China and 14 other countries agreed on Sunday to create the world’s largest trade bloc, comprising nearly a third of all economic activity, in a deal many in Asia hope will help accelerate recovery from epidemic shocks.
The Regional Comprehensive Economic Partnership, or RCEP, was actually signed on Sunday on the sidelines of the annual 10-nation Association of Southeast Asian Nations summit.
Vietnamese Prime Minister Nguyen Chuan Phuc said, “I am pleased to say that after eight years of hard work, as of today, we have officially reached the CEPA negotiations to conclude for the signature.”
“The conclusion of the negotiations for RCEP, the world’s largest free trade agreement, will send a strong message confirming the pioneering role of the Association of Southeast Asian Nations in supporting the multilateral trading system, creating a new trade structure in the region, enabling sustainable trade facilitation, and stimulating supply. COVID-19 is helping to recover after the pandemic. ”
The pact will impose already low tariffs on intra-member trade that remain low, over time, and are less comprehensive than the 11-nation Trans-Pacific Trade Agreement that President Donald Trump withdrew shortly after taking office.
Aside from the ten ASEAN member countries, they include China, Japan, South Korea, Australia and New Zealand, but not the United States. Officials said the deal leaves the door open for India, which has pulled out due to fierce domestic opposition to market-opening requirements, to join the bloc.
It will take time to assess the finer details of the agreement that includes tariff schedules and rules for all the fifteen countries involved – The customs duty schedule for Japan only is 1,334 pages.
It is not expected to go beyond the European Union in integrating member economies but rather builds on existing free trade arrangements.
The deal has strong symbolic ramifications, showing that nearly four years after Trump launched his “America first” policy of striking trade deals with individual countries, Asia remains committed to multi-nation efforts toward freer trade that is seen as a formula for future prosperity.
Ahead of the “Special Summit” at RCEP on Sunday, Japanese Prime Minister Yoshihdi Suga said he would strongly transfer his government’s support “to expand a free and fair economic area, including the possibility of India’s future return to the deal, and he hopes to gain support from other countries.”
The deal is also a coup for China, by far the largest market in the region with more than 1.3 billion people, allowing Beijing to portray itself as a “champion of globalization and multilateral cooperation” and giving it greater influence over the rules governing regional trade, said Gareth Leather, Senior. Asian economists at Capital Economics, in a report.
The new China News Agency (Xinhua) quoted Chinese Premier Li Keqiang as praising the agreement, describing it as a victory over protectionism, in comments he made via a video link.
“The signing of the Regional Comprehensive Economic Partnership Agreement is not only a landmark achievement for regional cooperation in East Asia, but also a victory for multilateralism and free trade,” Li said.
The agreement is expected to help China, Japan and South Korea finally reach a tripartite free trade agreement after years of struggling to bridge their differences.
Now that Trump’s opponent, Joe Biden, is declared president-elect, the region is watching to see how US policy on trade and other issues develop.
Analysts doubt Biden will push hard to join the Trans-Pacific Trade Agreement or to roll back the many US trade sanctions the Trump administration has imposed on China given widespread frustration with Beijing’s trade and human rights records, and accusations of espionage and theft of technology. .
Critics of free trade agreements say they tend to encourage companies to move manufacturing jobs overseas. Michael Jonathan Green of the Center for Strategic and International Studies said that Biden, after defeating disaffected Rust Belt voters in Michigan and West Pennsylvania in the November 3 elections, “will not dissipate that by returning to the Trans-Pacific Partnership.” Webinar.
But given concerns about China’s growing influence, Biden is likely to seek more engagement with Southeast Asia to protect US interests, he said.
The fast-growing and affluent Southeast Asia market of 650 million people has been hit hard by the epidemic and is urgently seeking new drivers for growth.
RCEP originally housed about 3.6 billion people and includes about a third of global trade and global GDP. With the exception of India, it still covers over 2 billion people and nearly a third of all commercial and commercial activities.
The United States, Mexico, and Canada Agreement, or USMCA, the revised version of the North American Free Trade Agreement under Trump, covers slightly less economic activity but less than one-tenth of the world’s population. The European Union and the Trans-Pacific Comprehensive and Progressive Partnership, the revised version of the deal that Trump has rejected, is also smaller in size. The RCEP includes six of the remaining eleven CPTPP members.
India has refrained from exposing its farmers and factories to more foreign competition. Among other concerns, Indian dairy farmers are wary of competition from New Zealand and Australian dairy and cheese producers. Automakers fear imports from all over the region. But the biggest fear in general is the influx of manufactured goods from China.
Trade and investment flows within Asia have expanded dramatically over the past decade, a trend that has accelerated amid the rift between the United States and China, which have slapped billions of dollars in punitive tariffs on each other’s exports.
The RCEP agreement is broad enough to extend to suit the differing needs of member countries as diverse as Myanmar, Singapore, Vietnam and Australia. Unlike the CPTPP and the European Union, it does not set unified standards for work and the environment or obligate countries to open up services and other vulnerable areas in their economies.
Geoffrey Wilson, director of research at the USA Perth Center, said in a report for the Asia Society that it is setting up rules for trade that will facilitate investment and other business within the region.
“RCEP, therefore, is a much-needed platform for the recovery of the Indo-Pacific region after COVID,” he wrote.
The Association of Southeast Asian Nations includes Cambodia, Indonesia, Laos, Myanmar, the Philippines, Thailand, Brunei, Singapore, Malaysia and Vietnam.
Associated Press writers, How Dinh in Hanoi, Vietnam, and Mary Yamaguchi in Tokyo contributed to this report.
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