Spotlight: Long-awaited RCEP trade deal injects stimulus into global post-pandemic recovery

After over 30 rounds of negotiation and a number of high-level meetings stretching eight years since November 2012, the Regional Comprehensive Economic Partnership (RCEP) agreement was finally signed Sunday, marking the launch of the world's biggest free trade bloc.

Due to COVID-19 concerns, leaders of the 15 participating countries remotely took turns in alphabetical order to sign the deal at a video ceremony during the 37th summit of the Association of Southeast Asian Nations (ASEAN) and related summits held from Thursday to Sunday.

"We were pleased to witness the signing of the RCEP Agreement, which comes at a time when the world is confronted with the unprecedented challenge brought about by the COVID-19 global pandemic," the leaders said in a joint statement unveiled ahead of the signing.

The deal features 10 ASEAN countries and their free trade partners including China, Japan, South Korea, Australia and New Zealand.

Founded in 1967, ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Vietnam is the ASEAN chair for 2020.

POST-PANDEMIC STIMULUS

One of the most explicit and direct impacts of the RCEP lies in its potential strong boost to the recovery of economy and trade, as the pandemic has disrupted supply chains.

According to a report by the World Trade Organization in April, world trade is expected to fall by between 13 percent and 32 percent in 2020 due to the pandemic.

The signing of the RCEP has brought light and hope to people amid the current grim international situation, showing that multilateralism and free trade remain the correct direction for the world economy and human progress, said Chinese Premier Li Keqiang at the 4th RCEP Summit held via video link before the signing ceremony.

"The pandemic raised the demand for all countries to unite in combating the pandemic," said Jin Jianmin, a senior fellow at Fujitsu Research Institute in Tokyo, Japan.

"We need to find a new way to contain the pandemic and restore economic growth, so as to enhance the confidence of the world in future development," he continued.

The RCEP will serve the purpose by helping boost confidence for its participating countries to step out of the pandemic crisis, said Cao Jing, deputy secretary-general of the Trilateral Cooperation Secretariat, which consists of China, Japan and South Korea.

"It will lead to the robust growth of trade and investment in countries, reduce current 'obstructions' of the global industrial chains and supply chains, and accelerate the economic recovery after the pandemic," she said.

MANIFESTO FOR MULTILATERALISM

Many also see the signing of the RCEP as a statement for free trade, as in recent years, the trend of trade protectionism and extreme nationalism has been on the rise, before COVID-19 added to isolationism and protectionism.

"The agreement is a manifesto of trade liberalization amid adversity and a model of free trade agreement associated with economic opening in the context of COVID-19 and other complex emerging trends," said Vo Tri Thanh, former deputy head of Vietnam's Central Institute for Economic Management under the Ministry of Planning and Investment.

"The RCEP allows people to choose solidarity and cooperation when facing challenges, instead of resorting to conflict and confrontation; and to choose mutual assistance and support, rather than taking a 'beggar-thy-neighbor' approach or a 'wait-and-see' attitude," Chinese Premier Li said at the RCEP summit, adding it shows the world that opening up and cooperation are the only way to achieve mutually beneficial outcomes.

The RCEP merges the difference in tariff level to be a single, synchronized tariff liberalization among the 15 countries, which is technically more uniform and reducing the noodle-bowl effect, said Neak Chandarith, director of Cambodia 21st Century Maritime Silk Road Research Center at Royal University of Phnom Penh, when talking about a proliferation of free trade agreements between individual countries.

Kin Phea, director-general of the International Relations Institute of the Royal Academy of Cambodia, echoed the point and said this trade pact is instrumental in subverting creeping unilateralism.

It sends a clear message that the RCEP participating countries are highly committed to a multilateral regime and international cooperation, while staying industrious in uplifting a multilateral trading system, which has been the basis for both regional and global economic development for decades, he continued.

After signing the agreement, Japan's Trade Minister Hiroshi Kajiyama said the pact will contribute to the establishment of free and fair economic rules in the region.

REAL WORK BEGINS

However, as the trade pact involves countries across the Asia Pacific, their differences in issues such as development level can not go unseen, according to experts.

Wilson Lee Flores, a columnist for the newspaper The Philippine Star, for instance, has shown his concern that the Philippines' domestic industries and export companies are not yet that globally competitive, so participating in the trade pact is a challenge for the country to quickly modernize and be competitive.

"The RCEP should speed up the economic integration among its 15 members, and it shall become a dynamic catalyst for global economic progress," he said.

Jin Jianmin from Fujitsu Research Institute also noted that the extent of trade agreements, tariff concessions and the level of market opening will be affected by the social acceptability of each participating country.

He called on the larger economies to set an example in market opening, and help the lesser developed participating countries benefit more from opening up and enhance their governance capacity in an integrated market.

The call is resonated by Chheang Vannarith, president of the Phnom Penh-based Asian Vision Institute, who expected more technical support for the less developed economies such as Cambodia, Laos, and Myanmar so as to help them improve production and export capacity.

In another bid to help fill the gap, he also called for the synergy between the Belt and Road Initiative and the RCEP, as the BRI has been playing a crucial role in strengthening regional infrastructure development and connectivity, which are the key elements to support trade and to attract investment.