Update Free Trade Agreements in Asia – Regional Comprehensive Economic Partnership

Newspapers in Europe including Switzerland talk about TPP (Trade Pacific Partnership) and TTIP (Transatlantic Trade and Investment Partnership). Swiss based companies are well advised to follow the discussions about TTIP (negotiating parties are the U.S. and the EU) since it will have an impact on the future trade landscape.

Anyway, a post on those topics will follow later. There is little information to read in the newspapers about the Regional Comprehensive Economic Partnership, short RCEP. RCEP will be an important Free Trade Agreement for Swiss and European companies doing business or manufacturing activities in Asia. For the ones looking to expand to Asia and define a strategy to enter into Asia it may as well be of high importance. The RCEP aims for a harmonisation of Rules of Origin, which currently differs in each different FTA the ASEAN members (Association of Southeast Asian Nations: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) have concluded with its trading partners Australia / New Zealand, China, India, Japan and South Korea. Amongst many other topics, RCEP aims to reduce non-tariff barriers as well as sanitary and phyto-sanitary measures and Technical Barriers to Trade.

Negotiations on RCEP started in November 2012 with nine rounds of negotiations. The last one took place in Nay Pyi Taw, Myanmar, between the 3rd and 7th August 2015 and the 10th round will take place next October in South Korea. As TPP negotiations were not concluded end of July in Hawaii, the RCEP is gaining more importance. Why? The RCEP is perceived as a counteraction of China against the US-led TPP negotiated between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the U.S. RCEP countries account for 45 per cent of the world population. The aim is to finalise the agreement by the end of this year although the deadline might be pushed to 2016. The ambition to come up with a “high-end mega-FTA” is not a priority for all negotiating partners. Where Australia wants customs duty cuts on over 90 per cent tariff lines, India has a different view. India is reluctant to offer too high tariff reductions and the domestic industry is against giving more access to goods from China. According to the latest information, India decided to offer 80 to 85 per cent of tariff lines for duty cuts to South Korea and Japan, 70 to 75 per cent tariff lines to ASEAN and about 40 to 50 per cent to China, Australia and New Zealand. Because of this, the RCEP loses some of the initial expected impacts. Still, RCEP will facilitate and enhance trading activities in the Asian region. It is therefore crucial for Swiss and European companies to carefully analyse future opportunities for doing business in Asia. We keep you posted.

Further information