Trade ministers from Southeast Asian nations and five other Asia-Pacific countries on Sunday signed the world’s largest trade agreement in terms of economic output which is seen as a huge coup for China in extending its influence.
The Regional Comprehensive Economic Partnership includes 10 Southeast Asian economies along with China, Japan, South Korea, New Zealand and Australia, with members accounting for around 30 percent of global GDP.
First proposed in 2012, the deal was finally sealed at the end of a Southeast Asian summit in Vietnam as leaders push to get their pandemic-hit economies back on track.
“Under the current global circumstances, the fact the RCEP has been signed after eight years of negotiations brings a ray of light and hope amid the clouds,” said Chinese Premier Li Keqiang after the virtual signing.
“It clearly shows that multilateralism is the right way, and represents the right direction of the global economy and humanity’s progress,” he said.
The agreement to lower tariffs and open up the services trade within the bloc does not include the United States and is viewed as a Chinese-led alternative to a now-defunct Washington trade initiative.
The RCEP “solidifies China’s broader regional geopolitical ambitions around the Belt and Road initiative”, said Alexander Capri, a trade expert at the National University of Singapore Business School, referring to Beijing’s signature investment project that envisions Chinese infrastructure and influence spanning the globe.
It aims to lift or reduce tariffs on industrial and agricultural products and facilitate services and investments, according to Philippine Trade Secretary Ramon Lopez.
“The RCEP will further broaden the Philippines’ economic engagements with its trading partners through improved trade and investment, enhanced transparency, integrated regional supply chains, and strengthened economic cooperation,” Lopez said.
“This agreement will also complement ongoing programs and policies to make the country a manufacturing and investment hub in the region,” he said.
Lopez said the newly-formed trade bloc “is a more modern and high-quality FTA agreement which includes other economic technical topics, MSMEs, intellectual property, e-commerce and other new topics.”
India was also not included in the RCEP. Without India, the bloc accounts for 30 percent of the world’s global population at 2.2 billion and 28.2 percent of the global GDP at a combined $23.9 trillion, much larger than other regional trading blocs.
It also accounts for 27.8 percent of the total trade at $10.5 trillion, with $5.5 trillion in exports and $4.9 trillion in imports, and contributes to 23.6 percent of global inward foreign direct investment and 33.5 percent of global outward FDI.
The trade ministers said the RCEP remained open to embrace India once it complied with the required internal trade reforms.
Lopez said that as a signatory to the RCEP, the Philippines would benefit in terms of bigger market for its products.
“This then offers wider market opportunities for our exporters and service providers. RCEP countries account for more than 50 percent of our export market. RCEP has improved levels of market access among each other, but still respects exclusion list for sensitive products mostly for agriculture products,” he said.
Lopez said the RCEP is a product of an eight-year negotiation and was cleared by the inter-agency committees at the National Economic and Development Authority Board Cabinet Committee on Trade and related Matters.
He said the trade deal would also have a major impact on jobs for the Filipino people and the enhanced participation of MSMEs in the global value chain.
Lopez said with RCEP ratified, the Philippines could improve its export competitiveness in key products like garments, automotive parts and agricultural products such as canned food and preserved fruits while encouraging more investments in the country in vital sectors such as research and development, financial services, game development, information technology and business process outsourcing.
“We are optimistic for the future of the country as we are set to conclude a historic milestone, especially in this time of crisis and the region’s post-pandemic recovery,” Lopez said.
Launched in November 2012, the RCEP agreement is a modern, comprehensive, high-quality, and mutually beneficial economic partnership agreement. It includes not only the usual areas of trade in goods and services, investment, and economic cooperation, but also emerging trade areas such as intellectual property, electronic commerce, government procurement and competition.
A chapter dedicated to support MSME development is also a key feature of the RCEP agreement, and is expected to facilitate the integration of MSMEs into the global value chain.
“This RCEP agreement will be a catalyst for the country’s economic development as it provides not only enhanced market access for Philippine key products”•such as garments, automotive parts, and agricultural products like canned food and preserved fruits”•but also a platform for more investments in the country in vital sectors such as manufacturing, research and development, financial services, game development, E-commerce, and the IT-BPO sector,” said lead negotiator Assistant Secretary Allan Gepty.
The RCEP participating countries accounted for 50 percent of Philippine export market, and 61 percent of Philippine import sources in 2019. The region accounted for 11.4 percent of foreign direct investments entering the Philippines in the same period. With AFP