cumulation

Using RCEP: Creating Products for Asia

Using RCEP: Creating Products for Asia

Under RCEP, however, the shampoo company can make shampoo safe in the knowledge that—as long as the content in the bottle comes from anywhere in the 15 markets in Asia meeting the ROOs for RCEP—it can be shipped to any of the 15 markets in Asia without any changes in formulation.  Given the size and diversity of these markets, this is a significant advantage to all Asia-based firms.  Even better, under RCEP, firms will need to fill out only one sheet of paper to prove that their products “qualify” for origin.  The new RCEP certificate of origin (CO) should reduce costs and time for companies.  The extent of the benefits, ie, the lower tariffs on offer, will vary in RCEP.  In some instances, the gap between the MFN rate or existing FTA benefits and new RCEP rates may be small.  But the ability to ship products, like shampoo, across all of Asia without change in formulation, is still extremely significant.  It means that firms will be competitive in markets that they may never have considered in the past. This apparently small element of RCEP is likely to be game changing.  Companies should start preparing now to use this trade agreement.

RCEP: Creating Rules for Trade in Goods

RCEP: Creating Rules for Trade in Goods

Under RCEP, with 16 member countries involved, making a chicken pie should be quite easy with content inside members.  The ROO threshold could be quite high without unduly hampering the ability of firms to comply with the rules.  Of course, not every product is a chicken pie.  This is why RCEP negotiators are working off what are called product-specific ROOs to ensure that the ROOs make sense for different types of products.  The rules for chemicals should be different than the rules for textiles which should be different than the rules for pies.  But all should ultimately be crafted to allow firms to source across the 16 member states without too much hassle.  The point of the agreement is to facilitate trade in the region.  It should help unlock new opportunities for companies to make pies or juice or plastics.  These rules should work for large and small firms by avoiding cumulation rules that add unnecessary complexity by asking companies to calculate value addition by stops in the supply chain.   The ROOs are an important element in getting the final RCEP agreement to do what it is meant to do—facilitate trade better across the 16 members.