This is the third article of the Regional Comprehensive Economic Partnership Agreement (RCEP), which is part of a series of articles covering its economic, trade and investment impacts on Cambodia.
This article deals with the legal aspects of trade in goods. The provisions on trade in goods and related chapters (Chapters 2-7) reaffirm existing rights and obligations under relevant WTO agreements.
In line with RCEP’s objective of liberalizing and facilitating trade in goods, Chapter 2 contains provisions covering the parties’ market access for goods, tariff commitments and non-tariff measures.
As of 2005, ASEAN had concluded more than 100 bilateral and regional FTAs, in part in response to the WTO’s failure to push for further liberalization of world trade.
Its motivation is to promote deeper regional economic integration through greater intra-ASEAN trade, starting with the ASEAN Free Trade Agreement (AFTA), the ASEAN Framework Agreement on services (AFAS) and the ASEAN Comprehensive Investment Agreement (ACIA).
However, intra-ASEAN trade growth has remained stagnant, accounting for only a quarter of the total world trade of ASEAN member states (AMS), largely hampered by rising non-tariff barriers (NTBs).
The other factors explaining the slow progress of intra-ASEAN trade are the diversity and different levels of development of AMSs: not only are their economies not complementary but sometimes there is even competition in certain areas, such as clothing, shoe, agricultural production or light manufacturing.
As for trade relations with ASEAN dialogue partners, the process started with the three neighbors of East Asia: China, Japan and the Republic of Korea, giving birth to the word “ASEAN Plus 3” .
Other dialogue partners joined later, including Australia, New Zealand and India. All of these FTAs have led to a confusing ‘bowl of noodles’ of free trade pacts that are all focused on a freer flow of goods and services.
With RCEP, ASEAN has consolidated the FTA’s “bowl of noodles” and ended the rules of origin confusion that has preoccupied exporters for the past two decades.
For many companies, the chapter on trade in goods is likely to be the most impactful chapter of the entire RCEP agreement. It contains key elements governing the implementation of goods-related commitments to achieve further trade liberalization between the Parties.
This includes the granting of national treatment to goods of other parties, reduction or elimination of customs duties, temporary duty-free admission of goods, customs valuation and goods in transit.
Goods to be brought into the customs territory of each Party are exempt under certain conditions, totally or partially, from the payment of import duties and taxes, if these goods: are introduced into its customs territory for a specific purpose; are intended for re-exportation within a specified period; and have not undergone any modification, with the exception of normal depreciation and losses due to the use made of it.
RCEP will reduce or eliminate import tariffs on most industrial products, covering approximately 92% of all products through several key tariff classification codes.
This will be implemented gradually over the next 20 years in accordance with each party’s schedule of tariff commitments.
Some tariffs are eliminated immediately on the effective date of the Agreement, while others will be phased out according to phase-out schedules extending over a period of up to 20 years.
From an economic perspective, the overall impact of RCEP may be moderate and spread over time and will not necessarily lead to major changes in the existing economic structure of ASEAN and its individual AMS.
Initially, the RCEP will have a relatively minor impact on short-term trade flows due to the fact that tariffs and quotas will be eliminated in only 65 percent of the goods traded within the RCEP.
With 86-90% of merchandise categories covered by RCEP already eligible for tariff elimination under existing ASEAN FTAs with dialogue partners, RCEP will improve market access but will not involve necessarily strong tariff reductions for all parties.
It is quite clear that China, Japan and the Republic of Korea will benefit more than other parties, as RCEP mainly consolidates and updates existing FTAs between ASEAN and its partners.
The tariff reductions between these three countries are more important, even if their tariff schedules will be introduced gradually.
In view of their commitments, the RCEP should facilitate the transformation of the regional value chain, especially since these three countries and the ASEAN countries have a high level of intra-industrial trade, mainly in the sector of l ‘electronic.
For other products like clothing, textiles, toys, machinery and plastics, manufacturers looking to diversify their businesses outside of China can do so with RCEP’s regional rules of origin reflecting the processes of Modern production and streamlined trade logistics arrangements are becoming easier.
Regional cumulation rules will facilitate inputs from the most efficient and profitable regional source, while promoting access to preferential tariff treatment.
By using regional distribution centers, the movement of goods in the ASEAN region to China, Japan and the Republic of Korea and vice versa will be facilitated.
For its part, Cambodia has benefited from good trade preferences for its products. Agricultural products include cashews, corn, coconut, fresh mango, banana, sweet potato, honey, turmeric powder, orange, papaya, passion fruit, l garlic, guava, dragon fruit, durian, etc.
For processed agricultural products are included noodles, cakes, bird nests, fish processing products, cassava flour, coconut processing products, peanut oil, sausages. , chili sauce, banana jam, mango jam, durian jam, packet noodles, etc.
As for industrial goods, they include: bicycles, clothes, shoes, electronic components, electric cables, furniture, white sugar, cane sugar, handbags, suitcases, electric wires, sports equipment, processed resin, medicine shell, liquid natural rubber, panel-shaped rubber, latex rubber, litter, processed wood chips, etc.
In short, even though the additional direct trade benefits under RCEP are minimal, when combined with the expansion of investment, favorable rules of origin and ASEAN trade ties, its economic impact does not is not as low as some analysts would have predicted.