ECONOMIES that signed on to the world’s mega trade deal, the Regional Comprehensive Economic Partnership (RCEP), can only maximize its benefits if uniform regulations on rules of origin are established, according to experts from the Asian Development Bank (ADB) and United Nations.
In an Asian Development Blog, ADB Economic Research and Regional Cooperation Department Economist Pramila Crivelli and United Nations Conference on Trade and Development (Unctad) Technical Assistance Chief Stefano Inama said this is one of their recommendations to maximize the benefits of RCEP.
The RCEP includes 15 nations and 2.2 billion people who account for 29 percent of global gross domestic product. The mega trade deal includes Southeast Asian countries, Australia, New Zealand, South Korea, China and Japan.
“Free trade deals like the Regional Comprehensive Economic Partnership are impressive at first glance but if rules of origin are not worked out in a business-friendly manner, they won’t succeed,” Crivelli and Inama said.
“The RCEP agreement provides a built-in mechanism to resume unfinished business without going back to the drawing board. This great opportunity should not be missed,” they added.
Crivelli and Inama also said RCEP members should activate a built-in review of the rules of origin certification procedure. This review should be supported by studies on best practices and endeavor to eliminate gray areas.
They said RCEP members should also make public the utilization rates of the trade pact using the concept adopted at the World Trade Organization. This will help in monitoring the effectiveness of the agreement.
Addressing rules-of-origin issues is imperative, they said, since the Association of Southeast Asian Nations (Asean) countries have not demonstrated the capacity to lead in a rules-of-origin business friendly environment.
Further, the authors said documentary evidence of origin has affected the implementation of various free trade agreements for decades.
“Human beings travel with passports, and goods with a certificate of origin provided by government authorities or by self-certification of exporters or importers,” Crivelli and Inama said. “In this area, the RCEP has not fully embraced the trade-facilitating principle of self-certification.”
It is envisioned that the RCEP would be profitable for Asian small and medium-sized enterprises that have suffered the most from the pandemic.
Crivelli and Inama said this will be because all tariffs will be brought down to zero under the RCEP. Currently, most-favored nation tariff rates vary from 0.3 percent in Brunei to 13.1 percent in Korea, with an average of 5.6 percent for all RCEP countries.
“Combined with high intra-regional trade values, this leaves no doubt that these significant preference margins—the difference between the most-favored nation applied rate of duty and the preferential rate could trigger substantial tariff savings,” the authors said.
DTI pushes ratification
Earlier, the Department of Trade and Industry (DTI) said ratifying the RCEP this year would support the country’s economic recovery from the unprecedented damage wrought by the Covid-19 pandemic.
As with any free-trade agreement (FTA), the RCEP has to be approved by President Duterte and must be ratified by the Senate before it takes effect on the domestic end.
Next year would be the ideal time to ratify the RCEP, Trade Assistant Secretary Allan B. Gepty said, as exporters can use it to boost their activities in the national recovery from the health crisis.
Further, he said the RCEP as a whole may only be legally enforced by 2021 due to a clause that states the trade deal can only take effect once it is ratified by majority of the signatories.
In a previous statement, Trade Secretary Ramon M. Lopez said he believes lawmakers will ratify the RCEP without delay, as the trade deal could be key in bringing down the cost of Covid-19 vaccines and facilitating their transfer to the Philippines.
Lopez explained that the Philippines can maximize its RCEP membership to reduce the cost of vaccines manufactured by parties to the trade deal, particularly China. He said tariffs for medical supplies are trimmed, if not eliminated, under the RCEP, as agreed upon by negotiators, in view of the health crisis.
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