Opportunities from RCEP for exporting Vietnamese goods to the Korean market
• Opportunities from harmonized rules of origin, increasing the choice of preferential tariffs when exporting to Korea
In comparison with previous FTAs between Vietnam and Korea, RCEP brings the advantage of harmonized rules of origin - an important condition to enjoy preferential tariffs. Specifically, RCEP allows the accumulation of materials originating within the bloc from all 15 RCEP member countries, so Vietnam's exported goods can use materials imported from other member countries and still meet the rules of origin.
In fact, most RCEP member countries (China, South Korea, Japan, ASEAN countries) are Vietnam's main source of raw materials, so the ability of goods to meet RCEP’s rules of origin is higher, the rate of taking advantage of preferential tariffs in RCEP is also expected to be better than AKFTA or VKFTA.
RCEP is not exclusive but takes effect in parallel with existing FTAs between Vietnam and South Korea, which helps Vietnamese businesses have more choices of preferential tariffs/rules of origin in a beneficial way for businesses to do business more effectively with the Korean market. For example, preferential tariffs under AKFTA/VKFTA are higher than RCEP, but the ability to meet rules of origin under these Agreements is more difficult than RCEP, in this case, businesses can choose rules of origin and enjoy preferential tariffs under the RCEP - the most beneficial option for businesses.
• Opportunities from reducing non-tariff barriers
The RCEP agreement has many commitments on simplifying customs procedures and facilitating trade, on creating favorable conditions for recognition of equivalence of SPS measures, encouraging recognition of TBT conformity assessment, etc. These commitments help limit unnecessary trade barriers between Vietnam and South Korea, thereby making it easier for Vietnamese goods to enter the Korean market.
South Korea is considered a relatively demanding market, imported products (especially food) are subject to many non-tariff measures. In addition, some administrative procedures are still inadequate, time-consuming and costly for businesses. Therefore, the implementation of RCEP is expected to help Vietnamese goods easily enter the Korean market by reducing non-tariff barriers and reforming Customs procedures.
• Opportunities from reducing costs and improving competitiveness
Thanks to the advantage of harmonized rules of origin within the region, Vietnam can import raw materials that Vietnam does not have a competitive advantage in production from RCEP member countries at better prices. Therefore, the products will have greater price competitiveness in the Korean market.
In addition, RCEP also includes many commitments on services and institutions that can help manufacturing and exporting enterprises save production costs, thereby improving their competitiveness. For example:
- Commitments to opening markets for services supporting production such as finance, telecommunications, logistics, etc will create higher competition in these fields and give opportunities for manufacturing enterprises to access these services with better quality and more reasonable prices, thereby reducing service costs in product prices;
- Commitments to promoting a competitive environment, modern trade methods, and business support (competition, e-commerce, small and medium-sized enterprises, etc.) will create conditions for manufacturing businesses, especially small and micro enterprises to improve their competitiveness and better access to customers.
Throughout RCEP, commitments are made to achieve liberalization, equality, transparency and facilitation for trade and investment among member countries. These commitments will help Vietnam's business and legal environment more and more favorable, costs- and time-saving for businesses, thus production, import and export activities also become more convenient and easier.
In addition, to a certain extent, Vietnamese businesses have an advantage over many other RCEP countries in complying with high standard commitments without paying additional fees. This stems from the fact that Vietnam has met stricter rules when implementing other new generation FTAs with standards equal to or even higher than RCEP, such as CPTPP or EVFTA, while other RCEP countries such as China or some ASEAN member countries will face greater cost pressure to comply with higher standards when doing business with the Korean market. Therefore, it is expected that Vietnamese goods will have a greater competitive advantage compared to some RCEP member countries.
Source: Center for WTO and International Trade
