Fifteen countries signed a sweeping Asian trade deal on Sunday seen as a huge coup for China to expand its influence.
The Regional Comprehensive Economic Partnership (RCEP) – which comprises 10 Southeast Asian economies along with China, Japan, South Korea, New Zealand and Australia – is the world‘s largest trade pact in terms of GDP, analysts said.
First proposed in 2012, the deal was finally sealed at the end of a Southeast Asia summit as leaders work to get their pandemic-hit economies back on track.
“I am happy that after eight years of complex discussions, we officially ended the RCEP negotiations today,” Vietnamese Prime Minister Nguyen Xuan Phuc said before the virtual signing.
The deal to cut tariffs and open up trade in services within the bloc does not include the United States and is seen as a China-led alternative to a now defunct Washington trade initiative.
RCEP “solidifies China’s broader regional geopolitical ambitions around the Belt and Road initiative,” said Alexander Capri, trade expert at the National University of Singapore Business School, referring to Beijing’s flagship investment project which envisions Chinese infrastructure and influence around the world.
“It’s kind of a complementary element.”
But many signatories are battling serious coronavirus outbreaks and also hope RCEP will help ease the crippling economic cost of the disease.
Indonesia recently entered its first recession in two decades, while the Philippine economy contracted 11.5% year-on-year in the last quarter.
“Covid has reminded the region why trade matters and governments are more keen than ever for positive economic growth,” said Deborah Elms, executive director of the Asian Trade Center, a Singapore-based consultancy firm .
“RCEP can help you get there.”
India pulled out of the deal last year over concerns over the entry of cheap Chinese goods into the country and will be a notable absentee during Sunday’s virtual signing.
He can join at a later date if he wishes.
Even without India, the deal covers 2.1 billion people, with RCEP members accounting for around 30% of global GDP.
Basically, it should help cut costs and make life easier for businesses by allowing them to export products anywhere in the block without meeting separate requirements for each country.
The deal touches on intellectual property, but environmental protections and workers’ rights are not part of the pact.
The deal is also seen as a way for China to draft the rules for trade in the region, after years of US retreat under President Donald Trump, which saw Washington withdraw from its own trade pact, the Trans-Pacific Partnership ( TPP). ).
While U.S. multinationals can benefit from RCEP through affiliates in member countries, analysts said the deal could cause President-elect Joe Biden to rethink Washington’s commitment to the region.
According to Rajiv Biswas, chief economist for APAC at IHS Markit, the United States could see the potential benefits of joining the successor agreement to the TPP, the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP).
“However, this is not expected to be an immediate priority issue … given the overwhelming backlash to the TPP negotiations from many segments of the US electorate due to concerns about losses in the United States. ‘American jobs for the benefit of Asian countries,’ he added.
(Except for the title, this story was not edited by GalacticGaming staff and is posted from a syndicated feed.)