SINGAPORE - The world's largest trade pact kicked in on Saturday (Jan 1), cutting tariffs for businesses for about 92 per cent of goods traded among signatory parties that have ratified the agreement.
The 10 countries that have ratified the Regional Comprehensive Economic Partnership (RCEP) agreement are Australia, Brunei, Cambodia, China, Japan, Laos, New Zealand, Singapore, Thailand and Vietnam.
The free trade agreement is between 15 countries, including Indonesia, Malaysia and the Philippines, which are expected to ratify it soon. Myanmar's ratification is pending acceptance by other members.
For South Korea, the agreement will take effect on Feb 1 - 60 days after its instrument of ratification, a document by which a country formally agrees to be bound by a treaty, was deposited.
The RCEP is also the first time China and Japan, as well as Japan and South Korea, are in a free trade agreement.
Singapore's Minister for Trade and Industry Gan Kim Yong said the pact will boost trade and business ties between the Republic and other RCEP parties.
"We are heartened that many Singapore businesses indicated that they were keen to explore utilising the RCEP agreement... That the agreement is entering into force about a year after it was signed, is testament to the region's determination and commitment to deepening economic integration amid difficult times," he said.
"We look forward to the swift ratification of the RCEP by all remaining parties so that the full potential of the agreement can be realised," added Mr Gan.
Besides the tariff elimination, businesses can benefit from additional preferential market access for specific products, said the Ministry of Trade and Industry on Friday.
These include mineral fuels, plastics, other chemical products, miscellaneous food preparations and beverages in certain RCEP markets such as China, Japan and South Korea.
Businesses will also have greater preferential access to markets and more flexibility to take advantage of regional supply chains.
The RCEP agreement also includes commitments above existing Asean Plus One free trade agreements in several sectors, and aims to provide more certainty for businesses through greater transparency.
It will also be easier for investors to finance projects as the agreement includes commitments to prevent performance requirements - set out by host states requiring investors to meet economic and social goals - from being imposed on them.
The RCEP builds on existing bilateral agreements that Asean has with its free trade partners. It covers about 30 per cent or US$26 trillion (S$35 trillion) of global gross domestic product, and 30 per cent of the world's population.
For example, the world's largest free trade agreement will remove tariffs on 86 per cent of Japan's exports to China, up from 8 per cent of goods that are currently tariff-free, according to professional services firm Deloitte.
Japan's tariff-free exports to South Korea will also burgeon from 19 per cent to 92 per cent.
The agreement comprises 20 chapters, including areas such as intellectual property, competition policy, e-commerce and government procurement.