RCEP free trade deal to take effect Saturday

The Regional Comprehensive Economic Partnership free trade deal will take effect at the start of 2022 on Saturday, bringing together 15 Asian and Oceanian countries that account for 30% of the world’s economy.

The RCEP pact is Japan’s first economic partnership agreement with China and South Korea. The other 12 signatories are Australia and New Zealand plus the 10 members of the Association of Southeast Asian Nations.

The deal will abolish import tariffs on 91% of items, mainly auto parts and other industrial goods. Japan’s auto industry is seen especially benefiting from the tariff cuts.

China will gradually raise the proportion of imports of industrial products exempted from tariffs from 8% to 86% over two decades. Among the products are motors for electric vehicles, which are expected to enjoy high demand amid moves toward decarbonization.

South Korea will also increase the proportion of such tariff-exempted items, including electronic parts for automobiles, from 19% to 92%.

The agreement will also give a tailwind to exports of Japanese agricultural, forestry, fishery and food products. Tariffs will be lifted in stages for products such as Japanese beef in Indonesia and sake in China and South Korea.

According to a Japanese government estimate, increased trade as a result of the tariff cuts is seen pushing up the country’s real gross domestic product by around ¥15 trillion.

RCEP’s economic impact on Japan is believed to be around double that of the Trans-Pacific Partnership free trade agreement, whose 11 members include Japan, Australia, New Zealand and some ASEAN states, but not China.

Under the RCEP pact, Japan will not reduce its import tariffs for the five sensitive agricultural product categories of rice, wheat, beef and pork, dairy products and sugar.

But the country will lower tariffs on clothing, matsutake mushrooms and makgeolli, a South Korean alcoholic drink.

RCEP is the first major trade pact for China, which applied for TPP membership in September 2021 to capitalize on the economic growth of the Indo-Pacific region.

Taiwan followed suit with its own TPP bid, while South Korea said it will begin procedures for a future bid.