Hoi An, an old riverside trading port in Vietnam. Picture: GETTY IMAGES
Hoi An, an old riverside trading port in Vietnam. Picture: GETTY IMAGES

The signing of the Regional Comprehensive Economic Partnership (RCEP) free trade agreement is a significant achievement. Eight years of negotiation yielded an agreement between Asia-Pacific countries that account for 2.2-billion people and about 30% of the global economy. By those measures it is the largest trade deal in history.

More significantly, the partnership lays a foundation for future economic and political integration in Asia — and it is doing so without the US. Decisions by US administrations to maintain distance from this trade pact were a mistake — although it is not too late for this to be remedied. In the meantime, the US absence obliges Japan to show leadership to direct both agreements towards integration, openness, good governance and the rule of law.

RCEP negotiations begin in 2012 and proceeded fitfully. Agreement might have been possible a year ago but India then decided to withdraw from the pact, fearing it would unleash a flood of Chinese imports. After recognising that this was not a negotiating tactic and Delhi would not return, the remaining 15 governments: 10 members of the Association of South East Asian Nations (Asean) — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam — and Japan, China, South Korea, Australia and New Zealand finalised the deal.

While the headline numbers are large, actual economic benefits are less substantial. Most signatories already have bilateral agreements with low tariff rates, and members of Asean already trade freely among themselves. According to one estimate, RCEP will by 2030 add $186bn to the global economy — a drop in the bucket of a global economy that already exceeds $80-trillion — and 0.2% to the GDP of its members. But the deal is important because it simplifies the “noodle bowl” of existing trade agreements.

It is the symbolism of the deal that matters most. RCEP is reaffirmation of the signatories’ commitment to trade liberalisation and deeper integration at a time when governments are putting up barriers and reverting to protectionism. And it is the first trade agreement that brings together China, Japan and South Korea, the world’s second, third and 12th largest economies respectively. /Tokyo, November 19

Japan Times

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