What's the RCEP trade deal?
16 November, 2020
Backed by China, the sprawling Regional Comprehensive Economic Partnership (RCEP) is seen as a coup for Beijing in extending its influence over the region and marks its dominance in Asian trade.
After eight years of wrangling over the details, the trade pact - the world's major when it comes to GDP, say analysts - was signed on Sunday (Nov 15).
WHAT IS RCEP?
Launched in 2012, RCEP is a trade pact between the 10-member ASEAN bloc, along with China, Japan, South Korea, Australia and New Zealand. India had been due to sign but pulled out this past year.
The offer includes 2.1 billion people, with RCEP's members accounting for around 30 % of global GDP.
Its aim is to lower tariffs, start trade in services and promote investment to help emerging economies catch up with all of those other world.
Specifically, RCEP is likely to lessen costs and time for companies by allowing them to export something anywhere within the bloc without meeting separate requirements for every country.
It also touches on intellectual property, but will not cover environmental protections and labour rights.
"A key priority area for further RCEP negotiations is likely to be e-commerce," said Rajiv Biswas, Asia Pacific chief economist at global business consultancy IHS Markit, after nations struggled to totally agree on a number of the provisions on digital trade.
It is unclear when the pact will be ratified nonetheless it could come into force next year.
HOW COME IT MATTER?
It mainly matters since it sets new trade rules for the spot - and has China's backing but does not include the USA.
Observers say it solidifies China's broader geopolitical ambitions in the region, where it has faced little competition from the US since President Donald Trump pulled out of a trade pact of its.
That deal, called the Trans-Pacific Partnership (TPP), was on the right track to be the world's biggest trade pact, until Washington pulled the plug, saying it funnelled off US jobs.
However, observers say the RCEP isn't as considerable as the TPP, or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), as its successor is known.
It "is not a completely completed, fully rationalised agreement," said Alexander Capri, a trade expert at the National University of Singapore Business School.
"The problem with RCEP is that you have 15 incredibly varied countries at different stages of development and with completely internal priorities," he added.
WHY NO INDIA?
India withdrew this past year over concerns about cheap Chinese goods entering the country, though it can join at a later time if it chooses.
It raised alarm about market access issues, fearing its domestic producers could be hard hit if the country was flooded with cheap Chinese goods.
Textiles, dairy, and agriculture were flagged as three vulnerable industries.
Prime Minister Narendra Modi faced mounting pressures in the home to have a tougher stance on the terms, and proved unbending as the RCEP negotiations found a close.
WHAT DOES IT MEAN FOR THE US?
It is likely that a new US administration under President-elect Joe Biden will focus more on Southeast Asia, analysts say, though it remains unclear whether he'd want to rejoin the CPTPP.
This issue remains a politically sensitive issue in the US.
"The administration will be looking at this very closely," said Capri.
Source: www.channelnewsasia.com
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