KUALA LUMPUR: After eight years of intense negotiations, China and 14 other countries agreed to establish the world’s largest trade bloc on the last day of the Association of Southeast Asian Nations’ (ASEAN) virtual summit in Hanoi, Vietnam.
Dubbed the world’s biggest free-trade agreement, the Regional Comprehensive Economic Partnership (RCEP) will represent $24.8 billion or almost a third of the global gross domestic product based on the World Bank’s 2018 data.
“Undoubtedly, it represents a significant and imperative milestone in the integration and revitalization of economies of the 15 parties,” Malaysia’s Trade and Industry Minister Azmin Ali said in a statement.
This RCEP will allow the 15 members to “enhance their regional value chains, boost regional trades and investments as well as provide an avenue for information sharing,” he said.
Analysts hope the deal will hasten recovery from the shocks of the pandemic in Asia.
“The conclusion of RCEP negotiation, the largest free-trade agreement in the world, will send a strong message that affirms ASEAN’s leading role in supporting the multilateral trading system, creating a new trading structure in the region, enabling sustainable trade facilitation, revitalizing the supply chains disrupted by COVID-19 and assisting the post-pandemic recovery,” said Vietnam’s Prime Minister Nguyen Xuan Phuc.
The accord will take already low tariffs on trade between member countries still lower, over time, and is less comprehensive than an 11-nation trans-Pacific trade deal that President Donald Trump pulled out of shortly after taking office.
The tariff elimination is an increase from the current 8 percent between both Japan and China without a bilateral free-trade deal.
Malaysian Prime Minister Muhyiddin Yassin said that the free-trade deal would “act as the main vehicle to enhance regional economic integration” within ASEAN and its partners.
“(Due to) challenges brought by the coronavirus pandemic, coupled with the global trading systems due to regional tension, it was imperative for ASEAN to continue to sustain its competitiveness in the region,” he said in a statement on Sunday after signing the agreement.
“I believe that this is the touchstone for future growth and vibrancy of our regional economic collaboration,” he added.
Apart from the 10 ASEAN members, it includes China, Japan, South Korea, Australia, and New Zealand, but not the US. Officials said the accord leaves the door open for India, which dropped out due to fierce domestic opposition to its market-opening requirements, to rejoin the bloc.
It will take time to fully assess the exact details of the agreement encompassing tariff schedules and rules for all 15 countries involved — the tariffs schedule just for Japan is 1,334 pages long.
It is not expected to go as far as the EU in integrating member economies but does build on existing free trade arrangements.
“Lower tariffs coupled with a massive market share will be a huge advantage for RCEP members to be part of a crucial supply chain, especially post-pandemic,” said Azmi Hassan, a professor of Geostrategy at the Malaysia Technology University.
He told Arab News the RCEP is also expected to provide a “huge avenue” to China to mold the Asia Pacific region “according to its view.”
“The region is considered a catalyst to the world geopolitics and with China in the driver seat via RCEP, not only economic issues come into play, but also geopolitics and this puts China in the lead compared to the US,” Azmi added.
He said opportunities for China were “vast” as it would be able to “shape the future global economic structures” by promoting pro multilateralism and anti-protectionism.
Others believe that the RCEP is more “inclusive” and does not “elicit protectionist tendencies” from non-member countries, especially the US.
“The agreement is an affirmation of the importance of lowering trade barriers. This means prospering each other through a mutually beneficial exchange of goods and services,” Prof. Yeah Kim Leng, a senior fellow of Sunway University and director of the Economic Studies Program, told Arab News.
Yeah said the regional pact would boost growth and economic efficiency through increased trade and investment flows.
“While the gains may not be equally distributed among the member countries, the net overall economic output and efficiency gains from the closer regional cooperation will be positive in the long run.”