It is expected to give a fillip to the partner economies by reducing tariffs, strengthening supply chains with defined rules of origin, and framing of new e-commerce rules.
The Regional Comprehensive Economic Partnership, or RCEP, was signed virtually on Sunday on the sidelines of the annual summit of the 10-nation Association of Southeast Asian Nations.
China and 14 other countries agreed on Sunday to set up the world’s largest trading bloc, encompassing nearly a third of all economic activity, in a deal many in Asia are hoping will help hasten a recovery from the shocks of the pandemic, AP reported from Hanoi. The Regional Comprehensive Economic Partnership, or RCEP, was signed virtually on Sunday on the sidelines of the annual summit of the 10-nation Association of Southeast Asian Nations.
Tough India surprised participants late last year by abandoning the agreement, the partners have made it clear New Delhi is welcome to rejoin the pact. Prime Minister Narendra Modi said he pulled out over concerns about how RCEP would affect the livelihoods of Indians, particularly the most vulnerable. “The clause allowing India to join at a later date is symbolic and shows China’s desire to build economic bridges with the region’s third-largest economy,” Bloomberg quoted Shaun Roache, Asia Pacific chief economist at S&P Global Ratings, as saying. Malaysia recognizes the difficulties India is facing, Prime Minister Muhyiddin Yassin said in a speech on Sunday, it added.
The pact will which cover 2.2 billion people with a combined GDP of $26.2 trillion. It is expected to give a fillip to the partner economies by reducing tariffs, strengthening supply chains with defined rules of origin, and framing of new e-commerce rules.
The accord is also a coup for China, by far the biggest market in the region with more than 1.3 billion people, allowing Beijing to cast itself as a “champion of globalisation and multilateral cooperation” and giving it greater influence over rules governing regional trade, Gareth Leather, senior Asian economist for Capital Economics, said in a report.
Among the benefits of the agreement include a tariff elimination of at least 92% on traded goods among participating countries, as well as stronger provisions to address non-tariff measures, and enhancements in areas such as online consumer and personal information protection, transparency and paperless trading, according to a statement issued on Sunday by Singapore’s Ministry of Trade and Industry. It also includes simplified customs procedures while at least 65% of services sectors will be fully open with increased foreign shareholding limits.
Bloomberg added: “Whether RCEP changes regional dynamics in favor of China depends on the U.S. response, experts said. The agreement underscores how U.S. President Donald Trump’s 2017 decision to withdraw from a different Asia Pacific trade pact – the Trans-Pacific Partnership or TPP – diminished America’s ability to offer a counterbalance to China’s growing regional economic influence.”
According to AP, “The accord will take already low tariffs on trade between member countries still lower, over time, and is less comprehensive than an 11-nation trans-Pacific trade deal that President Donald Trump pulled out of shortly after taking office. Apart from the 10-member Association of Southeast Asian Nations, it includes China, Japan, South Korea, Australia and New Zealand, but not the US. (The bloc) is not expected to go as far as the European Union in integrating member economies but does build on existing free trade arrangements. The deal has powerful symbolic ramifications, showing that nearly four years after Trump launched his “America First” policy of forging trade deals with individual countries, Asia remains committed to multi-nation efforts toward freer trade that are seen as a formula for future prosperity,” AP reported.
It added: China’s official Xinhua News Agency quoted Premier Li Keqiang hailing the agreement as a victory against protectionism, in remarks delivered via a video link.Now that Trump’s opponent Joe Biden has been declared president-elect, the region is watching to see how US policy on trade and other issues will evolve.
Analysts are sceptical Biden will push hard to rejoin the trans-Pacific trade pact or to roll back many of the US trade sanctions imposed on China by the Trump administration given widespread frustration with Beijing’s trade and human rights records and accusations of spying and technology theft.
Critics of free trade agreements say they tend to encourage companies to move manufacturing jobs overseas. So, having won over disaffected rust-belt voters in Michigan and western Pennsylvania in the November 3 election, Biden is “not going to squander that by going back into TPP”, Michael Jonathan Green of the Centre for Strategic and International Studies said in a web seminar.
But given concerns over China’s growing influence, Biden is likely to seek much more engagement with Southeast Asia to protect US interests, he said.
The fast-growing and increasingly affluent Southeast Asian market of 650 million people has been hit hard by the pandemic and is urgently seeking fresh drivers for growth.