RCEP to bring significant benefits to members, say experts_china

Clay Curtis
November 19, 2020

Fifteen nations in the Asia-Pacific region have signed the world's biggest trade deal, which is expected to drive economic growth in a region hard-hit by the coronavirus pandemic.

"The signing is extremely significant toward realizing a free and open worldwide economic order" at a time when some countries are becoming inward-looking due to the novel coronavirus pandemic, said Hiroaki Nakanishi, chairman of Keidanren, Japan's largest business lobby.

The original 12-member agreement, known as the Trans-Pacific Partnership, was thrown into limbo in early 2017 when President Donald Trump withdrew the United States from it.

It lowers tariffs and sets common rules that cover trade, services, investment, e-commerce, telecommunications and copyright. India does have a free trade agreement with Asean, for both goods and services, but we did opt out of RCEP talks last November, citing "significant outstanding issues".

India's decision comes at a time when Joseph R Biden's election as the 46th American President has revived the prospect of the US' re-entry into the ambitious Trans-Pacific Partnership (TPP) trade deal with 11 others.

With the economy already slowing sharply pre-Covid, political parties, including the Congress which was an original RCEP proponent, too were unusually united against the deal.

Australia and Japan are still particularly keen that India should join RCEP as a counterweight to China, which will clearly be the dominant force for the foreseeable future.

Similarly, India's trade deficit increased with ASEAN, Japan and South Korea, after it signed FTAs with these countries.

The deal is also seen as a way for China to draft the rules of trade in the region, after years of USA retreat under President Donald Trump which have seen Washington pull out of a trade pact of its own, the Trans-Pacific Partnership (TPP).

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"This is a trade agreement".

The RCEP "solidifies China's broader regional geopolitical ambitions around the Belt and Road initiative", said Alexander Capri, a trade expert at the National University of Singapore Business School, referring to Beijing's signature investment project that envisions Chinese infrastructure and influence spanning the globe.

Even without RCEP, India's merchandise trade deficit with China stood at $53.6 billion in FY19, or almost a third of its total deficit, and $48.7 billion in FY20, even without factoring in the deficit with Beijing-proxy Hong Kong.

Xinhua pledged that China, as the largest RCEP economy, would "help build the region's resilience through an inclusive and sustainable post-pandemic economic recovery process and contribute to the recovery and growth of the world economy".

The agreement touches on intellectual property, but environmental protections and labour rights are not part of the pact. But they have yet to remove major stumbling blocks such as market access.

"We make up 25% of the world's trading capacity, of the economy of the world".

Biden reiterated his criticism of Trump's America-first policy.

Asked why he would not comment on plans for trade agreements when he has said he would rejoin the World Health Organization and the Paris Climate Accords, Biden said: "You're asking me about whether I'd join a specific proposal, the details of which are now only being negotiated among those nations".

It's tough to gauge the immediate economic significance of the deal.

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