Bigger than EU and Nafta

Cielito Habito

Philippine Daily Inquirer, the Philippines

Something momentous happened over the last weekend that signals the continuing shift of the world's economic fulcrum to Asia-Pacific away from North America. Fifteen economies, comprising about a third of the world's population, signed a trade agreement that formalises what is now the world's largest trading bloc.

Initiated by the 10 Asean economies, the newly minted Regional Comprehensive Economic Partnership, or RCEP, now brings in five of the six "dialogue partners" with which Asean has already had separate free trade deals: Australia, China, Japan, New Zealand and South Korea.

India, the sixth dialogue partner, was originally part of the group, but chose to withdraw late last year on fears of an onslaught of dumped goods from China, among other concerns. Even without India, RCEP is now bigger than the European Union, and the North American Free Trade Agreement composed of Canada, the United States and Mexico.

The formal signing of the RCEP agreement is seen as a "victory" for China over the United States, as it certainly gains an advantage over the latter in their ongoing trade war.

This is because China, by its sheer size, inevitably dominates the new trade group, and with formalisation of the agreement, can assert that it has alternatives to the US market; and it gains the upper hand over the latter in influencing future economic directions in Asia-Pacific.

It was the second concern that had prompted former US president Barack Obama to champion the Trans-Pacific Partnership (TPP) agreement as a key part of his administration's "pivot to Asia".

The TPP was then seen as a rival to RCEP, as even as it has a much smaller combined population and consumer base, it would have also accounted for 40 per cent of the world's incomes. But US President Donald Trump chose to pull out of TPP in one of his earliest moves as president, thereby emasculating that grouping. Still, the rest proceeded on a much-downgraded scale and significance, as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which they signed in 2018.

Where does our country stand in all this? Trade Secretary Ramon Lopez points out that the RCEP economies accounted last year for half of Philippine exports, 61 per cent of our imports, and 11.4 per cent of foreign direct investments. The agreement is thus of critical importance to us.

Basis for global free trade

Editorial

The Yomiuri Shimbun, Japan

A huge trading bloc will be created. It is hoped that the new trading bloc will be used as a basis for developing the global free trade system. The RCEP is the first free trade agreement that Japan has signed with China, its largest trading partner, and South Korea, its third-largest trading partner.

This large-scale agreement comes after the TPP multilateral free trade pact and the economic partnership agreement with the European Union. It is commendable that an agreement on the RCEP has been reached. Expansion of trade and investment and increased efficiency of supply chains are expected. It is desirable to use the RCEP to vitalise the stagnant Japanese economy.

Under the accord, Japan is expected to benefit most from tariffs on auto parts. Tariffs on about 90 per cent of auto parts exported from Japan to China, such as battery materials for electric vehicles, are likely to gradually drop to zero.

However, the level of liberalisation is low compared with the TPP.

Deal to aid recovery after pandemic

Editorial

China Daily, China

The signing of the Regional Comprehensive Economic Partnership offers a badly needed boost to regional economic confidence, and may serve as a crucial first step towards the redrawing of the global economic map over time.

Although it does not go as far as the European Union in integrating member economies, a free trade deal of such a scale will provide enormous momentum to regional trade - not to mention the hopes it embodies for countering protectionism, boosting investment, opening up the trade in services and allowing freer movement of goods within the region.

The deal may, in turn, provide substantial assistance to the post-pandemic recovery of the signatory economies.

The heavy blow dealt to regional economies by the coronavirus added to the signatories' sense of urgency and facilitated the ultimate signing of the agreement.

But the parties to the agreement should be aware that any attempt to add geopolitical baggage to the essentially economic grouping will only end up disrupting its functioning.

South Korea set to benefit greatly

Editorial

The Korea Herald, South Korea

Economists predict that the deal, the first trade accord bringing together China, Japan and South Korea, could add almost US$200 billion (S$269 billion) annually to the global economy by 2030.

South Korea is set to be among the greatest beneficiaries from the RCEP agreement, which marks the first step towards Asia's integration into a coherent trading zone.

A local research institute recently forecast the country's gross domestic product would grow by 0.41 to 0.51 percentage point additionally over a decade after the accord comes into force.

But the RCEP launch could put South Korea in a further awkward position amid an intensifying rivalry between the United States and China.

• The View From Asia is a compilation of articles from The Straits Times' media partner Asia News Network, a grouping of 24 news media titles.