On November 15, 2020, the ASEAN states (Brunei, Indonesia, Cambodia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam), as well as Australia, China, Japan, New Zealand and South Korea, signed the Regional Comprehensive Economic Partnership (RCEP). This grouping covers 30% of the world’s population and 30% of the global economy.
Thanks to free trade agreements with China, Japan, the Philippines, Singapore and South Korea, Switzerland is relatively well positioned in the Asian region.
The RCEP will significantly change the environment for Swiss companies, bringing both risks and opportunities – as indicated by an initial analysis by Professor Patrick Ziltener.
Risks: Competitive disadvantages for Swiss exporters
In certain markets – for example in Australia, which has not signed a free trade agreement with Switzerland – Swiss exporters have to accept higher trade barriers compared with their Asian competitors, particularly in the case of Japanese and Korean companies selling high-quality, hi-tech products.
Opportunities: Higher demand as a result of economic upswing and simpler trading in Asia
Swiss companies with subsidiaries in China benefit from better market access in the RCEP states. Swiss companies with complex value chains extending across more than one RCEP state could also benefit from simplifications. However, as most SMEs do not have any local subsidiaries and export by relatively direct routes to Asia, these opportunities are unfortunately rather limited.
However, Swiss companies can also benefit from the agreement without complex value chains if they produce and sell within the RCEP states. This is for example possible if their production is located in China and they sell the products to Japan.
The improved trading conditions could lead to a general economic upswing and higher demand for capital goods, which Swiss companies could increasingly satisfy.
We advise Swiss SMEs with international activities to systematically review their value chains in the Asian region and analyze their competitive situation.
Will there soon be new competition? Will there be opportunities to approach new customers in neighboring countries more easily?
The RCEP is a regional trade agreement between the ASEAN states (Brunei, Indonesia, Cambodia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam) and Australia, China, Japan, New Zealand and South Korea. The agreement covers around a third of global economic output and a third of the world’s population.
The RCEP is the first agreement linking China, Japan and South Korea.
What does the RCEP cover?
The text of the agreement is publicly accessible. The RCEP contains the following elements:
- Trade in goods: Tariff reductions on around 80-90% of products, uniform rules of origin
- Services: E-commerce, ban on data localization requirements
- Intellectual property
- Competition policy
The RCEP does not cover:
- Labor law
What are the expected consequences of the RCEP?
The RCEP promotes the integration of the value chains within the region by eliminating the previously complex and fragmented trading regimes in the region (“spaghetti bowl”).
Some observers have expressed criticism that the RCEP is rather superficial, noting comparisons to the CPTPP. Despite that the RCEP is expected to deliver a boost to the economic momentum of the region. The Brookings Institution expects gains of USD 100 billion (China), USD 46 billion (Japan), USD 23 billion (South Korea) and USD 19 billion (Southeast Asia) by 2030.
In-depth analysis in the study by free trade expert Professor Patrick Ziltener
Download the study below with the following title (in English): “The Regional Comprehensive Economic Partnership (RCEP) as “Single Rulebook” bringing Free Trade to 30% of the World Economy and 30% of World Population – What does it mean for Swiss Companies?”