15 countries from Asia and the Pacific regions are targeting to strengthen trade bonds in the world’s largest free-trade agreement this weekend. Beijing’s decade-long pursuit to achieve greater economic integration is soon to be signed formally. The Regional Comprehensive Economic Partnership(RCEP) has sought the goal of:
- Reducing tariffs,
- Strengthening supply chains with common rules of origin, and
- Codifying new e-commerce rules.
Countries such as Japan, New Zealand, Australia, Thailand, Vietnam, and China are part of this multinational pact. These 15 nations have sought to announce the agreement at the Asean Summit. Vietnam will be virtually hosting the summit this year at the end of this week.
Azmin Ali, Trade Minister of Malaysia said to reporters that they would sign the deal on Sunday. He also said that the deal would be the zenith of “eight years of negotiating with blood, sweat, and tears.”
The transit of this deal is sure to harm few US companies and other multinationals outside the region. Moreover, President Trump also withdrew from talks on a separate Asia-Pacific trade deal, called the Trans-Pacific Partnership (TPP). William Wiranto, an economist with Oversea-Chinese Banking Corp. has said that the TPP and RCEP are quite different. He said that while the TPP was more involved in fundamental changes in the economy, RCEP is more like ‘let’s open the door in trade and focus on the bottom line’. He added that RCEP would be seen as more China-centric but he doesn’t think it would be the same way as the TPP, which was US-centric.
The region under RCEP accounts for nearly 30% of the global GDP
The deal will have a huge impact, which may well extend beyond the region. The 15 negotiating countries account for nearly a third of the global GDP and 30% of the global population. The implementation of RCEP would make it harder for US businesses to tackle Chinese-backed partnerships that cover more than 2.2 Billion people with a combined GDP of approximately $26 Trillion. The impact of the deal also showed how China has left America behind in terms of their economic relations with neighboring nations. This, however, may change when Joe Biden comes to power.
Many participating countries are also becoming cautious of becoming economically dependent on China. Japan has recently looked into the reassessment of supply chains in China. Beijing’s move to ban Australian exports after a government investigation into the origin of Coronavirus has also given them some bad rep. It will be a tricky situation for Biden who would be tasked with strengthening the economic ties of the US with the region.
India exited the RCEP deal last year on November 4, 2019. PM Narendra Modi said he was afraid of the repercussions the deal would have on common people. Since then other countries have called on India to rejoin.
The RCEP consists of 15 countries covering the Asia-Pacific region. The 15 countries are:
- South Korea