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HANOI: Fifteen countries will sign a lengthy Asian trade deal on Sunday that they hope will help them recover from the pandemic and which is seen as a major blow to China in expanding its influence.
The Regional Comprehensive Economic Association (RCEP) – which includes 10 Southeast Asian economies along with China, Japan, South Korea, New Zealand and Australia – it will be the world’s largest trade pact in terms of GDP, analysts say.
The deal to cut tariffs and open up intra-bloc trade in services does not include the United States and is seen as a China-led alternative to a now-defunct Washington trade initiative.
RCEP “solidifies China’s broader regional geopolitical ambitions around the Belt and Road initiative,” said Alexander Capri, a trade expert at the National University of Singapore Business School, referring to Beijing’s flagship investment project that foresees China’s infrastructure and influence around the world.
“It’s kind of a complementary element.”
With eight years to prepare, the agreement will finally be signed at the end of a Southeast Asian summit. – on video due to the pandemic.
Many of the signatories are battling serious coronavirus outbreaks and hope the RCEP will help mitigate the crippling cost of a disease that has devastated their economies.
Indonesia recently fell into its first recession in two decades, while the Philippine economy contracted 11.5% year-on-year in the latest quarter.
“Covid has reminded the region why trade is important and governments are more eager than ever for positive economic growth,” said Deborah Elms, executive director of the Asian Trade Center, a Singapore-based consultancy.
“RCEP can help you get there.”
India absent
India withdrew from the deal last year over concerns about cheap Chinese goods entering the country and it will be a notable absence during Sunday’s virtual signing.
You can join at a later date if you wish.
Even without India, the agreement covers 2.1 billion people, and RCEP members account for around 30% of global GDP.
Fundamentally, it should help reduce costs and make life easier for companies by allowing them to export products anywhere within the bloc without meeting separate requirements for each country.
The agreement touches on intellectual property, but environmental protections and labor rights are not part of the pact.
The agreement is also seen as a way for China to write the rules of trade in the region, after years of US withdrawal under President Donald Trump, which have seen Washington withdraw from a trade pact of its own, the Trans-Pacific Partnership (TPP). )).
Although US multinationals will be able to benefit from RCEP through subsidiaries within member countries, analysts said the deal could cause President-elect Joe Biden to reconsider Washington’s commitment to the region.
This could see the potential benefits for the United States from joining the TPP’s successor agreement, the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership, said Rajiv Biswas, Apac chief economist at IHS Markit.
“However, this is not expected to be an immediate priority issue … given the considerable negative response to the TPP negotiations from many segments of the US electorate due to concerns about the loss of US jobs in Asian countries,” added.
