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China and 14 other countries agreed to form the world’s largest free trade bloc, which encompasses nearly a third of all economic activity, in a deal that many in Asia hope will help accelerate recovery from the impacts of the coronavirus pandemic.
The Regional Comprehensive Economic Association, or RCEP, was signed virtually Sunday on the sidelines of the annual summit of the 10-nation Association of Southeast Asian Nations (ASEAN).
At the online ceremony, the leaders of the RCEP countries took turns standing behind their trade ministers who, one by one, signed copies of the agreement, which they then triumphantly displayed to the cameras.
“The RCEP will soon be ratified by the signatory countries and will enter into force, contributing to the pandemic economic recovery after COVID,” said Nguyen Xuan Phuc, Prime Minister of Vietnam, who organized the ceremony as ASEAN president.
RECP will take tariffs that are already low in trade between member countries, even lower, over time. It will represent 30 percent of the world economy, 30 percent of the world’s population and will reach 2.2 billion consumers, according to Vietnam.
RCEP “will help reduce or eliminate tariffs on industrial and agricultural products and establish rules for data transmission,” said Luong Hoang Thai, head of the Department of Multilateral Trade Policy at the Ministry of Industry and Trade of Vietnam.
In addition to the 10 ASEAN nations, the agreement includes China, Japan, South Korea, Australia and New Zealand, but not the United States. Authorities said the deal leaves the door open for India, which withdrew due to fierce domestic opposition to its market-opening requirements, to rejoin the bloc.
“After eight years of negotiating with blood, sweat and tears, we finally reached the point where we will seal the RCEP Agreement,” Malaysian Trade Minister Mohamed Azmin Ali said in a statement before the ceremony.
The agreement sends a signal that the RCEP countries have chosen to “open up our markets rather than resort to protectionist measures during this difficult time,” he said.
The deal is a blow to China, by far the largest market in the region with more than 1.3 billion people, allowing Beijing to present itself as a “champion of globalization and multilateral cooperation” and giving it greater influence over the rules governing regional trade, Gareth Leather, a senior Asian economist at Capital Economics, said in a report.
The United States is absent from the RCEP and the 11-nation Trans-Pacific Partnership (TPP) agreement from which US President Donald Trump withdrew shortly after taking office. This leaves the world’s largest economy outside of two trade groups that comprise the fastest growing region on earth.
Now that Trump’s opponent, Joe Biden, has been declared president-elect, the region is watching how US policy on trade and other issues will evolve.
Analysts are skeptical that Biden will push hard to rejoin the trans-Pacific trade pact or to reverse many of the US trade sanctions imposed on China by the Trump administration given widespread frustration with Beijing’s trade and human rights record. and the accusations of espionage and technology theft. .
Ahead of the RCEP “special summit” meeting on Sunday, Japanese Prime Minister Yoshihide Suga said he would strongly convey his government’s support for the “expansion of a free and fair economic zone, including the possibility of future return of India to the agreement and hope to obtain the support of the other countries ”.
The RCEP agreement is flexible enough to accommodate the disparate needs of member countries as diverse as Myanmar, Singapore, Vietnam and Australia. Unlike the European Union, it does not establish unified standards on labor and the environment, nor does it commit countries to open services and other vulnerable areas of their economies.
But it sets rules for trade that will facilitate investment and other business within the region, Jeffrey Wilson, research director at the Perth USAsia Center, said in a report for the Asia Society, an organization that promotes understanding between the United States and Asia.
“RCEP, therefore, is a much-needed platform for the Indo-Pacific post-COVID recovery,” he wrote.
The pact will enter into force once enough participating countries ratify the agreement at the national level within the next two years.
ASEAN members include Cambodia, Indonesia, Laos, Myanmar, the Philippines, Thailand, Brunei, Singapore, Malaysia, and Vietnam.
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