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The Philippines’ accession to the Regional Comprehensive Economic Association (RCEP) will provide local exporters with opportunities to double their shipments while protecting sensitive products such as agricultural products, the country’s trade chief said on Sunday, Ramón M. López.
China and 14 other countries agreed on Sunday to establish the world’s largest trading 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 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.
“I am pleased to say that after eight years of hard work, as of today, we have officially concluded the RCEP negotiations for its signature,” said host country Vietnamese Prime Minister Nguyen Xuan Phuc.
“The conclusion of the RCEP negotiation, the world’s largest free trade agreement, will send a strong message that affirms Asean’s leadership role in supporting the multilateral trading system, creating a new trade structure in the region, allowing the facilitating sustainable trade, revitalizing supply chains disrupted by Covid-19 and assisting post-pandemic recovery, ”said Phuc.
The deal will take on already low tariffs on trade between member countries, even lower, over time, and is less comprehensive than an 11-nation trans-Pacific trade deal that President Donald Trump withdrew from shortly after taking office.
The RCEP is expected to boost multilateral exchange between the 15 trading partners at a time when the global economy is recovering from the impact of the Covid-19 pandemic.
With 15 countries as initial signatories, RCEP covers more than a third of the world’s population and about a third also of global GDP and international trade.
López: beyond the usual trade agreements
In a statement, Commerce Secretary López described the RCEP as a more modern and high-quality free trade agreement (FTA) that contains not only the traditional provisions of the trade agreement, but also terms geared towards the era of digital exchange.
In addition to the usual conditions on the trade of goods and services, the RCEP provides a framework on how its signatories should handle the technical matters of intellectual property, electronic commerce, as well as micro, small and medium enterprises.
“This is a more modern and high-quality free trade agreement that includes other technical economic issues, [such as] Mipymes, IP or Intellectual Property, electronic commerce and other new topics, not only commercial access, as well as the areas of commerce of products and services and investments ”, explained López.
López argued that the incorporation of the Philippines into the RCEP will allow local exporters the opportunity to increase shipments. Likewise, the Asia-Pacific agreement maintains a provision that protects the sensitive products of each signatory, in the case of the Philippines, agricultural products.
“The RCEP countries represent more than 50 percent of our export market. RCEP has improved the levels of market access among themselves, but still respects the exclusion list of sensitive products mainly for agricultural products ”, added the head of trade.
With the signing of the RCEP, this side of the Asia-Pacific region can now compete with the trade agreement forged by Western nations with the economies of Southeast Asia, dubbed the Comprehensive and Progressive Trans-Pacific Partnership.
However, RCEP negotiators keep their fingers crossed for India to rejoin the trade deal after pulling out of the talks last year.
Delhi withdrew from the RCEP negotiations for fear that the trade deal and its consequent reduction in tariffs would harm its domestic industries. He also sees the RCEP as a way for China to increase its trade surplus vis-à-vis the economic partners involved in the package.
Asean 10 plus 5
In addition to the 10 members of the Association of Southeast Asian Nations, RCEP includes China, Japan, South Korea, Australia, and New Zealand, but not the United States. Officials said the deal leaves the door open for India.
It is not expected to go as far as the European Union in integrating the member economies, but builds on existing free trade agreements.
The agreement has powerful symbolic ramifications, showing that nearly four years after Trump launched his “America First” policy of forging trade deals with individual countries, Asia remains committed to multinational efforts toward freer trade that is seen as a formula for future prosperity.
Ahead of Sunday’s RCEP “special summit” meeting, Japanese Prime Minister Yoshihide Suga said he would strongly convey his government’s support for “expanding a free and fair economic zone, including the possibility of India’s return. to the agreement in the future, and that he hopes to obtain the support of the other countries. “
The deal is also 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. on the rules governing regional trade. Gareth Leather, a senior Asian economist at Capital Economics, said in a report.
China’s official Xinhua news agency quoted Prime Minister Li Keqiang hailing the deal as a victory against protectionism, in remarks released via video link.
“The signing of the RCEP is not only a historic achievement of East Asian regional cooperation, but also a victory for multilateralism and free trade,” Li said.
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.
Critics of free trade agreements say they tend to encourage companies to move manufacturing jobs abroad. So, having won over disgruntled rust belt voters in Michigan and western Pennsylvania in the Nov. 3 election, Biden “isn’t going to waste that going back to the TPP,” said Michael Jonathan Green of the Center for Strategic and International Studies. in a webinar.
But given concerns about China’s growing influence, Biden is likely to seek a much greater engagement with Southeast Asia to protect US interests, he said.
The rapidly growing and increasingly prosperous Southeast Asian market of 650 million people has been hit hard by the pandemic and is urgently looking for new engines of growth.
The RCEP originally would have included around 3.6 billion people and encompassed roughly a third of world trade and global GDP. Except for India, it still covers more than 2 billion people and about a third of all business and commercial activity.
The United States-Mexico-Canada Agreement, or USMCA, the revamped version of the North American Free Trade Agreement under Trump, covers slightly less economic activity, but less than a tenth of the world’s population. The EU and the Comprehensive and Progressive Trans-Pacific Partnership, the revised version of the deal that Trump rejected, are also smaller. RCEP includes six of the 11 remaining members of the CPTPP.
