Fifteen Asia Pacific countries signed the Regional Comprehensive Economic Partnership (RCEP) during a virtual summit last 15 November 2020.
The biggest trade bloc estimated to be worth US$26.2 trillion or almost 30% of the world’s GDP was made between the 10 Association of Southeast Asian Nations (ASEAN) state members, East Asian economic giants China, Japan, and South Korea, and Oceania’s Australia and New Zealand. It is considered bigger than both the United States-Mexico-Canada Agreement and the European Union.
Initially, India was part of the talks but had to withdraw over lower tariffs that could hurt its local producers.
According to the ASEAN website, the deal is expected to “improve market access with tariffs and quotas eliminated in over 65% of goods traded and make business predictable with common rules of origin and transparent regulations.” RCEP would also encourage firms to invest more and generate jobs, providing the region its much-needed boost to recover from the economic slump brought by the COVID-19 pandemic.
RCEP began as a draft during the 2011 ASEAN Summit in Indonesia, while its formal negotiations were launched during the subsequent summit in Cambodia.
Amid the diplomatic rows between multiple RCEP countries, the free trade agreement pursues a common economic interest among the members that might help deescalate or ease tensions. However, critics have argued that the agreement is not as comprehensive as the ten-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which includes a more significant reduction in tariffs on imports and provisions in labor and environmental standards.
Despite its differences from the CPTPP, the ASEAN-led RCEP is projected to add $209 billion annually to world incomes and $500 billion to world trade by 2030, according to the Washington DC-based Brookings Institution. The pact brings Asia to the center stage of world trade in the face of the declining US influence in the economic sphere.