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HANOI, Nov. 15 (Reuters): Fifteen Asia-Pacific economies formed the world’s largest free trade bloc on Sunday, a China-backed deal that excludes the United States, which had left a rival Asia-Pacific grouping. Pacific under President Donald Trump.
The signing of the Regional Comprehensive Economic Association (RCEP) at a regional summit in Hanoi is one more blow for the group promoted by former US President Barack Obama, from which his successor Trump emerged in 2017.
Amid questions about Washington’s engagement in Asia, the RCEP may cement China’s position more firmly as the economic partner of Southeast Asia, Japan, and Korea, putting the world’s second-largest economy in a better position to shape to the commercial rules of the region.
The United States is absent from both RCEP and the successor to the Obama-led Trans-Pacific Partnership (TPP), leaving the world’s largest economy outside of two trade groups that encompass the fastest-growing region on earth.
Rather, RCEP could help Beijing reduce its dependence on foreign markets and technology, a shift accelerated by a deepening rift with Washington, said Iris Pang, ING’s chief economist for Greater China.
RCEP brings together the 10 members of the Association of Southeast Asian Nations (ASEAN), China, Japan, South Korea, Australia and New Zealand. Its goal in the coming years is to progressively reduce tariffs in many areas.
The agreement was signed on the sidelines of an ASEAN online summit held as Asian leaders address tensions in the South China Sea and discuss plans for a post-pandemic economic recovery in a region where rivalry between the United States and China has been on the rise.
RCEP will represent 30% of the global economy, 30% of the world’s population and will reach 2.2 billion consumers, host Vietnam said on Sunday.
Despite being outside of the RCEP and having been in the administration that pushed through the TPP, President-elect Joe Biden, Obama’s vice president, is unlikely to rejoin the TPP anytime soon, analysts said, as his administration will have to prioritize the management of the COVID-19 outbreak. at home.
“I’m not sure there will be a lot of focus on trade in general, including efforts to rejoin” the successor group to the TPP, “for the first year or so because there will be a lot of focus on COVID relief,” Charles Freeman, senior vice president for Asia at the US Chamber of Commerce said this month.
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.
The pact will come into effect once enough participating countries ratify the agreement domestically within the next two years, the Indonesian trade minister said last week.
For China, the new group, which includes many US allies, is a windfall in large part as a result of Trump’s withdrawal from the TPP, ING’s Pang said.
India withdrew from the RCEP talks in November last year, but ASEAN leaders said the door remained open for it to join.
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