RCEP: 15 Asia Pacific countries signed the world’s largest trade agreement

10 ASEAN members and 5 countries signed a large-scale free trade agreement that promises to accelerate the economy after the Covid-19 pandemic.

The Regional Integral Economic Association (RCEP) was signed online after 8 years of negotiation.

RCEP is made up of ten members of the Association of Southeast Asian Nations (ASEAN), along with China, Japan, Korea, Australia and New Zealand.

“I believe that the agreement will soon be ratified and put into effect by the countries, contributing to the economic recovery after the pandemic and contributing to the development of the member countries in the coming time,” said Prime Minister Nguyen Xuan Phuc. talk.

Members represent almost a third of the world’s population and represent 29% of world GDP.

The new free trade zone will be larger than the Agreement between the United States, Mexico and Canada and the European Union.

India also entered negotiations, but withdrew last year, fearing that lower tariffs could hurt domestic producers.

The main reason India chose not to join the RCEP was the fear that a large amount of cheap Chinese imports could further damage India’s domestic industries.

India’s trade deficit with China stands at about $ 50 billion in fiscal 2019.

On the other hand, China is said to be trying to expand its influence by leading the creation of a multilateral trade framework amid a growing rift with the United States.

The Chinese government said that trade with ASEAN countries from January to October increased 5.1% year-on-year to $ 540 billion, making ASEAN Beijing’s biggest trading partner. .

RCEP is expected to remove a series of import duties within 20 years.

The agreement also covers intellectual property, telecommunications, financial services, electronic commerce and professional services.

But perhaps the new “rules of origin”, the official rules that define product traceability, will have the biggest impact.

Many member states already have free trade agreements (FTAs) with each other, but there are still limitations.

“Existing FTAs ​​can be very complex to use compared to RCEP,” said Deborah Elms of the Asian Trade Center.

Companies with global supply chains can face tariffs even in an FTA because their products contain ingredients made elsewhere.

For example, an Indonesian-made product that contains Australian components may face tariffs elsewhere in the ASEAN free trade zone.

According to the RCEP, components from any member country will receive the same treatment, which could give companies in RCEP countries an incentive to find suppliers in their business sector. this block.

Although RCEP is an ASEAN initiative, many see the agreement as an alternative to the China-backed Trans-Pacific Partnership (TPP).

The TPP does not have China participating, but includes many Asian countries. Twelve member countries signed the TPP in 2016 before US President Donald Trump withdrew the United States in 2017.

The remaining members continue to form the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) with 11 members.

Although it includes fewer member countries, the CPTPP reduces tariffs more and includes labor and environmental provisions than the RCEP.

The RCEP brings together countries that often have flawed diplomatic relations, especially China and Japan.

Both Australia and China signed the deal, despite reports that China may boycott some Australian imports due to political differences.

International trade is much lower on the agenda in this year’s US elections, and President-elect Joe Biden has said relatively little about whether or not his trade policy will change significantly. check whether to join the TPP or not.