In a major development, China and 14 other countries agreed on Sunday to set up the world’s largest trading bloc, encompassing nearly a third of all economic activity.
Many Asian countries are hoping that the deal will help in speeding up the recovery process from the shocks of the coronavirus pandemic.
The Regional Comprehensive Economic Partnership, or RCEP, was signed virtually on Sunday on the sidelines of the annual summit of the 10-nation Association of Southeast Asian Nations.
Top officials from 15 nations that also include Australia, New Zealand and the 10 members of the Association of Southeast Asian Nations inked the RCEP on the final day of the 37th ASEAN Summit hosted virtually by Vietnam.
RCEP will bolster pandemic affected economies
Supporters of the trade pact, which covers 2.2 billion people with a combined GDP of $26.2 trillion, said it will bolster pandemic-weakened economies by reducing tariffs, strengthening supply chains with common rules of origin, and codifying new e-commerce rules.
Among the benefits of the agreement include a tariff elimination of at least 92% on traded goods among participating countries, as well as stronger provisions to address non-tariff measures, and enhancements in areas such as online consumer and personal information protection, transparency and paperless trading, according to a statement issued on Sunday by Singapore’s Ministry of Trade and Industry.
It also includes simplified customs procedures while at least 65% of services sectors will be fully open with increased foreign shareholding limits.
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 pact should help shrink costs and make life easier for companies by letting them export products anywhere within the bloc without meeting separate requirements for each country. The agreement touches on intellectual property, but environmental protection and labour rights are not part of the pact.
The RCEP signing comes as Southeast Asian nations experience uneven recoveries from the coronavirus pandemic. Governments across the region have been negotiating travel lanes and bubbles in fits and starts as officials weigh health risks with economic needs.
Malaysia, Indonesia, and the Philippines are among those still dealing with elevated virus caseloads, while Singapore and Vietnam have so far successfully prevented new outbreaks. Japan is looking for the pact to be a catalyst for its post-coronavirus economy, Japanese trade minister Hiroshi Kajiyama told reporters Sunday.
India pulled out of the pact over Chinese concern
India pulled out of the agreement last year over concerns about cheap Chinese goods entering the country and was a notable absentee during Sunday’s virtual signing.
Signatories to the agreement said they hoped New Delhi would rejoin in the future, acknowledging its “strategic importance” to the deal which already covers more than two billion people.
India had last year refused to join the grouping citing reservations that goods manufactured by China could come into India through third countries under the RCEP, exacerbating its already skewed trade with China.
India had also said that it was reviewing free trade deals that it had struck in the past given that these had not worked in its favour. Indian industry had also apprehended greater market access to China could harm key manufacturing sectors like steel and textiles.
India also had concerns about giving greater market access to other non-FTA partners like Australia and New Zealand.
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