On Sunday, the leaders of fifteen nations convened virtually to formally sign the world’s largest free trade agreement, the Regional Comprehensive Economic Partnership (RCEP).
Comprising of the ten member states of ASEAN, China, Japan, South Korea, Australia and New Zealand, RCEP covers a third of the world’s population and encompasses nearly a third of all economic activity.
Beyond the collective economic size of the nations party to the agreement, it is hoped that RCEP will add momentum in the way of trade liberalisation as countries look to recover from the economic effects of the pandemic.
Commenting on the agreement, Vietnam’s Prime Minister Nguyen Xuac Phuc said, “the conclusion of RCEP negotiation, the largest free trade agreement in the world, will send a strong message that affirms ASEAN’s leading role in supporting the multilateral trading system, creating a new trading structure in the region, enabling sustainable trade facilitation, revitalising the supply chains disrupted by COVID-19 and assisting the post-pandemic recovery”.
The accord will lower already reduced tariff rates between member states but is not thought to be as extensive as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Nevertheless, the deal retains powerful ramifications for the direction of trade liberalisation. It is the first multilateral trade agreement where China is a participant, which according to Gareth Leather of Capital Economics, will allow Beijing to present itself as a ‘champion of globalisation and multilateral cooperation’.
Furthermore, with a new administration due to take office in the United States in the new year, there is an expectation that a President Biden may adopt a more pragmatic approach with trade policy in the Asia Pacific region in face of increased Chinese influence, but will not wish to proceed at a pace that alienates the rust belt voters that gave him the keys to the Oval Office.