RCEP and CPTPP ratification is important to buffer the economy post-pandemic
29 Jun 2021
Businesses want to invest in a country that offers an arrangement that will be applied for a long time
Malaysia needs to expedite the ratification of existing free trade agreements (FTAs) to help buffer the economy especially in the post-pandemic era.
According to UOB Global Economics and Markets Research ED and research head Suan Teck Kin diversified trade relations will be valuable to the businesses community because such agreements allow preferential market access for participating members which extend businesses assurity.
“Businesses want certainty. They want to invest in a country that offers an arrangement that will be applied for a long time.
“With just one rule of origin document is now sufficient to cover all countries in Regional Comprehensive Economic Partnership (RCEP), this makes it easier for businesses to meet the required rules of origin for their exports, thus, benefit from preferential treatment and greater cost savings,” he told The Malaysian Reserve.
Malaysia has signed two major FTAs, the RCEP and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), but the government is yet to ratify both trade deals.
Malaysia is expected to gain the most with the first ever participation of three major east Asian economies coming together in RCEP — China, Japan and South Korea.
Malaysian businesses are expected to reap the benefit of these trading partners connected on a single FTA that would provide an effective platform for production, distribution, circulation of goods and services.
Sunway University Business School economist Dr Yeah Kim Leng said the ratification of RCEP and its implementation is expected to be the primary focus of member countries to create the world’s largest trade bloc.
He noted in the case of Asean countries, FTAs are increasingly being pursued at the regional level, thereby, making individual bilateral FTAs between two countries redundant or less effective.
“We are seeing some partial shift of production and trade activities by multinational companies out of China to South-East Asia although the urgency may be reduced if the regional trade blocs help to reduce trade tension diversion.
“Increasingly, the advanced western economies are focusing on human rights and environmental, social and governance compliance in trade negotiations that could lead to higher non-trade-related standards being imposed on member countries.
“Future trade deals will likely include mechanisms on how to deal with shocks to supply chains and how trading partners can minimise disruptions to trade in essential goods and services,” said Yeah.
In a post-Covid-19 world, United Overseas Bank (M) Bhd senior economist Julia Goh said a review of existing FTAs may need to cover new aspects of the digital trade including cross-border data flows and services.
“Perhaps the most crucial part for future FTAs and potential risks or opportunities, are related to protectionism which are often cited as national security concerns.
“As such, it is most important FTAs maintain an open trading system, allowing duty-free movement of parts and components and make Asia’s supply chains more predictable and resilient,” she added.
Malaysia Rating Corp Bhd head of economic research Firdaos Rosli said the discussion on FTA’s in the pandemic era focused on Trade-Related Aspects of Intellectual Property Rights or intellectual property rights particularly in the topic of Covid-19 vaccine productions and global supply.
He added that although all countries need vaccines, not all could manufacture vaccine supply.
However, he said by establishing trade links for production via FTAs, this could be potentially solved.
The global mass production of these products is critical in addressing the shortfall in supply to many developing countries and uneven economic recovery. Source: The Malaysian Reserve