By Jerom Bolt
Amid trade disputes with the United States, China and 14 other Asia-Pacific countries have reached a consensus to create the world’s largest free trade bloc. After eight years of negotiations, the agreement was signed at the virtual summit of the ASEAN community of Southeast Asian states, which took place in the Vietnamese capital, Hanoi. The Regional Comprehensive Economic Partnership or RCEP, as the pact is abbreviated, comprises 2.2 billion people and about a third of global economic output.
The agreement reduces tariffs, establishes common trade rules and thus facilitates supply chains. It includes trade, services, investment, e-commerce, telecommunications and copyright. RCEP means “Comprehensive Regional Economic Partnership”. In addition to China and the ten Asian countries, Vietnam, Singapore, Indonesia, Malaysia, Thailand, the Philippines, Myanmar, Brunei, Laos and Cambodia, Japan, Australia, South Korea and New Zealand also participate.
RCEP paves the way for the harmonization of disparate rules of origin in the various ASEAN Free Trade Agreements and the establishment of regional content rules so that intermediate goods can be obtained from any of the 15 countries. The benefits are said to be particularly high for China, Japan and South Korea. It will also step up the efforts of those three countries to reach their own trilateral free trade agreement, negotiated for as long as the RCEP and is blocked for political reasons.
China will win in other ways. By acceding to its first plurilateral trade agreement, it can present itself as committed to trade liberalization at a time when America seems relatively decoupled from the region and when a trade war with China continues. Li Keqiang, China’s prime minister, was delighted with the signing, calling RCEP “a victory for multilateralism and free trade” and, more lyrically, “a ray of light and hope in the clouds.”
By Jerom Bolt