The world’s biggest free trade pact may be just months from final signatures after talks this month appeared to bring the trade group’s 16 members closer to agreement.
The Regional Comprehensive Economic Partnership (RCEP), is a trade deal hatched in 2012 by the 10-member Association of Southeast Asian Nations (ASEAN) (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) along with six free trade agreement partners (China, Japan, India, South Korea, Australia and New Zealand). It will cover about 32% of the world GDP and nearly 30% of global trade. The deal excludes the United States.
During a meeting in Beijing Aug. 2-3, the countries hashed out core differences. The deal should be finished by year’s end, Thai Prime Minister Prayut Chan-o-cha told a news conference Sunday after an ASEAN foreign ministers meeting held in Bangkok.
Exporters from the 16 signatory countries hope for freer, cheaper and more reliable trade, after U.S. President Donald Trump withdrew from a Pacific Rim deal in 2017 and has since challenged countries across the world on existing agreements. The United States has been embroiled in a trade dispute with China since early 2018, with both nations raising tariffs on the other’s imports.
“There is understandably concern in ASEAN about the effect of future U.S. trade barriers being introduced that will affect their countries,” said Stuart Orr, business and law professor at Deakin University in Australia. “Striking this deal will reduce their dependence on the U.S. as a market by creating a coordinated ASEAN market.”
US pullback in free trade
Much of Asia, especially major manufacturers such as China and Vietnam, traditionally count the United States as a major destination for exports.
Last month, the United States said it would impose a final round of tariffs on China as part of an 18-month-old trade dispute, affecting $300 billion worth of Chinese goods.
“China needs to strengthen its local trade opportunities to assist it in its trade war with the U.S.,” Orr said.
Trump has also mulled placing tariffs on auto imports from the European Union and Japan, and threatened tariffs against Mexico.
Momentum in talks toward Asia trade deal
In China, the official Xinhua News Agency said Monday more than two-thirds of the RCEP negotiations on bilateral market access had been completed with talks on what’s left “being actively pushed forward.”
The RCEP also covers import tariffs, labor and intellectual property rights. The elimination of trade barriers would offer signatory states access to low-cost raw materials, Orr said, while the deal as a whole would expand the number of firms operating in Southeast Asia.
“In the context of the ongoing trade war between the U.S. and China, Vietnam could have other markets,” said Trung Nguyen, international relations dean at Ho Chi Minh University of Social Sciences and Humanities.
Once implemented by the target year of 2030, the partnership, encompassing about 47% of the world’s population, will increase global real incomes by an estimated $286 billion per year, the Brookings Institute said in a report in November.
But negotiators have reached agreement on just seven of RCEP’s 18 chapters, cautioned Rajiv Biswas, Asia-Pacific chief economist at IHS Markit, a market research firm in Singapore. A year-end finish line may be impossible, he said.
“These kinds of deals take a long time to agree. Then, they have to be ratified by parliaments. Then, they have to be implemented in terms of legislation. So, there’s nothing fast about these kinds of deals,” Biswas said. “So, I think it’s unrealistic to have too much sense of urgency about it.”
India edges on board
India has held back talks on the pan-Asian deal over the years on concerns about low-cost imports entering from China, and competition with China over manufacturing, Biswas said.
“India is single-handedly holding up the other 15 negotiating parties,” said Oh Ei Sun, senior fellow with the Singapore Institute of International Affairs. “On this front, China and ASEAN countries, they almost have consensus, like greater market access and more free trade, and so on.”
India’s Commerce Secretary Anup Wadhawan met his Chinese counterpart in Beijing last week to hash out some of the issues, Indian news outlet BusinessLine reported Sunday. India can accept RCEP if it addresses “the existing level of trade imbalance,” BusinessLine said.