By Yusra Barmaz
On Sunday 15th November, 15 countries from across the Asia Pacific region signed one of the largest trade deals ever brokered. The deal covers just under a third of the world’s economic output and includes countries such as China, Australia, Japan, New Zealand, South Korea and ten Association of Southeast Asian Nations (Asean).
Negotiations for The Regional Comprehensive Economic Partnership (RCEP) started back in 2012 and was finally signed over a video link due to COVID-19 travel and social distancing restrictions.
Over the course of the next 20 years, the RCEP will abolish tariffs on a range of imports. The deal also lays out a framework for more modern and competitive legislation that covers IP, telecommunications and professional services.
The RCEP also simplifies the ‘rules of origin’ legislation, making it easier to benefit from free trade agreements. While there are relatively extensive free trade agreements (FTAs) already in place in the region, the rules can be complicated to understand. For example, a product made with parts from various countries (as is often the case) could, under present rules, be liable for multiple tariffs as it’s exported and imported within the region. Under RCEP rules, product parts from member nations would now be treated equally, meaning it’s more straightforward to benefit from FTAs and sourcing parts from across member states is likely to be advantageous.
New cross border opportunities for businesses
John Ashwood, Managing Director, ZEDRA Hong Kong explains that for clients in the Asia Pacific region with cross border interests, the deal is likely to be great news. ‘While RCEP still has to be ratified in a number of countries and the rollback on tariffs are unlikely to be lifted in the very short-term, the promise of easier cross border trade is an exciting prospect. There have long been great opportunities in the Asia Pacific region and many companies want to expand their footprint, or pursue prospects in the region, which often includes trading between one or multiple countries. The RCEP is likely to lay the foundation for them to do so with more ease, effectiveness and profitability.’
Private clients and HNW families
For wealthy clients, the story is likely to be similar. Many wealthy individuals and families have local or international businesses which generate much of the family wealth. Of these, many will have significant links to multiple countries in the Asia Pacific region, either with products which are imported and exported, or with professional services which may be given to domestic or international customers.
‘Many of our private clients have businesses that generate or supplement their wealth. Likewise, they often have multiple investments across the region. Any deal which facilitates international trade and cross border investments is welcome. As RCEP comes into force, we expect families may well look to benefit from these business and investment opportunities more fully,’ adds John.