RCEP stands for Regional Comprehensive Economic Partnership, and it’s a free trade agreement for nations from the Asia Pacific. It’s a 15-member partnership that constitutes more than two billion people across the globe.
Given that the RCEP is a platform for such a wide population, it understandably controls about 30% of the global GDP. Therefore, it’s easily the largest agreement bloc for trade in history.
Among the countries that have joined the RCEP agreement are Australia, China, Cambodia, Brunei, New Zealand, Singapore, Thailand, Japan, South Korea, Myanmar, Vietnam, Laos, Indonesia, the Philippines, and Malaysia.
Interestingly, RCEP is the first-ever free trade agreement between China, Japan, and South Korea. Given that these are among the largest Asian economies, the RCEP promises to boost trade and economy in these regions.
What are the Aims of RCEP?
As the RCEP implementation starts in the region, it will become the biggest ever free trade zone in the world, even bigger than the European Union and US-Mexico-Canada Agreement. Initially, India also joined the negotiations but later pulled out due to the lower tariffs citing disadvantages to the local producers.
As RCEP is implemented, it will cut down the tariff ranges on imports in the next 20 years. Moreover, the RCEP promises provisions for intellectual property, financial services, telecom, ecommerce, and other professional services.
More importantly, the rules of origin will help define the origin of products and where they are likely to have the biggest impact. According to the representatives from the Asian Trade Centre, the current free trade agreements are far more complex than the RCEP.
Therefore, it paves the way for smoother and more effective implementation of the trade agreement, especially in the ASEAN (The Association of Southeast Asian Nations) and Pacific region.
Five Major Benefits of RCEP
As a free trade agreement, the RCEP trade deal has a lot to offer to the member countries. It promises to be a game-changer in the Asia Pacific region, promoting trade and development on a large scale.
Among many benefits for all the game players, the RCEP will help international businesses and payment processing companies as exports promise to grow exponentially over the next few years.
As per the reports from the United Nations Conference on Trade and Development, RCEP promises a 10% growth in the members’ exports by 2025, providing easier options for cross-border trade, smoother payment processing, internet finance firms, and many others.
In general, RCEP brings five major benefits to the RCEP members, especially the cross-border companies. Here’s a quick look.
Cross-Border Transaction Costs Will Reduce Considerably
One of the major advantages of the RCEP is the reduced cost of commodities, especially the ones produced locally in the RCEP member countries. The agreement promises to reduce tariffs eventually down to zero on more than 90% of goods trade.
It brings in some interesting elements like:
- Reduced transaction costs on exports
- Competitive prices on export commodities
Ultimately, it will reduce the cross-border transaction cost and will also bring in local payment processing companies.
Smoother Customs Clearances and Logistic Operations
With an effective RCEP agreement, custom operations should become remarkably smoother, thanks to the high-efficiency management tools like pre-arrivals processing and advance ruling. As a result, the customs clearance will be a breeze for the RCEP members.
In addition to that, the enhanced custom clearance efficiency also means quicker processing and transactions, speeding up the trade process in the region. Understandably, it will bring a financial boost to the region. Simply put, the high-efficiency measures from the RCEP trade agreement will promote:
- Frequent trade among the member countries
- Promote logistic infrastructure in the region
- Bring in more payment processing options like Oceanpayment.
Compliance Risk Should Reduce Considerably
Like most global trade agreements, the RCEP will reduce the compliance risk in trading. The agreement proposes uniform trade rules which means that the member countries will always be compliant with these measures.
As a result, the risk of non-compliance reduces, and sellers will be more comfortable in adhering to the trade standards. While uniform trade rules bring in many advantages, a couple of highlights of this uniformity include:
- Better awareness for traders regarding the trade rules to create a more compliant trade environment in the region.
- Reduced transaction barriers that generally occur due to non-compliant trade practices.
Fastlane the Digitalization of Cross-Border E-Commerce
As trade continues to adapt to the latest technological trends, the RCEP takes due account of the need for an effective digitalized standard for cross-border e-commerce. As a result, the modern standards for RCEP call for digital transactions and electronic certifications.
This initiative will promote paperless trade, bring electronic signature services into play, getting rid of tedious manual signature processes for logistics, trade services, and payments.
So, it effectively means a larger scope for digital payment processors like Apple Pay, Google Pay, WechatPay, Alipay, and many others.
Given that payment processing often hinders transaction speed, the ecommerce initiatives from RCEP will mean higher trade, especially among mass producers like China, Japan, and South Korea.
Layout of a Comprehensive Infrastructure
The acceleration in e-commerce services promotes the establishment of e-commerce platforms for cross-border trade. Therefore, supporting services like warehouses for efficient logistics, transportation facilities, and others will improve dramatically in the RCEP member countries.
It also means more need for labor and support staff, enhancing the job sector in these countries. Moreover, it will bring in more infrastructure development for workers and thereby support the construction businesses and their spinoffs.
How is the E-Commerce Market Developing in the RCEP Countries?
As the RCEP implementations take hold in the member countries, it is also critical to understand the progress of e-commerce development in the region. Here are some highlights to elaborate on the current ecommerce situation in the region.
- 80% of consumers in the region are satisfied with the e-commerce services.
- The customer satisfaction rate has increased, which has improved the sales by 1.2 times.
- 90% of the consumers from 2020 continue to use e-commerce services in 2021
- The majority of the consumers believe that e-commerce solutions have made their lives easier, and so, they have become part of the routine.
- Consumers believe that digital services have eased the purchase process, payment options, enhanced purchase experience, more product choices, and more competitive prices.
- Merchants don’t need more workspace as they go digital.
- Online shopping helps merchants to continue shopping, especially during the COVID-19 pandemic.
- E-commerce enjoys the trust of the merchants because they are easy to use and help in addressing a larger customer base.
- E-commerce has improved job opportunities by 83%, sustaining 87% revenue and improving livelihood by 84%.
Challenges that Cross-Border Companies will Face
As all countries around the world see growth in e-commerce platforms, there are various challenges for the RCEP members too. Here is a quick summary:
Uneven Economic Development
As countries like China and Japan are major players in the region, the other countries can find it hard to match the level of economic development in these regions. This creates discrepancies in the trade.
Cultural diversity is supposed to be good for any region because it exposes new products to different consumers. However, it also poses a challenge to the acceptance of new products on a wider scale.
Variation in E-commerce Development
Some countries have advanced further and taken giant strides in the e-commerce sector. So, it creates a mismatch between the services and digital advancements, creating a challenge for the processors to comply with the standards.
With RCEP being a one-of-a-kind trade agreement involving the developed as well as emerging economies of the Asia-Pacific region, the region is poised for unprecedented growth. The main sectors to benefit also include payment solutions for cross-border payments.
Oceanpayment already has the gears in motion, researching the marketing, as well as setting operations in Singapore and Australia. Thanks to the strategic relations with some of the biggest financial institutes around the world like Visa, MasterCard, UnionPay, We Chat Pay, Ali Pay, and Apple Pay, Oceanpayment is all set to bring in more partnerships into the fold.
With Singapore UnionPay NETS, Oceanpayment will have access to 95% of consumers in the ASEAN market. As a multi-purpose payment platform, it readily embraces the opportunities created by RCEP.