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The Regional Comprehensive Economic Association encompasses 15 countries and 2.2 billion people, or nearly 30% of the world’s population, according to a joint statement released by the nations on Sunday, when the agreement was signed. Their combined GDP totals roughly $ 26 trillion and they account for nearly 28% of world trade according to 2019 data.
The agreement includes several of the region’s major economic players in addition to China, including Japan and South Korea. New Zealand and Australia are also partners, as are Indonesia, Thailand and Vietnam in Southeast Asia.
The trade deal was first proposed in 2012 as a way to create one of the largest free trade zones in the world.
However, Reinsch said the deal could have long-term consequences, adding that China’s involvement “is a sign of its willingness to play a constructive role, despite its aggressive actions in the South China Sea, Hong Kong and other places”. “
“Both countries see huge benefits from their deeper economic integration with other Asian countries,” said Murray Hiebert, senior associate in the Southeast Asia Program at CSIS. “The RCEP could provide Beijing and Canberra with another platform where they could discuss and resolve their differences.”
Others noted that the agreement was further proof of Asia’s growing power. HSBC economists said Sunday that the deal “indicates that Asia continues to move forward with trade liberalization even as other regions have become more skeptical.”
“It may reinforce a trend that has already been underway for decades: that the global economic center of gravity continues to push relentlessly eastward,” they wrote in a research note.
It’s unclear if the deal will have an impact on the most important global trade relationship of all: that between the United States and China, which have been fighting over trade and related issues for the past few years.
“Whether that means a shift in regional dynamics in favor of China depends on the US response,” Reinsch said of the new trade deal. He noted the importance of the election of Joe Biden, who will succeed President Donald Trump in January.
“If the United States continues to ignore or intimidate the countries there, the pendulum of influence will swing towards China,” he added. “If Biden has a credible plan to restore America’s presence and influence in the region, then the pendulum could roll back our way.”
– Jake Kwon and Akanksha Sharma contributed to this report.
