On Sunday, 15 countries gathered to solidify their participation in Regional Comprehensive Economic Partnership (RCEP) by signing a free-trade agreement (FTA) to strengthen their trade ties and ensure easier availability of goods and services across the countries. It is being predicted that trading of polymer products is likely to receive a strong boost from the agreement signed between the Asia-Pacific nations. Analysts anticipate that the most immediate impact of RCEP could be the regionalization of polyethylene (PE) and polypropylene (PP) trades within the Association of Southeast Asian Nations (Asean) region, northeast Asia and Oceania.
The silver lining could be the gradual reduction of import tariffs for PE and PP stocks from northeast Asia-origin to southeast Asian countries such as Thailand, Malaysia, the Philippines and Indonesia from 5-10% to not more than 5% over the next 10-20 years. Import tariffs for polymers from all origins to Australia will also be curtailed from 5% to zero in the coming 20 years. Lower freight rates and shorter transit times would also attract buyers in RCEP nations. The FTA was signed by China, Japan, South Korea, Australia, New Zealand and the 10 members of Asean. According to data from the International Monetary Fund, RCEP nations hold nearly a third share in the global economy and their combined gross domestic product stands at around USD 26 trillion. RCEP was initially being negotiated between 16 countries- ASEAN members and Australia, China, Korea, Japan, New Zealand and India.
However, on November 4, 2019, India backed out from the discussions over “significant outstanding issues”. According to ChemAnalyst, India’s decision for opting out from RCEP is a repercussion of its escalating tensions with China. India feared rising imports and an uncomfortable exposure to Chinese products if it were a part of the agreement, which could have interfered with the various measures it is taking to reduce its exposure to China. However, this is likely to affect its bilateral ties with RCEP nations in longer terms.