SINGAPORE — From cost savings to greater market access, there will be clear benefits for Singapore businesses as the world’s largest trade deal comes into force, the city-state’s trade minister said on Tuesday.
The Regional Comprehensive Economic Partnership, or RCEP, is a mega trade agreement signed by 15 countries, which collectively cover about one-third of the world’s population and make up 30% of the global economy. It includes China, but excludes the U.S., and came into effect on Jan. 1.
RCEP is an important agreement that will boost trade collaboration and integration within the region, Gan Kim Yong, Singapore’s minister for trade and industry, told CNBC’s “Squawk Box Asia.”
“For the businesses, I think they can look forward to quite a lot of benefits. For a start, in terms of tariffs, businesses can enjoy up to 92% in terms of tariff reduction,” Gan said. “This will save 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 largest trading partners: China, Japan, South Korea, Australia and New Zealand. Those countries make up a market of 2.2 billion people and $26.2 trillion of global output.
The pact will allow for greater transparency and facilitate services exports in areas such as professional services, computer and business services as well as logistics and distribution, the trade minister said. Investors can also benefit from greater certainties around their investments, he added.
“RCEP is also an important signal to the rest of the world that the member countries look at integration and collaboration as an important way to continue to fuel the economic growth in the region, so, they believe in a rules-based multilateral trading system,” Gan said.
Singapore plans to engage with business leaders, business councils, and various other industry bodies to share how companies operating in the city-state can take advantage of RCEP, according to Gan.
“It’s a journey and in this journey, the first part is going to be a lot of sharing and education,” he said. “There’s a lot of work to be done – it’s not just signing the agreement and bringing it into force.”
Analysts have previously said that RCEP’s economic benefits are modest and that it would take years to materialize. However, the deal has widely been seen as a geopolitical victory for China at a time when U.S. 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 agreement.
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 a part of the Comprehensive and Progressive Trans-Pacific Partnership, an 11-nation mega trade pact that formed in 2018 after the United States withdrew from the Trans-Pacific Partnership a year earlier.