After signing, focus turns to ratification; China to hold sway in India’s absence
SINGAPORE — Fifteen countries spanning the Asia-Pacific region on Sunday signed the Regional Comprehensive Economic Partnership agreement, creating the world’s largest trading bloc that promises to help speed up the members’ post-pandemic growth.
The 15 countries are China, Japan, South Korea, Australia and New Zealand, along with the 10 members of the Association of Southeast Asian Nations. Together, they account for around 30% of the world’s gross domestic product and population.
This marks the first time China enters a nonbilateral free trade agreement of this scale. Coming at a time when the U.S. is less enthusiastic about joining global trade deals and talks on a post-Brexit trade deal between the European Union and the U.K. stall, Asia looks to take the lead in shaping the new global trade architecture.
The newly signed free trade framework extends beyond trade to set common rules and standards for a range of economic activitiy.
RCEP will take effect after at least six ASEAN countries and three non-ASEAN countries ratify it.
Sunday’s signing ceremony was held online, hosted by this year’s ASEAN chair Vietnam. With national leaders looking on, economic ministers from the 10 members of the Southeast Asian bloc signed in alphabetical order, followed by the five other countries. They held up their documents for the other participants to see over the video feed, each drawing applause from an audience in Hanoi.
“I am confident that RCEP will soon be ratified and come into force, further bolstering our post-pandemic economic recovery and delivering shared prosperity to the people and businesses of all participating countries,” Vietnamese Prime Minister Nguyen Xuan Phuc said after all countries signed.
RCEP was officially proposed in 2012, and the talks had dragged on since 2013. Progress was especially slow in the early years, but the discussions gained momentum after Donald Trump became the U.S. president in 2017. Amid a growing trend of protectionism, the participating governments became more motivated to promote free trade.
An exception was India, which was initially involved in the negotiations but withdrew last year, as it was reluctant to open up its agricultural and other key sectors.
The agreement, which the members described as “modern, comprehensive, high quality, and mutually beneficial,” includes 20 chapters of rules covering everything from trade in goods, investment and e-commerce to intellectual property and government procurement.
The deal will eliminate tariffs on a wider range of goods flowing between the participants, while ceilings on foreign shareholdings will rise in more service industries, such as professional services and telecommunications. The e-commerce chapter aims to enhance consumer protection and safeguard personal information, as well as promote acceptance of electronic signatures.
This marks the second big multilateral trade deal for Asia, following the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP — the 11-member version of the TPP, forged after Trump pulled the U.S. out. Seven of the 15 RCEP members belong to the CPTPP as well.
Some members are also already linked by bilateral free trade pacts, such as the one between ASEAN and China. RCEP can thus be seen as a framework joining together existing deals.
But in some respects, the pact also brings historic breakthroughs.
For China and Japan — Asia’s largest and second-largest economies — RCEP is the first free trade agreement to connect them. Tariffs on 86% of Japanese goods exported to China will be eliminated, up from the current 8%. This promises big benefits for Japanese manufacturers, such as automobile parts suppliers.