Mega Economic Bloc 'RCEP' Comes into Effect Domestically Today... Expansion of South Korea's Economic Territory

RCEP Officially Enforced Domestically... Accounts for 30% of Global GDP
Application for CPTPP Membership Submitted in April... Expanding FTAs to Emerging Markets

Busy Busan Port with Strong Export Performance
(Busan=Yonhap News) Photo by Kang Deok-cheol = On the 21st, unloading operations are underway at the Sinsundae Pier of Busan Port. From the beginning of January to the 20th, export amounts increased by more than 20% compared to the previous year. The Korea Customs Service announced on the 21st that the export value (provisional customs clearance basis) from January 1 to 20 was 34.4 billion dollars, an increase of 22.0% (6.22 billion dollars) compared to the same period last year. 2022.1.21
kangdcc@yna.co.kr
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[Asia Economy Sejong=Reporter Lee Jun-hyung] The Regional Comprehensive Economic Partnership (RCEP) came into effect domestically starting today. RCEP is a mega economic bloc involving 15 countries, including the 10 ASEAN nations. Once South Korea completes its accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which the government is currently pursuing, the country's economic territory is expected to expand significantly.

According to the Ministry of Trade, Industry and Energy on the 1st, RCEP was officially enforced domestically starting today. Previously, the South Korean government deposited the RCEP instrument of ratification with the ASEAN Secretariat on December 3 last year. According to the agreement's provisions, RCEP comes into effect 60 days after the deposit of the instrument of ratification, which is today. The government concluded RCEP accession in November 2020 after about eight years of negotiations.

RCEP is the world's largest free trade agreement (FTA). It includes 15 countries: the 10 ASEAN countries plus five non-ASEAN countries?Australia, China, Japan, New Zealand, and others. India withdrew from the negotiations at the final stage in 2019, citing concerns over competition with China. The combined population of the 15 member countries is approximately 2.3 billion. The regional gross domestic product (GDP) amounts to 26 trillion dollars (about 3,143.4 trillion won), accounting for 30% of the world's GDP.

Export Competitiveness ↑

It is analyzed that South Korea's export competitiveness could significantly increase starting with RCEP. In fact, the Ministry of Trade, Industry and Energy expects the overseas expansion effect for domestic companies due to RCEP to be greater than that of existing FTAs such as the Korea-ASEAN FTA. Once RCEP is enforced, not only key export products like automobile parts and steel but also service products such as online games, animation, and films will benefit.

The burden on export companies in utilizing FTAs will also be greatly reduced. According to the ministry, the introduction of a single origin rule that unifies the rules of origin recognition among RCEP member countries, expansion of cumulative origin scope, and diversification of origin certification methods such as self-issuance by authorized exporters will be implemented. Expanding the scope of cumulative origin will increase the range of tariff benefits, directly enhancing export competitiveness.

In particular, an increase in exports to major trading partners such as China and Japan is expected. China, South Korea's largest trading partner, accounted for about 25% of South Korea's total trade volume in 2020. The Chinese government has announced that it will gradually eliminate over 90% of import tariffs among participating countries once RCEP is enforced. Additionally, RCEP is South Korea's first FTA with Japan. Japan plans to eliminate or reduce tariffs within 20 years on Korean imports that account for 14% by import value and 41.7% by item count. Companies related to plastics and synthetic resins are expected to benefit.

Pursuing CPTPP Accession

The South Korean government is also pursuing accession to the CPTPP. The government plans to officially apply for CPTPP membership in April this year. CPTPP is a large FTA involving 11 Asia-Pacific countries including Canada, Australia, Mexico, and Japan. It includes countries not participating in RCEP such as Canada, Mexico, Peru, and Chile. The trade volume among member countries was 5.7 trillion dollars (about 6,900 trillion won) as of 2019, accounting for about 15% of global trade. Last year, the scale expanded further as four countries? the United Kingdom, China, Taiwan, and Ecuador?applied for membership.

The government aims to expand its FTA network to cover about 90% of the world's GDP within this year. This will be achieved through expanding FTAs not only with RCEP and CPTPP but also with emerging markets in Latin America and the Middle East. As of the end of last year, South Korea's FTA network covered about 85.4% of the world's GDP. The government is also focusing on joining the Digital Economy Partnership Agreement (DEPA). DEPA is an agreement among Chile, Singapore, and New Zealand to establish key digital trade norms and strengthen cooperation in related fields. The Ministry of Trade, Industry and Energy officially began the first accession working group negotiations for DEPA on the 27th of last month, accelerating the accession process.

This content was produced with the assistance of AI translation services.