Leaders from 15 Asia-Pacific nations – including China, Japan and South Korea – have sealed one of the biggest trade deals in history.
The FT reports that the Regional Comprehensive Economic Partnership (RCEP) could add almost $200bn annually to the global economy by 2030. According to The Guardian, it covers 2.2 billion people and 30% of the world’s economic output.
Eight years in negotiation, RCEP brings together China, Australia, Japan, New Zealand and South Korea with members of the 10-nation Association of Southeast Asian Nations (Asean), including Indonesia, Malaysia, the Philippines, and Thailand.
Trading bloc
Reuters reports that RCEP will progressively lower tariffs and aims to counter protectionism, boost investment and allow freer movement of goods within the region. It brings Asia a step closer to becoming a coherent trading zone like the EU or North America.
Japan and South Korea are expected to be among the biggest winners from the deal, but the benefit of cheaper goods is expected to spread as far as Europe and the US.
The FT reports that provisions on rules of origin could be particularly significant as it will mean that products produced in the RCEP zone will benefit from easier movement of components between members.
Not comprehensive
However, RCEP is “relatively unambitious” says the FT deal and covers only about 90% of tariff compared with 100% in the Trans-Pacific Partnership (TPP) agreement, a trade agreement which some RCEP members are also members of. Agriculture is largely absent from RCEP and the coverage of services is mixed.
The deal could not reach agreement on ecommerce as the signatories were unable to agree any rules on cross-border data flows or a customs moratorium on data transmission.
India is not covered by the deal after dropping out last year due to concerns that its economy would not be protected from cheap imports. However, the door is open for India to join in future.
US and EU miss out
With the US having pulled out of TPP under president Trump, the FT said that “neither the EU nor the US, the world’s traditional trade superpowers, will have any voice when Asia sets its trading rules”.
Although RCEP was not initiated by China, its sheer size is expected to make it the driving force.
The BBC reports that leaders hope that the pact will help to spur recovery from the coronavirus pandemic.
Chinese premier, Li Keqiang, said: “Under the current global circumstances, the fact the RCEP has been signed after eight years of negotiations brings a ray of light and hope amid the clouds.”
Trade war
However, China continues to be embroiled in a tariff dispute following Australia’s calls for investigations into China’s role in the initial spread of Covid-19.
In the latest worsening of what’s increasingly being described as a ‘trade war’, ABC Australia reports growing fears that China has cut off its imports of Australian wine.
Chief executive of the Australian Grape and Wine industry group, Ton Battaglene said that imports were being subject to increased testing and customs delay in China. The trade is worth more than $1bn.
“We’re talking about a significant disruption particularly at a time that is our maximum export time leading up to Chinese New Year,” he said.
Relations between the two countries have been acrimonious in recent weeks, with China blocking Australian exports despite the fact that a free trade arrangement exists between them.
UK turns east
With the Brexit transition phase ending on 31 December, the UK is currently looking to pivot towards Asia by looking to join CPTPP, the successor of the TPP.
In June, Liz Truss told MPs the UK had “formally announced our intention to pursue accession” to all the members of CPTPP – the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
The UK hopes that becoming part of the group will help secure trade and investment; diversify supply chains to make the economy more resilient, and help make the UK a global trading hub.
