Fifteen Asia-Pacific economies have created the world’s largest free-trade bloc on Sunday, a China-backed deal that excludes the United States, which had exited a rival Asia-Pacific grouping under President Donald Trump. The Regional Comprehensive Economic Partnership (RCEP) at a regional summit in Hanoi, is a massive hit to the group developed by former US president Barack Obama, which Trump left in 2017.
RCEP is formed from the 10-member Association of Southeast Asian Nations (ASEAN), China, Japan, South Korea, Australia and New Zealand. It aspires in coming years to progressively lower tariffs and ease trade across many regions. The deal was adjoined to motives of an online ASEAN summit conducted as Asian leaders address tensions in the South China Sea and shape policies for a post-pandemic economic recovery in a region where tensions caused by US-China rivalry are escalating. RCEP will occupy a share of 30% of the global economy, 30% of the global population and reach 2.2 billion consumers, host Vietnam said on Sunday.
Amid questions over Washington’s engagement in Asia, RCEP may strengthen China’s position more as an economic partner with Southeast Asia, Japan and Korea, enabling and empowering the world’s second-biggest economy to frame the region’s trade rules. The United States is not a member of both RCEP and the successor to the Obama-led Trans-Pacific Partnership (TPP), excluding the world’s biggest economy out of two trade groups that are active in the fastest-growing region on earth. By contrast, RCEP could aid Beijing to become more independent, shedding dependence on overseas markets and technology, a shift in political and economic standing speeded up deepening rift with Washington, said Iris Pang, ING chief economist for Greater China.
The pact will be implemented once enough participating countries ratify the agreement domestically within the next two years, Indonesia’s trade minister said last week. India did not participate in RCEP talks since November last year, but ASEAN leaders said the door remained open for it to join.
