Fifteen Asia-Pacific economies including China, Japan and South Korea have signed the Regional Comprehensive Economic Partnership (RCEP), forming the world’s largest free trade bloc encompassing nearly a third of the world’s population and gross domestic product.
Top officials from 15 nations that also include Australia, New Zealand and the 10 members of the Association of Southeast Asian Nations (ASEAN) inked the partnership after eight years’ negotiations, on the final day of the 37th ASEAN Summit hosted virtually by Vietnam.
The signing of the RCEP is “a victory of multilateralism and free trade,” Chinese Premier Li Keqiang said on Sunday. “The signing of the RCEP is not only a landmark achievement of East Asian regional cooperation but also a victory of multilateralism and free trade.”
“RCEP will soon be ratified by signatory countries and take effect, contributing to the post-COVID pandemic economic recovery,” said Nguyen Xuan Phuc, prime minister of Vietnam, which hosted the ceremony as ASEAN chair.
China’s finance ministry said in a statement the new bloc’s promises include eliminating some tariffs within the group, including some immediately and others over 10 years.
“For the first time, China and Japan reached a bilateral tariff reduction arrangement, achieving a historic breakthrough,” the ministry said, without providing more details. The deal marks the first time rival East Asian powers China, Japan and South Korea have been in a single free trade agreement.
RCEP “will help reduce or remove tariffs on industrial and agricultural products and set out rules for data transmission,” said Luong Hoang Thai, head of the Multilateral Trade Policy Department at Vietnam’s Ministry of Industry and Trade.
A minimum of six ASEAN countries in addition to three non-ASEAN partners must ratify RCEP for it to come into force, Singapore’s Minister of Trade and Industry Chan Chun Sing said following the signing. Singapore plans to approve the deal “in the next few months,” he said.
Among the benefits of the agreement include a tariff elimination of at least 92 per cent on traded goods among participating countries, as well as stronger provisions to address nontariff 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 per cent of services sectors will be fully open with increased foreign shareholding limits.
Negotiators pushed the deal across the finish line after India surprised participants late last year by pulling out of RCEP talks. 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,” said Shaun Roache, Asia Pacific chief economist at S&P Global Ratings.
Malaysia recognizes the difficulties India is facing, Prime Minister Muhyiddin Yassin said in a speech on Sunday. “Nevertheless, we wish to express our continuous support and welcome its accession to RCEP in the future.”
The agreement underscores how US 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.
RCEP could help Beijing cut its dependence on overseas markets and technology, a shift accelerated by a deepening rift with Washington, said Iris Pang, ING chief economist for Greater China.
Japan is looking for the pact to be a catalyst for its post-coronavirus economy, Japanese trade minister Hiroshi Kajiyama said on Sunday.
“Through the tariff removals, I believe there’ll be a major impact on improving Japan’s exports and making the region’s supply chains more efficient,” he said. “I strongly believe we are building free and fair economic rules through introducing new rules on data free flows and the banning of demands for technology transfers, as well as the protection of intellectual property.”
The agreement will make exports of participating countries more competitive and create an integrated market for China and regional nations, Singapore’s Chan said.
“Over the past years, there have been several ups and downs and it has certainly not been an easy journey,” he said. “At one point, the prospects of concluding the agreement were shaken by geopolitical and domestic preoccupations. We have all had to make difficult trade-offs to advance the negotiations.”