Singapore Minister for Trade and Industry Chan Chun Sing set out the value of a Free Trade Agreement (FTA) namely the Regional Comprehensive Economic Partnership (RCEP) agreement for Singapore in a speech that was delivered on Sunday (Nov 15), after he signed the agreement alongside the economic ministers of 14 other nations.
The RCEP is the world’s largest FTA comprising about 30 per cent of global GDP and about a third of the world’s population. The agreement was completed after eight years, since RCEP negotiations were formally launched in 2012 at the Asean Summit in Cambodia.
Mr Chan outlined how the RCEP will benefit the region, especially amid the economic downturn that was accelerated by the COVID-19 pandemic, in his speech. Read Mr Chan’s remarks in full here:
“Good Afternoon. Thank you for taking time to join me today. Happy to announce that we have just signed the RCEP Agreement. This is a major milestone that is a result of the hard work of many stakeholders over the last eight years.
My personal thanks to the RCEP countries, ASEAN Secretariat, the Chair of the Trade Negotiating Committee, as well as the Singapore Negotiating Team for bringing us across the finish line.
My special thanks too to my predecessor Mr Lim Hng Kiang for his contribution during the initial five years of negotiations and his continued support behind the scenes, beyond his term. Without the collective effort and determination of these individuals, we would not be here today.
Introduction to the RCEP
The RCEP is an important geostrategic initiative that will further regional economic integration. It consolidates smaller existing agreements to create a comprehensive partnership fit for the 21st century.
As the largest FTA in world, covering one third of the world’s GDP and one third of the world’s population, the RCEP will open new opportunities for trade and investment, shore up business confidence, and secure our region’s recovery.
The RCEP comprises a diverse group of countries in Asia: Developed economies – Japan, Korea, Australia, New Zealand; Middle income economies in ASEAN; and China, the second biggest economy in the world.
RCEP’s diversity shows how free and open trade and investment is in the common interest of all economies, regardless of our development stages.
And our determination to carry this through in this challenging year shows an awareness that our prosperity and success are interlinked. Deeper integration and a more interdependent world will ultimately lead to a safer and more prosperous world.
ASEAN has played a critical role in this journey. Its leadership as a trusted and neutral group, has enabled our partners to come together in an unprecedented way and cooperate under the umbrella of RCEP.
Without the RCEP, it would have been much harder for some of us to do bilateral or trilateral trade deals.
Geopolitical Environment and COVID-19
2020 has been a challenging year with the global disruptions to production and supply chains as a result of the COVID-19 pandemic. The after-effects will linger for years to come and it will take time for all of us to rebuild our economies and recover from the crisis.
Even so, no economy can recover on its own. As domestic pressure grows, it is understandable to want to onshore production and bring supply chains closer to home. However, this is not a sustainable strategy. In times like these, we need to continue to work together to recover from the crisis and chart a new path for the future.
The signing of the RCEP Agreement is a timely boost to the longer-term prospects of the region. It will be the bright spot that points the direction ahead. At a time where support for multilateralism is fraying, the RCEP will send a clear statement of the region’s unwavering support and commitment to the multilateral trading system.
It will place the region as the forefront of the global economic recovery and remain as an attractive investment destination during and post-COVID 19.
Economic Significance of RCEP amidst and post-COVID 19
The RCEP will broaden and deepen economic linkages. Additional preferential Trade in Goods market access coverage, notably further access into China, Japan and the Republic of Korea on top of our existing FTAs. In some of these markets, additional preferential market access reaches 22.1%.
These improved tariff elimination concessions above existing regional and bilateral FTAs, will allow businesses especially in the Chemicals & Plastics, and Processed Food sectors, to benefit from cost savings when selling their products to these markets.
Simplified customs procedures and enhanced trade facilitation measures to allow efficient administration of procedures and expeditious clearance of goods. This includes the release of express consignments and perishable goods within six hours of arrival. This lowers transaction time and costs and gives Singapore exporters greater certainty.
At least 65% of the services sectors are open to foreign participation and with increase in permissible foreign shareholding limits in some RCEP markets. At least 50 sub-sectors will be open for 51% foreign equity participation across various sectors including Telecommunications, Financial Services, Computer Related Services, Professional Services, and the Distribution and Logistics Services.
There are also enhanced Investment rules and disciplines to better support businesses’ regional investments. For instance, RCEP countries will have to abide by a set of performance requirements that governments are prohibited from imposing onto investors.
This improves transparency and provides investors with guarantees against such performance requirements throughout the lifecycle of their investment. The streamlined rules of origin will allow businesses to better take advantage of regional value chains.
The RCEP consolidates the various existing rules into a single rulebook to allow companies better navigate and integrate into the regional value chains. Regional cumulation will allow our businesses to include the use of raw materials and parts sourced from any of the other 14 RCEP markets as originating content.
This makes it easier for businesses to meet the required rules of origin for their exports, and thus benefit from preferential treatment and greater cost-savings.
Emerging trade fields are also pursued under the RCEP including ECommerce, Competition Policy, and Intellectual Property (IP) rights. On Electronic Commerce, individuals can be assured that personal data will be protected when shopping or carrying out any activities online.
Businesses will also be happy to hear that electronic signatures and transactions will be increasingly accepted across all RCEP markets. This will provide a more conducive digital trade environment and offer greater access to the RCEP markets. This is also particularly relevant during such times when we are forced to move most of our cross-border activities online.
The coverage of IP rights and Competition law will provide an additional layer of protection and assurance when operating in the region. For instance, there will be enhanced IP protection and enforcement, including for non-traditional trademarks such as sound marks and a wider range of industrial designs.
Businesses filing patent or trademarks applications can look forward to greater convenience as well as cost and time saving. With the commitment from all RCEP countries to accede to international IP Treaties (the Hague and Madrid Protocol), companies will only need to file for a single application designating multiple RCEP countries, instead of having to file one individually in each country.
Robust competition laws will also protect businesses from anticompetitive activity when operating in the RCEP markets.
Towards the Next Phase – Implementation of the RCEP
The signing today signifies the next phase of the RCEP journey. Work remains to be done in order to for us reap its benefits.
First, all RCEP countries would need to accelerate efforts to ratify the Agreement as soon as possible. The early implementation of RCEP will allow us to maximise its potential and bring about the benefits of RCEP for our businesses and people. This will potentially provide further opportunities to Singapore’s trade with the 14 RPCs which totalled 50.4% (S$515.2 billion) of our global trade in 2019.
Second, the RCEP must be kept ‘alive’ and relevant to take into account changing realities and evolving business needs.
As a regional agreement covering a fast growing and evolving region, there is great potential for the RCEP to bring exponential benefits.
The RCEP provides an opportune platform for regular exchanges to continuously update the agreement to keep pace with the evolving needs of our economies and the global trade environment.
The RCEP is a long-awaited agreement. Over the past years, there have been several ups and downs and it has certainly not been an easy journey. At one point, the prospects of concluding the agreement were shaken by geo-political and domestic preoccupations.
We have all had to make difficult trade-offs to advance the negotiations. Grateful to our fellow RCEP countries who have stood together with us in support of our common beliefs in trade liberalisation and regional economic integration.
For Singapore, the RCEP provides a strong foundation for us to rebuild our economy and overcome the challenges as we emerge from the pandemic together. I look forward to seeing our businesses tap on the benefits from the RCEP to support their post-pandemic recovery efforts. Thank you.”