Japan approves world’s biggest free-trade deal after China’s call to boost Asian economy
- 15-nation partnership is expected to cover nearly one-third of the world’s economy, trade and population and to come into effect from early 2022
- Vice-minister of foreign affairs calls for efforts to defend the multilateral trade system and expressed interest in China joining CPTPP
The approval by Japan’s upper house comes after the lower house gave the green light earlier this month and a day after China called for the deal to be ratified to shore up the economy in the Asia-Pacific.
The China-backed RCEP was signed in November last year and included the 10 members of the Association of Southeast Asian Nations (Asean) plus China, Japan, South Korea, Australia and New Zealand. By eliminating tariffs on 91 per cent of goods, the RCEP will create a free-trade zone covering nearly one-third of the world’s economy, trade and population.
It will also be the first deal of its kind involving China, Japan and South Korea, and comes as the three countries struggle to negotiate a trilateral free-trade agreement.
Japan’s government said in March that it expected the trade accord to boost the country’s GDP by 2.7 per cent and create 570,000 jobs.
Thailand and Singapore have also ratified the agreement. The deal will go into force 60 days after six of the Asean members and three non-Asean member states ratify it.
At a meeting of the United Nations Economic and Social Commission for Asia and Pacific on Tuesday, China’s vice-minister of foreign affairs Ma Zhaoxu called for efforts to stick to regional economic integration and defend the multilateral trade system.
“China took the lead in the ratification of the RCEP and is ready to push forward with all sides for the early entry into force and implementation,” he said.
Ma also underlined China’s interest in joining the Japan-led Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which is more open and demands higher standards for trade, investment, competition and labour protection than the RCEP.
“We are willing to actively consider joining the CPTPP to inject a new push for the economic integration of the Asia-Pacific region,” he said.
Wang Huiyao, director of the Beijing-based Centre for China and Globalisation, said the approval by Japan’s parliament sent a signal to the region, especially to Asean, on its support for economic integration despite increasingly complex geopolitical conditions.
“China will welcome the news. It’s a sign of support for regional economic integration. And the Japanese business community is still looking for a chance to cooperate with China, even though we don’t have a free-trade deal with Japan or a trilateral one with South Korea and Japan,” Wang said.
China is aiming to forge “high-standard” free-trade agreements with more partners in the next five years as well as closer cooperation along the industrial chain in the region, including in South Korea and Japan.
Wang Shouwen, China’s vice-minister of commerce, said in March that upon the enforcement of the RCEP, China would strive to speed up talks on the trilateral free-trade agreement.
Liu Jiangyong, an international relations professor at Tsinghua University, said enforcement of the RCEP would ease the way for China’s agricultural exports to Japan and reduce trade barriers to economic integration.
He also said the approval was a matter of procedure and much would depend on progress in the trilateral deal talks.
“Political tensions are expected to be a big restraint on forging the trilateral free-trade deal,” he said.
India was one of the founding RCEP members but skipped all negotiations from November 2019 because of concern that its trade deficit with China would grow.
However, a study conducted in 2019 by researchers at the University of Queensland and the Indonesian Ministry of Finance found the RCEP would add just 0.08 per cent to China’s economy by 2030. Over the same period, the trade war with the US would slice 0.32 per cent from its GDP.
Researchers at the Chinese Academy of Social Sciences were slightly more bullish on the prospects of the RCEP for China’s economy, estimating that over 10 years it would add 0.22 per cent to real GDP growth and 11.4 per cent to China’s total exports, should the schedule for trade liberalisation unfold as planned.
Additional reporting by Kyodo and Reuters