China and 14 other countries have agreed to form the world’s largest free-trade bloc, encompassing nearly a third of all economic activity, in a deal many in Asia are hoping will help hasten recovery from the shocks of the coronavirus pandemic. 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 (ASEAN). The Regional Comprehensive Economic Partnership (RCEP) Agreement is an agreement to broaden and deepen ASEAN’s engagement with Australia, China, Japan, Korea, and New Zealand.
RCEP’s economic significance
RCEP will connect about 30% of the world’s people and output and, in the right political context, will generate significant gains. RCEP could add $209 billion annually to world incomes, and $500 billion to world trade by 2030. According to ET, RCEP aims is to lower tariffs, open up trade in services, and promote investment to help emerging economies catch up with the rest of the world.
Member states of ASEAN and their FTA partners are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, China, Japan, India, South Korea, Australia and New Zealand.
The Objectives of RCEP
Specifically, RCEP is expected to help reduce costs and time for companies by allowing them to export a product anywhere within the bloc without meeting separate requirements for each country. The objective of the RCEP Agreement is to establish a modern, comprehensive, high-quality, and mutually beneficial economic partnership that will facilitate the expansion of regional trade and investment and contribute to global economic growth and development.
RCEP was pushed by Beijing in 2012 in order to counter another FTA that was in the works at the time: The Trans-Pacific Partnership (TPP). The US-led TPP excluded China. However, in 2016 US President Donald Trump withdrew his country from the TPP. Since then, the RCEP has become a major tool for China to counter the US efforts to prevent trade with Beijing. The accord is 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 globalization 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.
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.