RCEP: The Largest Trading Bloc
A new emerging Regional Comprehensive Economic Partnership (RCEP) consists of 10 members of the Association of Southeast Asian Countries (ASEAN), including South Korea, China, Japan, Australia, and New Zealand. The RECP is the largest trading bloc in the world, covering about 30% of the world’s trade volume. The new pact, in a way, will increase China’s influence in the region. The US already withdrew from the rival Asia-Pacific trade pact. President Doland Trump decided to leave the Trans-Pacific Partnership (TPP), in 2017.
The idea of a new pact was initiated in November 2011, during the 19th meeting of ASEAN. The negotiations were started in the 21st meeting of ASEAN in November 2012. The pact was ultimately signed on 15th November 2020 at a virtual ASEAN meeting hosted by Vietnam. The new agreement will take place after the ratification by at least SIX ASEAN members and THREE NON-ASEAN members.
Importance of RCEP
At the moment, RCEP is not much exhaustive on reducing tariffs as sharply as TPP. The size of the market is a factor of real importance. The gigantic size of about 30% of the World’s trade makes it the largest trade pact in the world. It is even bigger than both the US-Mexico-Canada Agreement and the European Union. China is a member of several bilateral trade agreements. The RCEP is the first regional trade pact that China ever has signed.
The first and foremost challenge ahead is to cooperate to recover from the corona-virus Pandemic. China being among the founder members, is hoping for its success. It was termed by the Chinese Premier Li Keqiang, “a victory of multilateralism and free trade”. India participated in the early negotiations but pulled away last year on the plea that its local industries will be affected by the lower rates of tariff. The member countries, still keeping the door open for India to rethink and join at a later stage.
The Scope of RCEP
The RCEP will eliminate a large chunk of tariffs on imports within 20 years. It also has a focus on intellectual property, telecommunications, financial services, e-commerce, and other professional services. Its new “rules of origin” will have a lasting impact on mutual trade.
The Members States already have Free Trade Agreements (FTA) with each other, which will be needing a second thought now. The RCEP will provide a more level playing field to members. The member states will have more benefits in trading within the region.
According to an estimate by The Peterson Institute for International Economics, the deal can increase the global national income by $186bn annually by 2030 push up about 0.2% to the economy of its member states. Some analysts guess that the developed regional states like China, Japan, and South Korea will reap more benefits as compared to other members. The immediate concern, however, is its ratification. The national parliaments will have heated debates on feelings of Chinese edge.
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