US trade war and Japan push raise prospects for China-backed Asia free-trade deal

The US trade war and a thaw in ties between China and Japan are raising prospects for the world’s biggest regional free-trade deal, analysts said on Sunday after trade negotiators voiced high hopes of reaching a broad agreement in November.

Singaporean Trade and Industry Minister Chan Chun Sing said trade negotiators from 16 likely signatories of the China-backed Regional Comprehensive Economic Partnership, or RCEP, agreed on key elements of the deal at a meeting in Singapore last week, and a broad agreement was likely when leaders of the countries met in the city state in November.

“We are looking for that broad agreement, that milestone to be achieved, or what we call substantial conclusion, when the leaders meet at the end of the year,” Chan said on Saturday.

The 16-nation pact, involving 10 Asean members as well as China, Japan, Australia, India, New Zealand and South Korea, would cover about half the world’s population and a third of its GDP.

It has been under negotiation for years but a deal has yet to be reached.

Japanese official: tariffs show Donald Trump does not understand free trade

Expectations of an agreement rose on Sunday when the Sankei newspaper quoted Japanese Prime Minister Shinzo Abe as saying Japan’s relationship with China had returned to a “normal track”.

“Premier Li Keqiang visited Japan in May and the Japan-China relationship has completely returned to a normal track,” Abe told the Sankei newspaper.

Huo Jianguo, a former director of a research institute under China’s Ministry of Commerce, said China urgently needed a breakthrough in the RCEP as it looked to the region for economic opportunities to help it weather its tit-for-tat trade war with Washington.

“China has to take the initiative in the forming a new international trade order,” Huo said. “The RCEP negotiations have dragged on for too long and China can’t afford another year of delay.”

Negotiations have stumbled over just how much each country should be prepared to open up its markets to outside goods, services and investment. Some countries like Japan are demanding a high level of opening up but others like are India resistant.

But Huo said interim arrangements could allow for gradual opening and the priority now was to reach a deal.

Trade war: China suffers three-month export downturn as Donald Trump’s tariffs bite

Analysts said any progress on a deal would depend on cooperation between China and Japan, the world’s second- and third-biggest economies.

“Japan used to be passive but now it has become much more proactive about the RCEP,” said Jiang Ruiping, a Japanese studies expert at China Foreign Affairs University.

Jiang said the US withdrawal from the Trans-Pacific Partnership (TPP), the completion of the Japan-European Union trade agreement and Japan’s own need for a regional free trade accord had pushed Tokyo to shift its attention to the China-backed plan.

Japan is a member of the TPP, a US-led trade pact that Washington withdrew from in 2017.

In July, Abe pushed for a swift agreement on the RCEP.

“As we are faced with concerns of the rise of protectionism in the world, all of us in Asia must unite,” he said.

Meanwhile, new life has been breathed into the China-Japan relationship, with Japan more willing to work with China on Beijing’s agenda.

“One area the better China-Japan relationship can work together in is regional trade cooperation,” Jiang said.