China has joined forces with more than a dozen countries across the Asia Pacific region to sign a huge free trade deal nearly a decade in the making. The Regional Comprehensive Economic Partnership (RCEP) spans 15 countries and 2.2 billion people, or nearly 30% of the world’s population, according to a joint statement released by the nations, when the deal was signed. Their combined GDP totals roughly $26 trillion and they account for nearly 28% of global trade based on 2019 data.
The RCEP – signed on November 16 between China, Japan, South Korea, Australia, New Zealand and the 10-member Association of Southeast Asian Nations (Asean)– Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam – is now considered the world’s largest trading bloc.
It is also particularly significant to the region because it is the first time the three most developed Asian powers of China, Japan and South Korea have been in a single free-trade bloc, and the first bilateral tariff reduction arrangement between China and Japan.
The RCEP will eliminate as much as 90 per cent of the tariffs on imports between its signatories within 10 years of coming into effect. But according to previous government statements, the discussion of the trilateral FTA is with “an aim of liberalisation at a higher level than the RCEP” – which covers opening of goods and services markets, investment, rules of origin, customs, competition and e-commerce.
What does it mean for the EU?
“Some in Europe may wonder, have we missed out? Is the European Union weaker because 15 other countries have signed a free trade deal without us? The answer is no,” states EU’s Foreign Policy chief Josep Borrell.
“The Indo Pacific region is of strategic importance to us,” he continued. “We believe in free and fair trade and in multilateralism as the route to get there, so we can be happy when others also take this path to enhance their own prosperity. As EU we tend to have more ambitious FTAs with almost all countries in the RCEP agreement,” he also added, forgetting to explicitly mention that the EU decided to withdraw part of the tariff preferences granted to Cambodia under the EBA trade scheme in August this year. This move has been accused to let Cambodia get closer other regional partners such as China and Japan.
What does it mean for the US?
The United States famously bailed on the Trans-Pacific Partnership — a major trade deal that would have cemented stronger relationships with several countries in Asia Pacific, including Japan, Australia, Malaysia, Singapore and Vietnam — when Trump took office. Since then, the United States has done some bilateral deals, including a 2018 agreement with South Korea and this year’s truce with China. But it hasn’t done a comprehensive regional trade agreement.
“Given the shortcomings of RCEP, we would not recommend the United States joining,” said Myron Brilliant, US Chamber of Commerce executive vice president and head of international affairs to the CNN. “The United States should however adopt a more forward-looking, strategic effort to maintain a solid US economic presence in the region. Otherwise, we risk being on the outside looking in as one of the world’s primary engines of growth hums along without us,” Brilliant added.