Singaporean Minister on Trade Benefits for Companies and Investors

SINGAPORE – From cost savings to better market access, there will be clear benefits for Singapore businesses with the entry into force of the world’s largest trade deal, the city-state’s trade minister said on Tuesday. .

The Regional Comprehensive Economic Partnership, or RCEP, is a mega trade deal signed by 15 countries, which collectively cover around one-third of the world’s population and represent 30% of the global economy. It includes China, but excludes the United States, and came into effect on January 1.

RCEP is an important agreement that will boost trade collaboration and integration within the region, Gan Kim Yong, Singapore Minister of Commerce and Industry, told CNBC’s “Squawk Box Asia”.

“For businesses, I think they can expect a lot of benefits. For starters, in terms of tariffs, businesses can benefit up to 92% in terms of tariff reduction,” Gan said. “It will reduce costs for businesses, it will also facilitate market access.”

The trade deal was signed by the 10 member states of the Association of Southeast Asian Nations and five of their major trading partners: China, Japan, South Korea, Australia and New Zealand. These countries represent a market of 2.2 billion people and 26,200 billion dollars in global production.

There’s a lot of work to be done – it’s not just about signing the agreement and putting it into effect.

Gan Kim Yong

Singapore Minister of Trade and Industry

The pact will allow greater transparency and facilitate exports of services in areas such as professional services, IT and business services as well as logistics and distribution, the trade minister said. Investors can also benefit from greater certainty around their investments, he added.

“The RCEP is also an important signal to the rest of the world that member countries see integration and collaboration as an important way to continue fueling economic growth in the region, therefore, they believe in a multilateral trading system based on rules, ”Gan said.

What RCEP means for Singapore

Singapore plans to engage with business leaders, business councils and various other industry bodies to share how businesses operating in the city-state can benefit from RCEP, according to Gan.

“It’s a journey and in this journey the first part will be a lot of sharing and education,” he said. “There’s a lot of work to be done – it’s not just about signing the agreement and putting it into effect.”

Analysts have previously said the economic benefits of RCEP are modest and it would take years to materialize. However, the deal was widely seen as a geopolitical victory for China at a time when the United States’ economic influence in Asia-Pacific has waned.

For his part, Gan told CNBC that all RCEP members “play an equal role, play a very important role” in the deal.

Being one of the most trade dependent economies in the world, Singapore has a number of multilateral and bilateral trade agreements beyond RCEP, such as the ASEAN Free Trade Agreement.

The city-state is also part of the Comprehensive and Progressive Trans-Pacific Partnership, an 11-country mega-trade pact that formed in 2018 after the United States withdrew from the Trans-Pacific Partnership a year earlier.

Dealing with multiple business platforms with a slightly different focus and different layouts can potentially pose challenges for businesses, according to Gan.

“Companies will need to understand which agreement is best for them and I think the [government agencies] will be there to help explain to companies what these agreements mean to them, to help them take advantage of the features of these agreements, ”he said.

What this means for Asia

RCEP is leading the way for member countries to discuss ways to make Asia-Pacific supply chains more resilient, the minister said, adding that the agreement simplifies customs processes and the clearance of shipments, among others. provisions.

“To a large extent, this facilitates logistics and distribution as well as supply chain resilience,” he said. “Ensuring that the supply chain remains resilient will require [have to] go beyond the simple document in RCEP. The key players will have to come together to seek solutions. “

Gantry cranes and containers stacked at Tanjong Pagar Terminal in Singapore on Sunday, November 7, 2021.

Huiying Ore | Bloomberg | Getty Images

Global supply chains were disrupted in 2020 due to the coronavirus pandemic and resulted in the shutdown of industries around the world. Last year, as lockdowns gradually lifted in many parts of the world, they triggered a surge in demand.

This has led to chaos for manufacturers and distributors of goods who have not been able to produce or supply as much as before the pandemic. A number of reasons, such as labor shortages and the scarcity of major components and raw materials, have contributed to this.

With the new variant of Covid omicron spreading rapidly across the world, there is a growing risk of further disruption to supply chains if countries are forced to lockdown again. That said, studies have shown that hospitalizations for people infected with omicron may be lower than the more deadly delta variant.

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