On Sunday, 15 countries will sign a sprawling Asian trade pact that they hope will help them recover from the epidemic, seen as a major coup for China in expanding its influence.
Analysts say the Regional Comprehensive Economic Partnership (RCEP) – which includes 10 economies in Southeast Asia along with China, Japan, South Korea, New Zealand and Australia – will be the world’s largest trade agreement by GDP.
The United States is not covered by the agreement to reduce tariffs and open services trade within the bloc, and is seen as a China-led alternative to Washington’s now-expired trade initiative.
Alexander Capri, a trade expert with the Business School of the National University of Singapore, said the RECP “strengthens China’s broader regional geopolitical ambitions around the Belt and Road Initiative,” referring to Beijing’s Distinctive Investment Project that envisions Chinese infrastructure and impact spanning the world.
“It’s kind of a complement.”
After eight years of preparation, the agreement will finally be signed at the end of the Southeast Asia Summit – held by videoconference due to the pandemic.
Many signatories are fighting the severe outbreak of the Coronavirus and hope that the Regional Comprehensive Economic Partnership agreement will help mitigate the devastating cost of a disease that has devastated their economies.
Indonesia recently plunged into its first recession in two decades, while the Philippine economy contracted 11.5 percent year on year in the last quarter.
“Covid has reminded the region why trade is important and governments are more eager than ever to achieve positive economic growth,” said Deborah Elms, executive director of the Asian Trade Center, a Singapore-based consulting firm.
“RCEP can help deliver it.”
– India absent –
India pulled out of the agreement last year due to concerns about the entry of cheap Chinese goods into the country and will be noticeable absent during the virtual signature on Sunday.
He can join later if he so chooses.
Even without India, the deal covers 2.1 billion people, with RCEP members representing about 30 percent of global GDP.
It should critically help cut costs and make life easier for businesses by allowing them to export products anywhere within the block without meeting the separate requirements of each country.
The agreement deals with intellectual property, but environmental protection and workers’ rights are not part of the agreement.
The deal is also seen as a way for China to shape trade rules in the region, after years of US backsliding under President Donald Trump, which has seen Washington withdraw from its own trade pact, the Trans-Pacific Partnership (TPP). ).
Although US multinationals will be able to benefit from RCEP through subsidiaries within member states, analysts said the deal could make President-elect Joe Biden rethink Washington’s involvement in the region.
Rajeev Biswas, chief economist for Asia and the Pacific at IHS Markit, said this could see the United States in the potential benefits of joining the subsequent TPP agreement, the Comprehensive and Advance Pacific Partnership (CPTPP).
“However, this is not expected to be an immediate priority issue … given the overwhelming negative response to the TPP negotiations from many sectors of the American electorate due to concerns about American job losses to Asian countries,” he added.
burs-aph / pdw / rma / axn