SINGAPORE - Almost 10 years after it was conceived at the Asean Summit in Bali in 2011, the world's largest trade pact - the Regional Comprehensive Economic Partnership (RCEP) - is set to be signed on Sunday (Nov 15).
Involving the 10 Asean members, plus China, Japan, South Korea, Australia and New Zealand, the RCEP bloc covers nearly one-third of the world's population, and contributes around 30 per cent of its gross domestic product.
It will eliminate as much as 90 per cent of the tariffs on imports between its parties within 20 years of coming into effect, and will improve market access for goods and services within the region.
It also aims to establish a common set of trade rules and covers non-traditional areas which are not in some existing agreements, such as e-commerce, competition policy, and intellectual property.
Here are five key things to note about the mega trade deal.
1. The Covid-19 factor
While online talks have made legal scrubbing - a process in which lawyers, translators and staff review and edit the text of the agreement - more cumbersome, the economic fallout from the Covid-19 pandemic was a motivating factor to finalise the deal, given the benefits of its cuts to tariffs and trade barriers.
A joint statement by ministers, released after online talks in August, said the signing of the agreement would enhance business confidence, as well as demonstrate the region's support for an open, inclusive and rules-based multilateral trading system.
"The ministers also underscored the significant role that the RCEP Agreement could play in post-pandemic recovery efforts, as well as in contributing to the growth and stability of the regional and global economy," the statement said.
Outgoing United States President Donald Trump's tariff-raising trade war with China has also given extra impetus in recent years to push ahead with the RCEP, which had otherwise progressed only sluggishly since negotiations began in 2012.
2. Who benefits?
All parties to the RCEP stand to gain.
Assistant professor of international studies at China's Renmin University Jason Ji said Cambodia, Thailand and Vietnam could see an increase in GDP and export volumes under the pact.
Key sectors he sees benefiting include Thailand's construction sector, Singapore and Malaysia's processed food industries, and Laos' manufacturing sector.
Singapore University of Social Sciences senior lecturer Pan Zhengqi said a significant result of the RCEP is that it helps to facilitate complex supply chains, which would also boost South Korea's electronics sector.
As for Vietnam, he said, the lower trade barriers and enhanced market access would benefit its telecommunications, textile and footwear sectors.
Dr Pan added that China, being the world's largest trading nation, stands to gain the most from the pact. Both its manufacturing and service sectors would see a boost, given the country's large export and import capacities, he said.
He added that exchanges of technical know-how under the agreement would also help China move up the value chain.
3. India's withdrawal
There will be 15 instead of 16 participants after India announced in November last year that it would pull out of the talks.
It had major concerns over trade imbalances, as it had trade deficits with 11 of the 15 nations involved in the RCEP. Fearing that the deal could result in a flood of manufacturing and agricultural products into its market, India was unwilling to remove tariffs on many sensitive industries.
However, the door remains open for India to rejoin, a point several Asean leaders made at their summit with Prime Minister Narendra Modi last Thursday.
Associate professor of practice at the Lee Kuan Yew School of Public Policy James Crabtree said India's decision not to come on board was a setback for the agreement but a "historic blunder" for India itself.
"It might well have made the agreement easier to finalise, but it also left it dominated by China, to the disappointment of South-east Asia in particular," he said.
"For India, it signalled a more fundamental turn away from economic openness, leaving New Delhi outside both of the economic blocs that will define Asia's future: RCEP and the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)."
Renmin University's Prof Ji said India's withdrawal is not irreversible, nor will its absence significantly impact the scope and quality of the agreement, as the bulk of the negotiations were already concluded with India's participation.
"That said, RCEP becomes a smaller mega-FTA because of India's absence, temporary or otherwise."
4. Where does the CPTPP fit in?
The Trans-Pacific Partnership (TPP) which originally included the US was seen as a counterweight to RCEP, and RCEP's inclusion of India was meant to balance China. But neither scenario has panned out in the way it was envisioned.
The CPTPP, which evolved from the TPP after Mr Donald Trump pulled out of the deal in one of his first acts as president, was concluded in 2018 among 11 countries, seven of which are also in the RCEP: Australia, Brunei, Japan, Malaysia, New Zealand, Singapore and Vietnam. The other CPTPP members are Canada, Chile, Mexico and Peru.
The CPTPP involves greater elimination of tariffs and also includes provisions on labour and environmental standards, unlike the RCEP.
But few are holding their breath that the US, which is still emerging from the throes of a bitterly contested presidential election, will return to the table any time soon.
"The RCEP provides China with much-needed reprieve from the US-China trade war and rising global protectionism," says SUSS' Dr Pan.
However, both the CPTPP and RCEP are seen as building blocks of a much-larger free trade vision spanning the Pacific Ocean: The Free Trade Area of the Asia Pacific (FTAAP), which members of the Asia-Pacific Economic Cooperation have alluded to as early as 2004. Malaysia is hosting this year's Apec leaders summit later this week.
5. Will Australia-China tensions affect the deal?
After Australia incurred the wrath of its largest trading partner, China, in April by leading calls for a probe into the origins of the coronavirus, the Chinese government ordered a halt to imports of Australian products such as coal, barley, and wine.
Some say the ongoing trade spat could stymie cooperation under the RCEP. But SUSS' Dr Pan said the trade pact can be useful in de-escalating tensions between Australia and China in one major way: It constrains the actions of both countries within a rules-based framework.
"As such, participating countries - even major powers such as China - might not readily use trade as a strategic leverage," he said, pointing out that China's behaviour within RCEP will shape its reputation and credibility as well as alter the behaviour of other states towards it.
By supporting frequent dialogues among members, the trade pact will also decrease information asymmetries and foster cooperation, he added.
Notwithstanding these issues, analysts agree that the key now is to demonstrate that the RCEP is useful.
"RCEP will not supersede pre-existing FTAs like Asean-Plus agreements per se," said Renmin University's Prof Ji, referring to agreements which Asean has signed separately with major economies such as China, Japan, and South Korea.
"But it improves upon them and facilitates an orderly and negotiated convergence of these agreements in terms of trading rules and customs procedures."