RCEP signing signals Asian nations taking rightful place in new world trading order

Name: RCEP: 15 Asia-Pacific countries sign world’s largest free-trade deal
Uploaded: 2020-11-19T10:20:39.000Z
Duration: 3 min 29 s
Description: RCEP: 15 Asia-Pacific countries sign world’s largest free-trade deal

Massive trade agreement expected to lower trade barriers and accelerate regional integration as manufacturers look to develop new markets in Asia

Full integration is a work in progress, as spread of non-tariff barriers and differences between countries’ regulatory regimes continue to thwart truly free trade

Reading Time:3 minutes

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Containers being loaded on a ship at the Saigon port in Ho Chi Minh City, Vietnam, on May 3. China and 14 other countries have agreed to set up the world’s largest trading bloc, encompassing nearly a third of global economic activity, in a deal many hope will help hasten Asia’s recovery from the shocks of the pandemic. Photo: AP

Stuart Tait

Published: 6:20pm, 19 Nov 2020Updated: 6:25pm, 19 Nov 2020

The signing of the landmark Regional Comprehensive Economic Partnership (RCEP) signals the beginning of a new era in global trade. It is an era when Asian countries start to play a major role in setting the standards that will enable the next round of global growth.

It took eight years and 31 rounds of negotiation before the 15 nations reached agreement on RCEP. Undoubtedly, some of the measures were softened to accommodate the concerns of such a diverse group, but that should not detract from what is by any standard a remarkable achievement in aligning a diverse group of countries which represents about 30 per cent of global GDP.

RCEP is a symbol of Asian nations coming together to take their rightful place among the architects of the global trading system of the future, a system they are doing so much to sustain and which their growing economic power will continue to define. The fact the agreement brought competitors including China, Japan and South Korea to the same table confirms that when it comes to free trade, the issues dividing Asia are less important than those that unite it. India dropped out of negotiations, but it is encouraging that the RCEP partners left the door open for New Delhi to join at a later date.

Although RCEP has limitations, it is an important step in the right direction. A 2018 International Monetary Fund paper estimated that getting rid of barriers to trade and foreign direct investment within Asia could boost regional GDP by as much as 15 per cent. Research by HSBC and Boston Consulting Group indicates that if the world embraced the principles of open and free trade, it could boost global GDP by US$10 trillion by 2025. Even if RCEP generates only a few percentage points of that, it will help put Asia back on its pre-pandemic growth trajectory.

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RCEP: 15 Asia-Pacific countries sign world’s largest free-trade deal

Trade in services is likely to play a key role in the recovery. Services trade grew 27 per cent faster than merchandise trade between 2005 and 2018. Covid-19 likely has amplified the shift as international services vendors take advantage of the global shift to digital working.

The partnership will accelerate regional integration. Asia is emerging from the pandemic faster and less damaged than Europe and North America, the traditional markets for much of its trade output. Asian manufacturers are already looking to develop new markets within the region, and consumers seem to be responding. The new standardisation of rules of origin will make intraregional trade easier and strengthen Asia’s position in global supply chains.