China, Others’ RCEP Deal: A Likely Testbed for Blockchain’s Maturity in International Trade
This weekend’s proposed signing of the Regional Comprehensive Economic Partnership (RCEP) Agreement by 15 countries to create Asia’s largest free trade zone that will cover 30% of global gross domestic product and trade may present a role for blockchain application in coming days going by emerging developments.
A statement from the Malaysian international trade and industry minister, Mohamed Azmin Ali, confirmed the conclusion by ministers from China, Japan, South Korea, 10 ASEAN members (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam), Australia and New Zealand to sign the long-awaited trade deal after eight years of negotiations with the opportunity for reluctant India to return later.
Safe for the exception of India which pulled out last November over concerns of excess dumpng of products from three other member countries, the RCEP potentially includes more than three billion people or 45% of the world’s population with a combined GDP of about $21.3 tln (or about 40% of world trade).
RCEP is an important agreement for ASEAN and it’s signing will be a testament to the world on our efforts to strengthen not only the multilateral trading system but upholding the WTO development agenda.
— Mohamed Azmin Ali • (@AzminAli) November 11, 2020
Embracing blockchain in the workings of the trade area seems plausible at some point since key member countries already at the top of their games with the technology’s development. Nonetheless, it is safe to say that virtually all the countries involved are aware of or have interacted with the technology’s application for various use cases. Aside from its helping with greater transparency in supply chains and for brands wanting to build trust with their customers, particularly in the food and agricultural sector, it can help ensure trust on a cross-border basis like the RCEP agreement being Japan’s first free trade framework with two vital trading partners: China and South Korea.
Blockchain – or the distributed ledger technology (DLT) – has been critical in recent years to the international trade industry which has seen steady progress towards trade digitalization including in Asia. An updated report by the World Trade Organization (WTO) this month suggests that DLT improvement in the space, with the average project moving from a maturity stage of 2.3 out of 5 to 3.3, is particularly visible in Asia through a series of cross-border initiatives.
The initiatives include the People’s Bank of China-backed Blockchain Trade Finance Platform which is a collection of four blockchain applications: account receivables financing, bill rediscount, tax filing, and international trade information collection. Originally unveiled as the Bay Area Trade Finance Blockchain Platform before broadening its geographical scope, it now has 48 participating banks using its DLT developed by the Digital Currency Institute of the PBoC and working on a cross-platform project with the Hong Kong Monetary Authority’s eTradeConnect which is also working with we.trade network to develop a more global reach for the platform and its members.
There is also eCOM Asia, a B2B data integration company providing digital transformation and data integration across all supply chain participants to enable trade and finance facilitation and generates revenues through a combination of subscription fees, read-write volume charges, and financing loan amount commissions. Its DLT-based eCOM Registry solution provides a data network for the secure sharing and exchange of data and enabling eKYC in financial service initiatives like for cross-border trade connectivity between Singapore and China for customs import and export declarations; and providing a MSME trade finance solution for the Hong Kong, China Port community to serve its US$40 bln trade finance gap.
The WTO praises many DLT projects moving from an exploratory to the production stage in just a year citing the COVID-19 pandemic having a positive impact on the blockchain plans of most businesses surveyed (about 80%).