Chinese Premier Li Keqiang, 7th from left, attends the 3rd Regional Comprehensive Economic Partnership (RCEP) Summit in Bangkok, Thailand, Nov 4, 2019. (ZHAI JIANLAN / XINHUA)
The agreement by 15 Asia-Pacific nations, including China, to move ahead with the world’s biggest trade deal has been hailed by analysts as both symbolically significant and a major achievement in a long and arduous process.
In a speech on Nov 4 at the 22nd ASEAN-China, Japan and Republic of Korea leaders' meeting in Bangkok, Chinese Premier Li Keqiang said 15 participating countries of the 16-nation Regional Comprehensive Economic Partnership have essentially concluded all negotiations on market access.
This will be a major breakthrough for the development of a free trade zone in East Asia, which will have the most diversified structure of members and the largest growth potential possible, Li said.
Economist Tim Harcourt, J.W. Nevile Fellow at the University of New South Wales, said the RCEP is “symbolically significant, and China made it happen”.
Siriwan Chutikamoltham, senior lecturer and academic director of the Nanyang Fellows MBA Program of Nanyang Technological University in Singapore, said the RCEP’s conclusion is a major achievement in a “long and arduous process”.
She said the agreement sends an immediate message of international cooperation and support of trade.
“This is a much-needed positive development amid the anti-globalization and political populism in the past several years,” said Siriwan.
The RCEP includes all 10 members of the Association of Southeast Asian Nations – Indonesia, Thailand, Singapore, Philippines, Malaysia, Vietnam, Brunei, Cambodia, Myanmar and Laos – as well as Australia, China, Japan, New Zealand and the Republic of Korea.
India, which had been party to the talks, did not sign the agreement on Nov 4. Analysts point to its fear that opening its economy would undermine its already fragile domestic manufacturing base.
As it now stands, the RCEP will cover an estimated 29 percent of the global economy. If India were to be included, it would cover 32 percent. The door will remain open for India, leaders said.
A formal agreement for the trade deal is expected to be signed by the 15 nations next year, although a date has yet to be finalized.
It ends seven years of protracted negotiations and will go a long way to further integrating economies around the region.
Siriwan of NTU said he hoped the conclusion of the RCEP agreement can help lift a cloud of economic uncertainty and boost growth.
“Covering 29 percent of the global economy, the RCEP is a significant trade agreement in anyone’s terms,” said Melissa Conley-Tyler, director, diplomacy at Asialink, a think tank at the University of Melbourne.
“It has taken 28 rounds since negotiations were formally launched in 2012 for 15 countries to reach an agreement on the text for 20 chapters,” she added.
Alice de Jonge, senior lecturer with the Monash Business School in Melbourne, said the significance of the deal should not be underestimated.
“It not only brings ASEAN closer together but the economies of five other regional economies as well, including China. It will see a close integration of value and supply chains.
“As for the United States, it leaves the US where it has chosen to be, which is outside the multilateral system,” she said.
Referring to India’s last-minute decision not to take part, de Jonge said: “In India’s case, the costs probably outweighed the benefits.
“Like all agreements, however, we won’t know until we see the agreement as the detail is always in the fine print.”
Jeffrey Wilson, research director at the Perth USAsia Centre, said that as far as trade blocs go, the RCEP is “bigger than the North American Free Trade Agreement, and bigger than the EU”.
He noted that there are “probably about 100” single bilateral trade agreements in the region already.
“All have different sets of trade rules, regulations, forms, tariffs and so on. It is complicated and is a major barrier to doing business. The RCEP streamlines all of this to make it easier with one set of paperwork for all … it’s not about lowering trade barriers,” he said.
Mustafa Izzuddin, research fellow with the Institute of South Asian Studies at the National University of Singapore, said the agreement will help hasten economic integration, not just within Southeast Asia but also with countries that have ASEAN-related FTAs, excluding India.
“This is also important as RCEP contributes towards fostering an ASEAN Economic Community, which (is key) to building a more cohesive regional community in Southeast Asia.”
Izzuddin said the conclusion of the RCEP also shows that it is possible to rise above domestic politics, especially in the face of extreme nationalism and regional interests.
“The exception being India, in which the current political leadership is not keen on pursuing regional interests at the expense of domestic public opinion,” he said.
“India's absence does leave a void, in that RCEP would have been better with India in it.”
That is why the RCEP will keep the door ajar for the country to join when it is ready to do so, he added.
Sandra Seno-Alday, a researcher at the Sydney Southeast Asia Centre and international business lecturer at the University of Sydney Business School, said she expects benefits to come from the RCEP.
“Countries like Australia, for example, could gain from developing financial services and education for the region. Without India you could see the Philippines gain with its business process outsourcing. Countries like Vietnam, Thailand and Indonesia could see gains in manufacturing.”
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