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HANOI: Fifteen Asia-Pacific economies will conclude talks on Sunday (November 15) and sign what could become the world’s largest free trade agreement, covering nearly a third of the world’s population and about 30 percent of the percent of its world gross domestic product.
The Regional Comprehensive Economic Partnership (RCEP), which could be approved at the end of a four-day ASEAN summit in Hanoi, will progressively reduce tariffs and aims to counter protectionism, boost investment, and allow freer movement of goods within region of.
A trade war between the United States and China and the withdrawal of US President Donald Trump America First from predecessor Barack Obama’s “turn” to Asia have prompted the realization of the RCEP, which is widely seen as Beijing’s opportunity to set the trade agenda. regional in the absence of Washington.
However, Democrat Joe Biden’s US election victory could challenge that, as the former vice president signals a return to stronger US multilateralism.
READ: Asia Pacific leaders to sign RCEP trade deal amid US electoral uncertainty.
WHAT IS RCEP ABOUT?
The RCEP includes China, Japan, South Korea, Australia, New Zealand and the 10 members of the Association of Southeast Asian Nations (ASEAN): Brunei, Vietnam, Laos, Cambodia, Thailand, Myanmar, Malaysia, Singapore, Indonesia and Philippines
India was involved in previous discussions but chose not to participate last year.
One of the biggest attractions of the agreement is that its members already have several bilateral or multilateral agreements, so RCEP builds on those fundamentals.
It will allow a set of rules of origin to qualify for tariff reduction with other RCEP members. A common set of regulations means fewer procedures and easier movement of goods.
This encourages multinational companies to invest more in the region, including building supply chains and distribution centers.
WHAT IS ITS GEOPOLITICAL SIGNIFICANCE?
The idea for RCEP was born in 2012 and was seen as a way for China, the largest importer and exporter in the region, to counter the growing influence of the United States in Asia-Pacific under Obama.
Negotiations for a US-led “regional mega-deal,” then known as the Trans-Pacific Partnership (TPP), Obama’s signature trade deal, were making great strides, and China was not among its 12 members.
The momentum behind RCEP grew when Trump withdrew the United States from the TPP in 2017, removing its chief architect and two-thirds of the bloc’s combined US $ 27 trillion GDP. It was renamed the Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP) and includes seven members of the RCEP.
As a key source of imports and the main destination of exports for most RCEP members, China will benefit and is well positioned to shape trade rules and expand its influence in Asia-Pacific, which Obama had openly sought to do. to prevent.
READ: Southeast Asian leaders kick off ASEAN summit amid ‘major power rivalries’
HOW IS RCEP DIFFERENT FROM CPTPP?
RCEP is primarily focused on cutting tariffs and increasing market access, but it is not harmonized to the same extent as CPTPP and is considered less comprehensive.
It requires fewer political or economic concessions compared to CPTPP and RCEP has less emphasis on labor rights, environmental and intellectual property protections and dispute resolution mechanisms, although it does include provisions on competition.
RCEP’s market size is nearly five times that of CPTPP, with nearly twice its combined annual commercial value and GDP.
LEE: Prime Minister Lee says Singapore will contribute US $ 100,000 to ASEAN’s COVID-19 fund and praises the signing of the RCEP as a ‘great achievement’
WILL AN OFFICIAL PRESIDENCY CHANGE ANYTHING?
Biden is signaling a shift to the Obama administration’s multilateral approach, but it might be premature to talk about trade deals given the enormous challenges that await him on the home front and the risk of upsetting the unions that helped him get elected.
His trade priorities are expected to focus on working with allies to put joint pressure on China on trade and push for changes in the World Trade Organization. Rejoining the CPTPP in its current form might not be on the horizon anytime soon.
Unions and progressives who backed Biden’s election have been skeptical of free trade agreements. You have included elements of those in your transition equipment and you can be advised to maintain protections in vulnerable industries such as steel and aluminum.
However, hints of Biden’s intention to reconnect in Asia-Pacific would be welcome, even as a counterweight against China.
