The leaders of 15 countries from the Asia-Pacific region came together on Sunday to virtually sign one of the largest free trade deals in history, seeking to reduce economic barriers preventing cooperation between the nations of the region.
Image: The China Times
The deal, known as the Regional Comprehensive Economic Partnership (RCEP), has been signed after nearly a decade of discussions at a virtual event hosted by Vietnam.
The RCEP adds onto existing trade deals signed by at least 10 countries in the region, including Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
These nations make up the Association of Southeast Asian Nations (ASEAN) which already sees active trade deals between its member states.
ASEAN has been joined by New Zealand, Australia, China, Japan and South Korea in attempting to ratify RCEP on the world stage.
The agreement was signed at the 11th meeting between the ASEAN members and the UN on the 75th anniversary of its founding.
Nguyen Xuan Phuc, prime minister of Vietnam, said: “RCEP will soon be ratified by signatory countries and take effect, contributing to the post-COVID pandemic economic recovery."
In total, the signatories make up 30% of the world's population and have a combined GDP of $26 trillion.
They hope it will allow for greater economic freedom and integration within the region.
Singapore's prime minister Lee Hsien described the occasion as a "major step forward" for the region.
He said: "At a time when multilateralism is losing ground, and global growth is slowing, the RCEP shows Asian countries’ support for open and connected supply chains, freer trade and closer interdependence.”
The deal was first proposed in 2012, and the nations hope this will transform the region into an economic free zone in a similar vein to the EU.
Analysts predict the deal could bring in as much as $200 billion (€168.4 billion) annually to the global economy.
The deal stands to reduce their economic dependence on the US, which has only accentuated the problems started by US President Donald Trump's withdrawal from the Trans-Pacific Partnership back in 2017, reversing a decision by his predecessor.
While the US has conducted bilateral trade in the region - such as the deal with Japan in 2018 - it is unknown whether a Joe Biden victory will open further trade with Asia-Pacific nations.
The deal comes with many of the standard avenues these types of deals tend to deliver; dealing with tariffs, customs administration, regulations and investment opportunities.
The RCEP will see the removal of the so-called 'rule of origin' which stipulates regulations based on where a product is made which may require altering depending on where a product is being exported to. The RCEP's refutation of this allows for an international standard for manufactured goods that will suffice for all nations.
It also sees the first official trade deal between Japan, China and South Korea, as tensions - particularly Sino-Japanese relations - have been strained due to decades of cultural and political differences.
The deal is said to lower the existing tariffs on goods between the 15 nations over time. According to Vietnamese officials, the new deal will reach at least 2.2 billion consumers.
However, the agriculture sector has been largely ignored by the deal, and the RCEP does little to set common standards for sector products.
Complications have also arisen from India withdrawing from the deal in 2019 over fears it would lead to an influx of cheap Chinese goods that could diminish domestic manufacturing. Its exit is a large blow, leading to a loss of 1.3 billion people and a $2.3 trillion strong GDP as the nation is on the verge of evolving into a global economic superpower.
Despite this, RCEP has been left open for the nation should they wish to join of their own volition.
The RCEP is likely to shape the future of trade in the Asia-Pacific region. Both the EU and US will have little say in future trade negotiations between the RCEP nations including how they set their trade deals.
There are concerns that this will cement China's position as the dominant superpower in the region, by allowing it to export its products anywhere within the bloc with fewer regulations.
The RCEP will not touch on environmental laws, which have become a big concern in China owing to the extreme pollution in the nation which has been linked to millions of deaths.
Despite this, recent reports have indicated that air pollution levels are now below 1990 levels, which may indicate the nation is better at moderating how it treats the environment. Whether or not these have been intentional reductions on the part of the government or a side-effect of the Covid-19 pandemic remains to be seen.
China is also among the world's largest user of fossil fuels which has led to significant carbon emissions in recent decades, despite the nation having signed up to the Paris Climate Accord and its plans to move towards carbon-neutrality by 2030.
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