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The Largest Trade Agreement of the world could be signed in 2020

After over six years of negotiations, fifteen countries in the Asia Pacific are now emphasizing to sign the largest trade deal of the world in 2020. The accord, termed Regional Comprehensive Economic Partnership (RCEP), involves all ten countries from the Association of Southeast Asian Nations bloc and five of its main trade partners, such as South Korea, Japan, China, Australia, and New Zealand. According to the Reuters report, together, the fifteen countries make up near to 1-3rd of the population of the whole world and worldwide gross national product. That’s greater than other domestic trading blocs like the United States-Mexico-Canada Agreement (USMCA) and the European Union. Initially, the mega-agreement started with sixteen nations, but India settled not to join the trade pact because of its concerns that it might hurt the domestic producers of the South Asian countries.

Importance of Regional Comprehensive Economic Partnership (RCEP)

In 2012 November, RCEP was initiated in Phnom Penh, Cambodia, as an initiative by the Association of Southeast Asian Nations (ASEAN) to boost trade between its member countries and six other countries.

Source: CNBC

Those six countries, South Korea, New Zealand, China, Australia, Japan, and India, already have impartial free-trade accords with ASEAN. Coming together under the flag of RCEP would encourage commerce across the group by standardizing customs procedures & rules, dropping duties, and broadening market access, specifically among states that do not have existing trade agreements. In 2013 all sixteen countries started dialogs RCEP when negotiations for another main trade pact – the Trans-Pacific Partnership (TPP) were in progress. Given the absence of China in the then United States-led TPP, which slated to be the biggest trade agreement of the world, many onlookers considered RCEP a mode for Beijing to counter the influence of America in the region.

However, the President of the United States, Donald Trump, dragged out his country from the TPP in 2017 and imposed punitive tariffs on numerous trading partners of the United States for what he blamed unfair trade practices. Particularly, the United States-China trade dispute hurt several Asian exporters by dropping demands for their products and slowing down growth. The urgency to settle RCEP improved after all that. Australian National University academics wrote in a report that RCEP fought hard, whereas a choice made comfort by the calculation that Asia required to repel against trade barriers even as the U.S. chose that path.

What will Regional Comprehensive Economic Partnership do?

The final text with particulars of the trade deal will go through authorized reviews before being signed as well as released. Analysts and media reports have said that RCEP is mainly beneficial for the trade of goods because it will gradually lessen duties on many products. Furthermore, the agreement will allow industrialists to sell the same products within the bloc but do away with the condition to fill in separate paperwork for every export destination. Executive director at Asian Trade Centre, Deborah Elms said, it would help producers of Asia to sell more of their goods to the rest of the region.

According to Reuters, even for those firms that export products outside the bloc, there will be encouragements to grow their supply chains all over RCEP member countries. However, RCEP said to have a deficiency of scope and quality in the Comprehensive & Progressive Agreement for CPTPP or Trans-Pacific Partnership. The latter is the deal that replaced the TPP or Trans-Pacific Partnership after the withdrawal of the United States. According to Reuters, especially, RCEP dissimilar to CPTPP – have a deficiency of call for commitments from member nations to protect the rights of workers and the environment. Also, RCEP covers fewer service sectors, and some reports claim one reason that India is walking away from the agreement.

Role of India

From the start, India involved in RCEP talks denied joining the trade deal over worries that the pact would hurt its local producers. Concerns of India toward the agreement had one of the major hurdles in recent RCEP negotiations. According to some analysts from Eurasia Group – a consultancy firm, some members of RCEP, for example, Japan, considered the participation of New Delhi crucial for both economic reasons as well as a counterweight to China. Meanwhile, India is the third-largest economy of Asia and a large consumer market. Whereas according to another consultancy firm, The Economist Intelligence Unit, the remaining fifteen countries still likely to bring RCEP into force. EIU said in a report that RCEP would be less weighty without India, whereas its route to execution becomes much smoother.