China Market Insider Is RCEP a Booster of the Asian Chemical Industry?
The new free trade zone RCEP (Regional Comprehensive Economic Partnership) means new growth, but also more competition in the Asian chemical industry, especially for small and medium-sized companies.
Beijing/China – The new free trade zone RCEP will enable the chemical industry in Asia to grow further, according to an analysis by PROCESS (China). In the short term, no significant change in trade flows in the region is expected, as there are already existing bilateral agreements for many chemicals and raw materials, and also because ratification of the RCEP in individual member countries is not expected until the next twelve months, the trade publication writes.
In the long term, however, "cost reductions through the abolition of trade tariffs" will boost economic performance and the labour market in the Asian and Chinese chemical industry. Individual sectors such as petrochemicals, and in particular small and medium-sized Chinese companies, will face "new challenges" due to cheaper imports, comments Process China.
China, the ten Asean countries, Japan, South Korea, Australia and New Zealand; a total of 15 nations, joined forces on November 15 to form the world's largest free trade zone by signing the Regional Comprehensive Economic Partnership (RCEP). The new trading bloc is responsible for almost 30 per cent of the world's economic output, with almost a third of the world's population, and is thus even larger than the European Union.
Possibly, within the next three decades, up to 90 per cent of all traded goods in the RCEP community will be free of import duties according to the agreement. In the case of such multilateral agreements, there are several thousand printed pages full of exceptions and transition periods which mean that the implementation in some cases will not be complete until 20 years and in the case of some products even until 35 years. Nevertheless, most analysts saw the free trade agreement as a positive signal for the chemical industry in Asia, recently hit by the trade war between the USA and China and then by slumps in sales due to the lockdown in the corona crisis, to open up new opportunities.
China's Prime Minister Li Keqiang called RCEP a "victory for multilateralism and free trade", and leaders of several other countries in Asia and the Pacific region made similar statements. "At a time when support for multilateralism is waning, RCEP represents a clear commitment of our region's unwavering support for the multilateral trading system," said Singapore's Trade Minister Chan Chun Sing at the signing of the agreement on November 15, on the side lines of an Asean summit in Hanoi. Because of Covid-19, Chan as well as most of the other leaders from the 15 member states participated in the ceremony via video conference.
China has signed a multilateral trade agreement with RCEP for the first time, and the agreement is particularly important for Chinese-Japanese and Chinese-South Korean trade. "Japan and South Korea have been important rivals of China in Asia since a long time, especially in manufacturing industries such as chemicals and energy," writes the Chinese business magazine Caixin. But now Japan and South Korea's markets will be more open to China.
From a Chinese perspective, the tariff cuts are expected to have a positive impact on the markets for pesticides and fertilisers, stated PROCESS (China). However, RCEP will bring new challenges, especially for small and medium-sized companies in the petrochemical industry in China, added the publication. It is expected that the chemical industry in the region will become even more attractive to multinational corporations than before as a result of the trade agreement, which also facilitates investments and reduces bureaucracy for imports and exports in the region, commented PROCESS.