The leaders of China and 14 other countries in the Asia-Pacific region have signed one of the largest free trade agreements in history, covering 2.2 billion people and 30% of global economic output.
The Regional Comprehensive Economic Partnership (RCEP) was signed Sunday via video link after eight years of negotiations.
Australia, Japan, New Zealand and South Korea signed the agreement, alongside members of the Association of Southeast Asian Nations (ASEAN), including Indonesia, Malaysia, the Philippines and Thailand.
The agreement sets the terms of trade in goods and services, cross-border investment and new rules for increasingly important areas such as e-commerce and intellectual property. The effect on trade in finished goods between Asian countries will be particularly pronounced, analysts say.
In a joint statement, the countries’ leaders said the trade deal would be a crucial part of their plans to recover from the pandemic, which has forced countries around the world to lock down their economies.
The leaders’ statement said the agreement “demonstrates our strong commitment to supporting economic recovery, inclusive development, job creation and strengthening regional supply chains, as well as our support for a trade and open, inclusive and rules-based investment platform”.
The combined GDP of the signatories was $26.2bn (£20bn) in 2019, around 30% of global GDP. The agreement will cover almost 28% of world trade.
It would have covered an additional 1.4 billion people had India not withdrawn from negotiations last year due to concerns it would not be able to protect the national industry as well as its agricultural sector.
However, the declaration of the signatories left the door open to India join the trading bloc, saying it would be “welcome”.
Although it does not offer the same level of integration as the EU or the United States-Mexico-Canada agreement, the agreement has been seen as an important step towards the removal of trade barriers, as well as the expansion of China’s influence.
Chinese Premier Li Keqiang called the deal “a victory for multilateralism and free trade”, according to a report Sunday by the official Xinhua news agency.
Australian Prime Minister Scott Morrison said the deal would “open new doors for Australian farmers, businesses and investors”.
Trade and investment flows in Asia have grown significantly over the past decade, a trend that has accelerated dispute between the United States and Chinain which the two superpowers imposed billions of dollars in punitive tariffs on the other’s exports.
The RCEP agreement is flexible enough to accommodate the disparate needs of member countries as diverse as Australia, Myanmar, Singapore and Vietnam.
Unlike the CPTPP – the Comprehensive and Progressive Agreement for Trans-Pacific Partnership – and the EU, it does not establish unified standards on labor and the environment or commit countries to opening up services and other areas vulnerable in their economies.
The signing of the agreement comes shortly after Joe Biden won the US presidential election. Biden is expected to shift US foreign policy to take more of the lead on global issues.
In 2017, Donald Trump withdrew from the Trans-Pacific Partnership, an agreement previously envisioned as a way to curb China’s influence.