The Regional Comprehensive Economic Partnership includes 15 countries and includes 2.2 billion people, or nearly 30% of the world’s population, according to a joint statement released by the countries on Sunday, when the agreement was signed. Its GDP is roughly $ 26 trillion and makes up nearly 28% of global trade, based on 2019 data.
The deal includes many of the region’s biggest economic hitters with the exception of China, including Japan and South Korea. New Zealand and Australia are also partners, as are Indonesia, Thailand and Vietnam in Southeast Asia.
A trade agreement was proposed for the first time In 2012 as a way to create one of the largest free trade areas in the world.
Reinch said, however, that the agreement could have long-term consequences, adding that China’s participation “is a sign of its willingness to play a constructive role, despite its aggressive actions in the South China Sea, Hong Kong and elsewhere.”
“Both countries see huge benefits from their deeper economic integration with other Asian countries,” said Murray Hebert, Senior Fellow of the Southeast Asia Program at CSIS. “RCEP can provide Beijing and Canberra another platform where they can discuss and resolve their differences.”
Others suggested the deal was further evidence of Asia’s growing strength. HSBC economists said on Sunday that the agreement “signals that Asia continues to push ahead with trade liberalization, even as other regions become more skeptical.”
“It may reinforce a trend that has already been in place for decades: that the global economic center of gravity continues to push unabatedly to the East,” they wrote in a research note.
It is not clear if the deal will have an impact on the most important global trade relationship ever: that between the United States and China, which have fought over trade and related issues over the past few years.
“Whether that means a shift in the regional dynamic in favor of China depends on the response of the United States,” Reinch said of the new trade deal. He pointed to the importance of the election of Joe Biden, who will succeed President Donald Trump in January.
He added, “If the United States continues to ignore or bully countries there, the effect of the pendulum will swing toward China.” “If Biden has a credible plan to regain US presence and influence in the region, the pendulum could swing in our way.”
Jake Kwon and Akankasha Sharma contributed to this report.