The countries represented in the Regional Comprehensive Economic Partnership (RCEP) account for 30% of the world’s population and 30% the world’s GDP (1) – basically, this region is the powerhouse of the global economy. Australia’s inclusion in this historic trading bloc is a huge boon to its manufacturers and financial systems, and will create monumental opportunities for economic and trade growth.
At the ASEAN summit held in Jakarta, Indonesia on November 15, 2020, the biggest regional free trade agreement in the history of the world was signed after eight years of negotiations. The Regional Comprehensive Economic Partnership (RCEP) includes 10 ASEAN countries: Brunei-Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam, along with five regional countries: Australia, China, Japan, South Korea and New Zealand.
The combination of the 15 countries in the RCEP make up almost a third of the world’s gross domestic product (GDP), and, by 2050, the RCEP is projected to account for half of the estimated $0.5 USD quadrillion global GDP.
What is the RCEP trade agreement?
The RCEP agreement aims to eliminate up to 90% of the tariffs on imports between its signatory countries over a period of 20 years from the signing of the deal, as well as establish collective rules for eCommerce, trade in goods and services, economic cooperation and intellectual property to facilitate international supply chains and lower exporting costs throughout the alliance. Analysts also predict that this will help stimulate the economies of the participating countries during the COVID-19 pandemic and pull economic activity back into the heart of the ASEAN and Indo-Pacific regions.
By standardizing and simplifying trade rules across countries for people to do business, this will reduce the time exporters must wait for their goods to clear customs, and will create opportunities for exporters to enter their products and services into regional value chains.
How will the RCEP benefit the Australian businesses?
The impact the RCEP will have on Australia is significant, particularly during the age of COVID-19. Trade is the backbone of Australia, with one in five jobs in the country being reliant on the industry. And trade will be vital in contributing to Australia’s economic recovery, and post-COVID, economic advancement. The unlocking of trade opportunities between Australia and Asia will create a huge opportunity for Australian manufacturers and services to expand, invest and create more jobs, in turn, pushing economic growth at a time when it’s needed the most.
Not only will Australian traders reap the benefits of the RCEP agreement, the gates will open for the export of services, resulting in Australia gaining crucial new access across financial, banking, health care, education and many other types of other service-related industries. Australia’s inclusion in the RCEP will also diversify their trade relationships toward other regional neighbors other than China, which is currently Australia’s biggest trading partner.
According to Smart Company Australia, the Australian government sums up the main benefits to Australian businesses as:
- One set of rules for accessing lower tariffs in any of the 15 RCEP markets
- New trade opportunities in telecommunications, professional and financial services
- Improved processes for tackling non-tariff barriers such as customs procedures
- Greater investment certainty
- New rules on eCommerce to make it easier for businesses to trade online
- A common set of intellectual property rules
- A new rule of origin agreement to boost Australian inputs in production chains
What will the RCEP mean for digital commerce?
Specifically targeting eCommerce as an area for development, the RCEP agreement has outlined how signatory countries can come together to promote and enhance eCommerce and digital trade. These commitments include helping small- and mid-sized businesses to overcome hurdles in digital commerce, urging for the ratification of practices that ensure consumer confidence and encouraging the cooperation between countries on research, training, capacity building and technical assistance. The agreement also covers privacy, and consumer protection, as well as data localization, storage and movement.
“The RCEP agreement will help to remove and reduce the traditional barriers Australian manufacturers and brands faced with growing their businesses beyond Australia’s borders, while allowing them to be more competitive as they enter new markets with better pricing and ease of delivery. As a result, we are seeing increased eCommerce activity from Australian producers looking to go direct to consumer in countries where they were typically reliant on distribution partners and third parties to enable trade.”
– Joshua Emblin, Territory Sales Director commercetools Australia
By facilitating digital trade, businesses of any size can reap the rewards of the RCEP agreement that offers new advantages in online payments, customs clearance and tariff reductions. Companies that plan on opening up their commerce to new markets should consider a headless solution for their commerce platform – such as commercetools – in order to effortlessly add new currencies, languages and prices for as many markets as needed. A headless approach also allows online businesses to react instantly to market changes by being able to quickly roll out new products, promotions and campaigns across any touchpoint, plus it enables unique, personalized and engaging experiences that keep customers coming back.
Are you a business located in an RCEP country? See how commercetools can power your regional commerce channels by getting in touch with us.