An Asian trade pact, nearly a decade in the making, will be finalized this weekend with negotiators near an agreement on the regional comprehensive economic partnership.
Trade ministers held a video conference Wednesday in preparation for a Sunday leaders’ summit, which may include a virtual signing ceremony. Ministers in Vietnam and Indonesia said they expected a deal.
The RCEP covers almost a third of global economic output and will create uniform rules of origin in large parts of the region to replace a mixture of bilateral trade agreements.
The RCEP trade deal is an important positive step in liberalizing trade and investment in the Asia-Pacific region
Analysts said the deal was a big step towards economic integration and would further reduce U.S. influence in the region after President Donald Trump left the Trans-Pacific Partnership, another major regional trade pact.
“The RCEP trade deal is an important positive step in liberalizing trade and investment in the Asia-Pacific region,” said Rajiv Biswas, chief Asia Pacific economist at IHS Markit.
“RCEP significantly expands the scope of trade and investment liberalization with chapters that create a common framework for rules of origin, strengthen intellectual property protection, trade in services, and remove barriers to investment.”
Rules of origin are criteria that determine where a product was manufactured in order to give it preferential treatment under a trade agreement.
RCEP will include the 10 members of Asean – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam – as well as Australia, China, Japan, New Zealand and South Korea.
Many of the members already have trade deals and RCEP is not expected to result in significant tariff reductions overall. But it will combine the existing deals and bring Asia one step closer to a coherent trading zone like the EU or North America.
Li Chenggang, China’s deputy trade minister, said Wednesday that the legal reviews of the RCEP documents had already been finalized in what he called a “milestone” agreement that would “reinvigorate confidence in regional economic growth.”
The deal was marked by a tug-of-war between China, which focused on tariffs and trade in goods, and Japan and Australia’s preference for a “higher quality” deal with more provisions in areas such as e-commerce and public procurement.
Fears over Chinese rule increased after India pulled out of negotiations in November 2019. Indian corporate groups warned of being inundated by a rush of cheap Chinese imports. New Delhi also believed China was unwilling to compromise on services where India has a competitive advantage.
Tokyo and Canberra have tried to convince New Delhi to come back on the deal and RCEP is likely to have special provisions that will allow India to join at a later date.
The 15 remaining countries in need of economic recovery after the Covid-19 pandemic have decided to move on.
Mr Biswas said the next US administration would have to face the consequences of being outside of the two major multilateral trade deals in the Asia-Pacific region. “However, US multinational corporations can benefit from RCEP regulations through their subsidiaries operating in member countries,” he said.