.
- Improved mechanisms for tackling non-tariff barriers in areas such as customs procedures, quarantine and technical standards.
- Greater investment certainty for businesses.
- New rules on e-commerce to make it easier for businesses to trade online.
- A common set of rules on intellectual property.
- Agreed rules of origin that will increase the competitiveness of Australian inputs into regional production chains.
To prepare for this, SMEs will need to restructure their global supply chains and look at transitioning to new regionally integrated networks. It will also be essential that your business is digitally and technologically enabled, with the corresponding level of preventative measures on cyber security.
According to PwC’s recent report ‘Asia Pacific’s time’, to enable companies especially SMEs to expand regionally as well as adopt new technologies, governments must play a role in supporting upskilling, as well as enabling access to capital and expertise.
Take some time to think about what opportunities the RCEP can offer your business, and what you need to do to reach these potential markets.