On Sunday, leaders from fifteen Indo-Pacific region nations will convene virtually to sign the world’s biggest free trade agreement.
The Regional Comprehensive Economic Partnership (RCEP) is a free trade agreement involving the ten member states of the Association of Southeast Asian Nations (ASEAN) and their five partners in Australia, China, Japan, New Zealand and India. Once implemented, it will be the biggest free trade agreement in existence, covering a third of the world’s population and GDP.
While not as sophisticated as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) with its provisions for labour and environmental standards, the RCEP will eliminate 90 per cent of tariffs on imports between its signatories within 20 years. In addition, the RCEP will outline common rules of e-commerce, trade and intellectual property.
The significance of the agreement is not limited to the collective size of the economies involved: rather it is first multilateral free trade agreement to which China is a party. RCEP may act as a springboard in more advanced and complex FTAs Beijing could seek with South Korea, Japan, the European Union and United States.
The formal signing of the agreement is a hopeful sign amid continued uncertainty over the status of international trade as a result of the economic effects of the coronavirus pandemic.
Speaking to the Straits Times, senior Indonesian trade official Iman Pambagyo was optimistic that RCEP demonstrates the value of multilateral trade liberalisation: ‘Against the backdrop of low confidence in the multilateral trading system, ongoing trade tensions amongst a number of countries, rising protectionism and the impact of Covid-19, the signing of the RCEP is a signal to the world and businesses that countries in this region remain optimistic and have a forward-looking orientation in terms of deepening and expanding regional economic integration to play a bolder role in the global value chain’.