South Korea plans to submit a bill to ratify regional multilateral free trade agreement with Southeast Asian countries and others this month as it seeks to find new markets for growth.

Southeast Asian countries and its dialogue partners China, Japan, South Korea, Australia, and New Zealand late last year signed the Regional Comprehensive Economic Partnership (RCEP) pact, which would create the world’s biggest trade block covering around 30% of global gross domestic product and around 2.2 billion people.

On Wednesday (1 September), trade minister Yeo Han koo spoke with Lim Jock Hoi, the secretary general of Association of Southeast Asian Nations (ASEAN) to discuss supply chain improvements as the outbreak of Delta variant of the coronavirus disrupts trade flows, Yonhap news agency citing the Korean-language statement of the Ministry of Trade, Industry and Energy.

Deeper ties with Southeast Asia

In the first half of the year, South Korea’s exports to Southeast Asia amounted to a record high of USD49.2bn, while Korean companies have been stepping up its investment in the region in recent years.

In recent years, South Korean semiconductor and electronics companies outsourced some production processes to countries such as Malaysia and Vietnam while automobiles and parts manufacturers investments have flown into Vietnam, the Philippines, and Indonesia.

The RCEP agreement – requiring ratifications of six ASEAN members and three dialogue partners before coming into effect – is projected to boost intra-region trade and investments as it will eliminate up to 90% of tariffs.

"CJK effect"

RCEP also marks the first free trade agreement between China, Japan, and South Korea, representing Asia’s top, second, and fourth largest economies. China and Japan have completed their RCEP ratification process earlier this year.

Economic Research Institute for ASEAN and East Asia (ERIA) viewed that “the CJK (China, Japan, Korea) impact could be significant and could have a positive impact” on post-pandemic recovery in Southeast Asia as it “could have an accelerating and enhancing impact on global value chains (GVCs) in the region.”

“The single ROO (rule of origin) framework under RCEP will have important implications for GVC activities in the region in terms of greater intra-industry trade and investment, and it is likely to create more value-added activities in the region,” the think tank said on its July report.

“RCEP agreement also has key elements for services liberalisation in key services trade in e-commerce, financial, professional, and telecommunication services. These services will be critical for structural transformation in the post-pandemic recovery in terms of the digital transformation of services in the East Asia region.”

Source: Capital.com

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