As the ongoing COVID-19 pandemic remains a threat to global health, business disruptions and mobility restrictions take their toll on economies. Most vulnerable to unpredictable business climates are small and medium enterprises (SMEs), already challenged by trade barriers even in pre-pandemic times. Which is why trade agreements that remove tariffs, and improve Intra-Asian market access, have the ability to unlock growth and expansion for Filipino entrepreneurs.
The Regional Comprehensive Economic Partnership (RCEP) is the world’s largest free trade agreement, covering about a third of the world’s economic output, trade and population. Seen as a positive step toward trade liberalization, the RCEP deepens the Philippines’ trade links with Asia Pacific nations; Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, Singapore, South Korea, Thailand, and Vietnam.
The RCEP encourages inclusive, comprehensive, and mutually beneficial economic policies that will enable SMEs to conduct intra-Asia trading with greater ease and enhanced tariff concessions. We believe some key initiatives will be particularly favorable for Filipino SMEs, especially those in e-commerce.
Fostering digital trade to reduce costs and increase efficiencies
The e-commerce chapter of the RCEP features initiatives that encourage SMEs to participate in the growing digital economy and leverage opportunities in online cross-border selling. The new deal makes way for a uniform system facilitating paperless trading and digitalized solutions such as electronic signatures and digital authentication.
Adopting cross-border, paperless trading can potentially reduce transaction costs and help SMEs create a seamless digital experience for customers – a huge factor influencing purchase decisions. There’s no doubt that automation of trade-related processes and logistics will significantly boost global competitiveness. Business owners will have more time to focus on enhancing the business and improving their customer service.
In the face of an enduring health crisis, contactless transactions are also paramount to ensuring business continuity while minimizing the spread of and exposure to COVID-19. The pandemic has shown us that digital transformation is not just a buzzword, but a fundamental component of recovery and resilience.
Cultivating a safe space for SMEs and customers
Consumer confidence and safety in the digital environment is essential for a well-functioning online trade market. By including commitments to improve online retailer and consumer protection, the RCEP can help digital trade in the region and boost confidence in the online environment.
Easing customs duties to enhance market access
According to the Department of Trade and Industry, the RCEP accounted for 50% of the Philippine export market and 61% of Philippine import sources last year as well as 11.4% of foreign direct investments that entered the country in 2019.
With the RCEP, member states aim to establish commitments on reducing or removing customs duties imposed on goods and services by about 92% within a 20-year timeframe. For a Filipino SME, this means increased opportunities to offer their products or services globally, especially in the areas of agriculture, garments and electronics.
Small local enterprises could benefit from having wider options for sourcing raw materials and finding cheaper prices. The RCEP is also projected to spur manufacturing and production activities in the country and contribute significantly to job creation.
Harmonizing systems and policies for development
The RCEP trade agreement will work towards establishing simplified trade rules that will improve international trade transactions and reduce administrative cost for exporters. In the process, this will encourage more production and manufacturing activities and ultimately provide additional jobs and business opportunities in the region.
Setting in place harmonized systems and policies for sustainable development are bound to help address pain points of local businesses, break down trade barriers and herald increased confidence in cross-border trade.
As businesses embrace digitalization to better serve their customers, FedExcontinues to evolve its logistics solutions and technologies by enabling local businesses to target global markets. In particular, FedEx Electronic Trade Documents (ETD) and the FedEx Delivery Manager have empowered SMEs to embrace e-commerce, providing them the capabilities to deliver their products across the world and map out a future that is ready for what’s next.
To discover more about the new developments shaping global business and how to take full advantage of them, please visit the FedEx APAC Go Global LinkedIN page.
