RCEP to go into force for S. Korea on Feb. 1; effectively first FTA with Japan

Posted on : 2022-01-28 17:18 KST Modified on : 2022-01-28 17:23 KST
Member countries of the mega-FTA account for 30% of the world’s population, GDP and trade volume
Leaders of RCEP member nations gathered for the 2019 summit in Bangkok, Thailand, link hands for a photo. (AFP/Yonhap News)
Leaders of RCEP member nations gathered for the 2019 summit in Bangkok, Thailand, link hands for a photo. (AFP/Yonhap News)

Known as the Regional Comprehensive Economic Partnership, or RCEP, the world’s largest free trade pact will come into effect for Korea on Tuesday.

This comes 60 days after the government deposited its instrument of ratification to the ASEAN Secretariat on Dec. 3.

Korea’s Ministry of Trade, Industry and Energy remarked in a press release on Thursday that Korea’s membership in RCEP is “expected to help [Korean] companies advance into overseas markets, as it expands the market for [Korea’s] key export items including steel and cars, as well as such service sectors as online games, animation, film and music.”

The ministry added that RCEP membership would alleviate the burdens of FTAs on domestic companies by integrating various origins standards into a single system, expanding regional cumulative rules on origin, and diversifying methods of certifying origins, such as self-certification by exporters.

With 15 member countries — the 10 ASEAN countries, plus Australia, Japan, China, Korea and New Zealand — RCEP accounts for around 30% of the world's gross domestic product, population and trade volume. For the countries that concluded ratification ahead of Korea — including  China and Japan — the trade pact came into force on New Year’s Day.

When RCEP enters into force in Korea, it will effectively mean that the country has signed its first free trade agreement with Japan.

Although India participated in RCEP negotiations in the early days of the agreement’s drafting, it started stepping back from the process in 2019 due to growing trade deficits with China.

The immediate impact of RCEP on the economy is not expected to be significant. This is because an agreement has not yet been reached on further market opening instead of simply a large-scale free trade agreement involving multiple countries. Although the agreement covers a large scope in terms of member countries, the same cannot be said for levels of market openness.

Yeo Han-koo, South Korea’s minister for trade, said that in terms of market openness, “RCEP is not deep, but instead is wide; CPTPP is deep but not wide.” CPTPP refers to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

The effects that RCEP will have on Korea are usually discussed with the long-term in mind and from a more strategic perspective. This is in line with the fact that Japan, which has not yet signed a separate FTA with Korea, has also joined RCEP.

Given this, from a diplomatic point of view, there is hope that Korea and Japan may be able to improve their relations through this economic link provided by RCEP. This line of thinking is based on the idea that the two countries can increase their manufacturing competitiveness by opening up their commodity markets, with exceptions for sensitive items.

This could also result in tightening of the regional supply and value chains. This is thanks to standardized rules regarding intellectual property rights and e-commerce.

After ratifying RCEP, the Trade Ministry, along with related ministries and agencies, have continued to hold briefing sessions for companies on revisions of laws and systems in order to help domestic companies make the most of the agreement.

Moving forward, the Korea Trade-Investment Promotion Agency, the Korea International Trade Association (KITA), and the Korea Chamber of Commerce will continue to monitor difficulties related to RCEP and are also planning to provide information and consultation services for companies using briefings as well as the 1380 FTA hotline.

Moreover, companies can obtain information related to customs regulations of partner countries through “YesFTA,” operated by the Korea Customs Service, and will also be able to search RCEP tariff rates and country of origin information using the KITA's TradeNavi service.

By Kim Young-bae, senior staff writer

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