The Regional Comprehensive Economic Partnership (RCEP) agreement comes into force for Malaysia on March 18 of this year, paving the way for the country to integrate into the world’s largest free trade agreement (FTA) that involves 15 countries, with a total population of more than 2.2 billion or nearly a third of the global population and world GDP.
RCEP represents a significant milestone in the vibrant growth and revitalisation of economies, anchored on the rules-based multilateral trading system, RCEP enables Malaysia to enjoy the global trade and investment ecosystem, benefiting from the eventual elimination of around 90 percent of tariffs among members.
Within ASEAN, Malaysia is expected to be the largest beneficiary of the Agreement in terms of gains in exports, with a projected US$200 million increase.
While the benefits of free trade agreements are well known, the question is whether Malaysia and other signatories will be able to enjoy the full bounties of the trade.
While RCEP eliminates tariffs on about 90% of traded goods, there are still many non-tariff barriers and non-tariff measures that are in place that can impede the free flow of goods and services within member countries.
Technically non-tariff measures (NTM) can be defined as ‘policy measures, other than ordinary customs tariffs, that can potentially have an economic effect on international trade in goods, changing quantities traded, or prices or both.
It includes things like inconsistent standards, unclear regulations, shifting, and unnecessary rules, expensive testing requirements, and weird labeling laws.
To greater facilitate trade, all signatories to RCEP must ensure international standards are adhered to as this would ease comprehension among the members and reduces costs, particularly among SMEs.
In addition, it should also attempt to have universal testing standards and ensure countries recognise the testing standards and testing agencies of other countries to avoid duplication of testing and increased costs for businesses. This also includes labelling requirements that should be universally designed with the consumers in mind.
Member countries must further improve trade facilitation rules and red tape behind the borders to facilitate greater trade flows between the various members.
Malaysia has one of the signatories of RCEP can ensure greater ease in trade through better logistics and customs facilitation in ports and other points of entry
In addition, Malaysia must engage and gear the private sector through active participation with them so they are not left out in the chance of affording them the opportunities of RCEP.
This would entail improving the delivery mechanism and ensuring the cost of doing business is reduced to ensure that the gains from trade are not erased through increasing cost.
It is paramount that Malaysia and other countries understand that delays in one country can harm the whole production and the global supply chain and supplies of trade-related services may also see their business reduced.
In short that the inefficiencies in each of the member countries in the form of procedural delays such as late customs clearance and cargo handling would result in the escalation of costs for the businessmen and must be avoided.
All countries must now resolutely ensure that there are no non-tariff barriers that exist in their countries and attempt to reduce inefficiencies that would facilitate greater trade under RCEP.
The world is seeing a gradual recovery from the pandemic and RCEP can be the recipe that can reinvigorate businesses but this can only happen if there is political will on the part of the signatories to reduce the various trade barriers across the region.
As the world gradually recovers from the economic repercussions of the pandemic, RCEP presents a vital tool to re-invigorate businesses and economic activities through a marked reduction in barriers to trade across the region.
