A monumental trade pact involving 15 nations and covering about a third of the world’s GDP and population was signed earlier this month.
The multi-lateral trade deal, the Regional Comprehensive Economic Partnership (RCEP), comprises the 10 nations of the Association of Southeast Asian Nations (ASEAN), Japan, South Korea, Australia, New Zealand and China.
The deal signed on the last day of the 37th annual meeting of ASEAN nations in mid-November had been in negotiations since 2011. India, which was initially a part of the trade negotiations, withdrew from the agreement last year, citing a concern it would lead to a flood of imports. Prime Minister Narendra Modi also cited concerns that the nation would lose out to other countries, including China on manufactured goods and Australia and New Zealand on dairy products. India, though, will be allowed to rejoin the trade pact.
The RCEP differs in scope from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Three key areas where the two agreements differ are in tariff elimination, labor, and environmental standards. Currently, the CPTPP, which includes Canada, Mexico and Chile, calls for the near elimination of tariffs, higher-level labor and environmental standards, and state-owned enterprises’ restrictions.
The RCEP calls for eliminating tariffs up to 91 percent, new e-commerce rules that include the protection of consumer information, simplified customs procedures and “transparency and paperless trading,” according to Singapore’s Ministry of Trade and Industry.
The Center for Strategic and International Studies states the RCEP contains no provisions for environmental or labor rules, and its section on dispute rules is “relatively weak.”
According to the South China Morning Post, the agreement is likely to spark talks between Australia and China, which are in the midst of a trade spat, “but hopes that the RCEP could cool tensions between the two trading partners may not be realistic.”
While the trade deal may not cool relations between the two nations, Bloomberg states Australia will benefit from RCEP as the nation’s farmers and businesses expect to benefit from “better export opportunities.”
Australian Prime Minister Scott Morrison said, “With one in five Australian jobs reliant on trade, the RCEP agreement will be crucial as Australia and the region begin to rebuild from the COVID-19 pandemic.”
The Wall Street Journal is reporting Japan’s automobile industry stands to benefit from the agreement as it will eliminate tariffs on nearly “$50 billion of auto parts sent to China each year—accounting for 87 percent of all such items exported.”
“Encouraging free trade is even more important now that the global economy is in a slump and there are signs of countries turning inward,” Japanese Prime Minister Yoshihide Suga said during the RCEP meeting with other leaders.
For the ratification of the RCEP, at least six ASEAN countries in addition to three non-ASEAN nations need to approve the pact.
A U.S. deal?
When the Obama administration negotiated the Trans-Pacific Partnership (TPP), it was explicit that it wanted to exclude China and be the deal’s anchor. The Trump administration withdrew from the agreement—enabling China to exert its economic influence on the region—and instead negotiated the Phase One trade deal with China, which included the agreement to buy U.S. agricultural goods and some energy products in exchange for lower tariffs. The coronavirus pandemic slowed talks on Phase Two of negotiations.
While campaigning, President-elect Joe Biden made no mention of the TPP or the CPTPP and whether he would renegotiate to join the agreement. While in Congress, Biden supported the North American Free Trade Agreement (NAFTA), and as vice president, he backed the U.S. participation in the CPTPP to contain China’s growing influence.
Although, The Wall Street Journal reports Biden “will advance Washington’s tough, new attitude toward China, but with an approach that relies more on pressure from U.S. allies, sanctions and other tools to shape Beijing’s behavior.”
Some tools could include other “commercial and strategic pacts,” such as the “clean network” pledges, which the Trump administration’s State Department called for other nations to limit Chinese telecom technology in their fifth-generation networks.
William Reinsch, a trade expert at the Center for Strategic and International Studies, told The Wall Street Journal the U.S.’s absence from the agreement sends a message to Biden’s incoming administration “that they need to give a lot more thought to what policy we want to maintain in the Pacific.”
The U.S. currently has bilateral trade agreements with Japan and South Korea, two nations in the RCEP. Anti-TPP lawmakers from both parties in Congress may be unlikely to reenter negotiations on the deal as the U.S. has trade agreements with these nations. — Charles Wallace, WLJ editor