Trade deal includes China, but not the US and India

SINGAPORE – The formation of the world’s largest free trade bloc in Asia-Pacific sends a signal that there is a need for economic integration despite existing challenges, according to a Singaporean government official.

Fifteen countries in Asia and the Pacific, including Singapore, signed the Regional Comprehensive Economic Partnership (RCEP) on Sunday. Those nations have a combined population of more than 2 billion and a total GDP of more than $ 26 trillion, and they represent approximately 30% of the world’s population and the global economy.

The 10 member states of the Association of Southeast Asian Nations (ASEAN) signed the RCEP agreement with their main trading partners: China, Japan, South Korea, Australia and New Zealand. The ASEAN countries are: Indonesia, Thailand, Singapore, Malaysia, the Philippines, Vietnam, Brunei, Cambodia, Myanmar, formerly Burma and Laos.

In particular, the agreement excludes the United States and can potentially allow China to cement its position as a vital trading partner for Southeast Asia and the other countries in the agreement.

“RCEP is an important development, but also a very important signal to global markets that, even as we fight the challenge (of the coronavirus pandemic), the challenge of public health care, and the economic challenge, we must continue building bridges and integration, “S Iswaran, Singapore’s Minister of Communications and Information, told CNBC’s” Squawk Box Asia “on Monday.

Iswaran is also the minister in charge of trade relations and oversees the city-state’s bilateral and multilateral trade negotiations at the Singapore Ministry of Commerce and Industry.

The RCEP agreement outlines provisions for preferential access in trade in goods, standard rules around investment and disciplines that govern it, enhanced trade facilitation measures, as well as “forward-looking issues” such as e-commerce and competition and rights laws. of intellectual property, according to Iswaran. .

By virtue of its size and the diversity of its members, the RCEP “indicates a commitment and a level of ambition, in terms of economic integration,” he said. “It has been a long road for eight years, but I think the result is well worth it.”

He explained that since the signing was endorsed and witnessed by the leaders of the 15 countries, there is “political will and commitment” to get things done under the agreement. The impetus comes from the fact that governments recognize that current circumstances, exacerbated by the coronavirus pandemic, require them to move quickly on economic initiatives to unlock opportunities for their people and businesses, Iswaran said. One of the ways to do this is to link with regional and global economies through agreements like the RCEP, he added.

The deal aims to “abolish about 92% of tariffs on traded goods,” Lavanya Venkateswaran, an economist at Mizuho Bank’s Asia and Oceania Treasury Department, said in a note. “It would be critical to deepening supply chain linkages, reaching into the services sector with ambitions for 65% of the services sector to be fully open under RCEP.”

The RCEP “is a much-needed and overdue lifeline for world trade that relies on multilateral trade rules, commitments and cooperation,” Venkateswaran said, adding: “Arguably there is also hope pinned on the RCEP to help catalyze the recovery of trade and world trade “.

Negotiations for the RCEP began in 2013 and initially included India, whose presence was seen by some members as a counterweight to China. But last year New Delhi refused to join RCEP, stating that some of its “key issues” remained unresolved.

Iswaran told CNBC that the door remains open for New Delhi to rejoin the deal at any time.

“India has been involved in many of the negotiations and would understand the nuances and I think all member countries remain open to the prospect of India joining in at the appropriate time,” he said.

The United States under President Barack Obama was part of a rival regional trade pact called the Trans-Pacific Partnership, which excluded China.

The TPP never came into effect when the United States abandoned the agreement under President Donald Trump and a new version of that pact emerged, called the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership. The CPTPP was signed by all TPP signatories except the US.

Iswaran said Singapore, as well as other Asian partners, value the United States’ involvement in the region. “I think the key point is that we want to deepen the commitment of the American economy to this part of the world,” he said, adding that it could be through RCEP or CPTPP or some other agreement.