China-centred pact signed, without India . . .
The Regional Comprehensive Economic Partnership (RCEP) was signed on Sunday on the sidelines of the virtual ASEAN Summit hosted by Vietnam. The free trade agreement includes Australia, China, Japan, New Zealand, South Korea, and the 10 ASEAN member nations. It accounts for nearly one-third of the global population and 29 per cent of global GDP, making it the world’s largest trade bloc. RCEP negotiations began in 2013 and progressed slowly until the U.S. pulled out of Trans-Pacific Partnership negotiations in 2017. India, an original RCEP adopter, pulled out last year to protect local producers and internal markets from lower tariffs and a potential increase of Chinese influence in its national economy. The deal will come into effect once six ASEAN members and three non-ASEAN members ratify. It could eventually eliminate tariffs and quotas on 65 per cent of the goods traded in the region.
RCEP vs. CPTPP: Competing visions . . .
RCEP provides a counter-narrative to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on setting global trade standards. RCEP is less ambitious in its terms, avoiding unified standards on intellectual property, labour, and the environment. Nor does it include Investor State Dispute Settlement provisions. RCEP is also less ‘progressive’ than the CPTPP in that it doesn’t champion inclusive trade, human rights, or Indigenous rights. While several RCEP signatories have experienced increased trade and diplomatic tensions with China in recent years, it didn’t stop them from moving RCEP forward – a clear signal of the growing role the Asia Pacific plays in global standard-setting and the importance of improved access to Chinese markets. Interestingly, Australia, Japan, and New Zealand have signed on to the more ambitious CPTPP and the less rigorous, but larger, RCEP.
A new trade agreement amid flux . . .
RCEP is the first trade agreement to include China, Japan, and South Korea. It also contains flexibility on rules of origin that could help spur interregional production and trade, potentially providing member economies more flexibility during the China-U.S. trade spat. We may have to wait some time for a response to RCEP from an incoming Biden Administration that will likely be focused on America’s pandemic response and the domestic economy. RCEP’s signing could also shift Canada’s slow-moving free trade negotiations with ASEAN, or possibly encourage Ottawa to double down on CPTPP implementation initiatives.
READ MORE
- New Zealand Foreign Affairs and Trade (Manatū Aorere): RCEP Agreement
- Nikkei Asia: RCEP to remove tariffs on 86% of Japan's exports to China
- Reuters: Explainer: What happens now the RCEP trade deal has been signed?
