A recent report from the World Bank offers a thorough analysis of how the RCEP can impact the economic atmosphere of its country members, including Vietnam.
Here, Vietnam Briefing highlights the facts and statistics on why and how Vietnam, among other middle-income countries, could benefit the most from the RCEP.
The Regional Comprehensive Economic Partnership (RCEP) agreement officially took effect on January 1, 2022. The countries that belong to RCEP account for almost one-third of world GDP and world population, and one-quarter of world exports and imports. If implemented successfully, it can have a considerable impact on not only Vietnam but the world’s economy.
The World Bank’s (WB) white paper Estimating the Economic and Distribution Impacts of the Regional Comprehensive Economic Partnership constructed a baseline or starting point and four alternative scenarios to estimate the economic and distributional impacts of the RCEP in Vietnam.
The baseline reflects the business-as-usual conditions prior to the implementation of the RCEP, where the tariffs of previous agreements, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), have been implemented, in parallel with the US-China trade war.
Then, the four alternative policy scenarios, as elaborated below, are compared against this baseline to determine the effect of the RCEP on Vietnam’s economy.
The four alternative policy scenarios take the effect of different policies into consideration to measure the impact of the RCEP. These policies can range from tariffs, and non-tariff measurements (NTMs) to trade cost policies.
As per UNCTAD, NTMs are policy measures, different from ordinary customs tariffs, that can potentially have an economic effect on international trade in goods. Technical requirements, export subsidies, minimum import prices, and environmental and health compliance requirements are some examples of NTMs.
In the baseline, between 2020 and 2035, the average tariffs imposed by Vietnam decline from 0.8 percent to 0.2 percent, while the tariffs faced by Vietnam are reduced from 0.6 percent to 0.1 percent.
In the most optimistic scenario (scenario 4), where all benefits are applied, Vietnam has the highest gains of all RCEP member countries. Vietnam’s income levels increase by 4.9 percent relative to the baseline, higher than other countries, where the income level increases by 2.5 percent.
While exports and imports increase for all RCEP member countries, Vietnam is expected to experience the highest increase in exports at 11.4 percent. Similarly, Vietnam’s imports also grow significantly at 9.2 percent compared to 7.2 percent for the Philippines.
This article was first published by VietnamBriefing which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to [email protected]