With revenue increasing by US$186 billion, RCEP will bring significant opportunities to its 15 member countries!

The Peterson Institute for International Economics (PIIE) in Washington predicts that by 2030, RCEP will increase trade among member countries by $428 billion, increase global exports by $500 billion, and boost national income of the 15 countries by $186 billion.

Once RCEP takes effect, trade between China and its partners will account for 27 percent to 35 percent of total global exports, and more than a third of its foreign trade goods will be tariff-free, the Ministry of Commerce said.

At the same time, this major trade deal will bring markets and job opportunities to Chinese companies and deepen cooperation across the region's supply chain.

However, in a more open market, Chinese products will face fierce competition from low-end products produced by Southeast Asian countries that have comparative advantages in labor and land, as well as high-end products from developed countries such as Japan and South Korea.

Customs data showed that ASEAN has become China's largest trading partner, and amid the pandemic, bilateral trade still grew by 7%, indicating that the ASEAN market has greater potential for China.

Taking Vietnam as an example, RCEP is more comprehensive than other free trade agreements and helps Vietnam better participate in the global supply chain.

There are three economic advantages for Vietnam to fully utilize the opportunities brought by the RCEP agreement.

First of all, RCEP member countries are the largest suppliers of raw materials, machinery and equipment parts for Vietnam, and are also the main markets for Vietnamese products.

Secondly, RCEP covers the world's largest production chains, so smooth and rapid docking with RCEP economies will help Vietnam have greater opportunities to participate in the global supply chain and increase Vietnam's role in this supply chain.

Third, Sino-US trade tensions and the COVID-19 pandemic have also prompted Vietnam to connect with China and other markets in the production chain, creating good opportunities for Vietnam to attract foreign investment.

However, while bringing many opportunities, the RCEP agreement also brings many challenges to Vietnam.

From an economic perspective, joining the RCEP agreement may increase Vietnam's trade deficit with the region, while RCEP's not very high standards will make Vietnam lose the motivation for institutional reform.

In terms of attracting foreign direct investment, most economies in RCEP are partners that invest heavily in Vietnam. However, some of these partners also lack technical skills and investment quality.

In addition, when Vietnam opened up its domestic market, it also brought competitive challenges to businesses.

In order to effectively utilize the RCEP agreement, Vietnam needs to implement three major measures, namely, continue to reform the system and improve the business environment; formulate a clear industrial development policy to identify core industries and supporting industries; and promote fundamental changes in the mechanism to control and ensure the quality of foreign direct investment funds.

Vietnamese businesses should take the initiative to understand RCEP’s commitments and then take action to be ready to take advantage of the opportunities RCEP brings while proactively addressing challenges.

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