A trade pact – the Regional Comprehensive Economic Partnership (RCEP) – covering a third of the world’s population and economic output has been signed by 15 Asia–Pacific nations.
After almost 10 years of negotiations, the 10 members of the Association of Southeast Asian Nations (ASEAN) — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam – have joined a trade pact with Australia, China, Japan, New Zealand and South Korea.
Officials said the door had been left open to India, which dropped out due to fierce domestic opposition to its market-opening requirements.
The RCEP was signed virtually on Sunday on the sidelines of the annual summit of the 10-nation ASEAN. In a virtual ceremony, leaders of RCEP countries took turns standing behind their trade ministers who, one by one, signed copies of the agreement, which they then showed triumphantly to the cameras.
“RCEP will soon be ratified by signatory countries and take effect, contributing to the post-COVID pandemic economic recovery,” said Vietnam’s Prime Minister Nguyen Xuan Phuc, who hosted the ceremony as ASEAN chair.
RCEP will take already low tariffs on trade between member countries lower over time. It will account for 30% of the global economy, 30% of the global population and reach 2.2 billion consumers, according to Vietnam.
“The real benefits here are twofold — one is for our farmers and exporters; they get a more common set of rules across all 15 nations,” said Australia Trade Minister Simon Birmingham.
“The other is for our services export industry, they get significant new access across financial, banking, aged care, health care, education and other types of services industries, right into the provision of architectural, engineering or planning services.
“This is about making sure that we have the opportunity for that part of the economy, the services industry, to be able to grow and be able to get the same type of uplift in trade benefits across the region that our goods exporters have had over recent years,” he said.
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.
“After eight years of negotiating with blood, sweat and tears, we have finally come to the moment where we will seal the RCEP Agreement,” Malaysia’s Trade Minister Mohamed Azmin Ali said in a statement ahead of the ceremony.
The deal sends a signal that RCEP countries have chosen “to open our markets instead of resorting to protectionist measures during this difficult time”, he said.
Economists said the deal, the first trade agreement bringing together China, Japan and South Korea, could add almost US$200 billion annually to the global economy by 2030.
By combining separate arrangements into a single deal, RCEP brings Asia a step closer to becoming a coherent trading zone like the EU or North America. It is not expected to lead to large overall tariff reductions.
“This is not only a monumental achievement in East Asian regional cooperation, but more important, a victory of multilateralism and free trade,” said Chinese Premier Li Keqiang at the fourth RCEP Summit held via video link, Xinhua reported.
Japan and South Korea are expected to be among the biggest winners from the deal, but the benefit of cheaper goods will spread as far as Europe and the US.
“We signed (RCEP) today, after a tough slog of eight years,” said Lee Hsien Loong, Singapore’s Prime Minister, on Sunday. “This is a major step forward for our region. At a time when multilateralism is losing ground, and global growth is slowing, the RCEP shows Asian countries’ support for open and connected supply chains, freer trade and closer interdependence.”
The deal is likely to further diminish US influence in the region after US President Donald Trump withdrew from the Trans-Pacific Partnership, another large regional trading pact.
“By some measures, this is the largest free trade agreement in history,” Peter Petri, professor of international finance at Brandeis University, told the Financial Times. “About 30% of the world’s people are covered.”
According to estimates by Professor Petri and Michael Plummer, a professor of international economics at Johns Hopkins University, RCEP will add US$186 billion to the size of the global economy and 0.2% to the gross domestic product of its members.