RCEP to improve Pakistan's Trade & Investment Potential Manifold: PRIME

The Regional Comprehensive Economic Partnership (RCEP) offers an immense window of opportunity for Pakistan to enhance its trade and investment potential, according to a latest report by the Policy Research Institute of Market Economy (PRIME).

Policy Research Institute of Market Economy (PRIME) is a public policy think tank based in Islamabad. Over the years, PRIME has played a lead role in national debates on public debt, national finance award, tax reforms, and information technology agreement.

The RCEP links 15 Asia Pacific countries, which account for 30 percent of the global GDP, through a Free Trade Agreement (FTA) with the aim of establishing a single, harmonized and predictable set of trade rules to facilitate businesses in locating their regional supply chains.

The agreement is expected to come into force by the end of 2021, allowing for new members to join within 18 months of its coming into effect. This timely report by PRIME establishes a strong case for Pakistan’s accession to the RCEP and provides a road map for Pakistan to boost its regional trade.

The report also claims that RCEP’s share in the Global Value Chain stands at 24.2 percent, while Pakistan is only making a menial contribution of 0.08 percent. Hence, the country can successfully integrate itself in the Global Value Chain by joining the RCEP.

In addition to this, a considerable proportion of Pakistan’s trade share (16.8 percent of total exports and 36.4 percent of total imports) is also associated with the RCEP countries. After the multilateral FTA goes into effect, the RCEP countries will enjoy preferential treatments within the bloc, which will ultimately threaten Pakistan's trade share with these economies. Therefore, being an outsider means larger trade deficits, potential loss of BRI financing and forgoing of the benefits of deeper regional and global trade integration for Pakistan.

Furthermore, Pakistan ICT industry also has a huge opportunity to gain a modest share in the regional value chain, especially with the probability of India joining the RCEP being unlikely in the medium-term.

The country will also be able to further develop its regional value chain in the manufacturing and exports of mobile phones by taking full advantage of its lower labor costs as compared to most RCEP members.

As the trends of global trade are evolving with GVC and multilateral trade agreements becoming cornerstones for trade enhancement, Pakistan needs to shift its focus on long-term goals. This latest report by PRIME also proposes multiple policy options to assist in fully materializing the benefits of joining RCEP: arranging stakeholder consultations; developing a roadmap for possible accession; enhancing public-private cooperation to raise awareness; leveraging sectors with export potential; overhauling trade policy and trade-related investment policy and establishing digital trade portals.