After more than six years of negotiations, more than a dozen countries in Asia Pacific are now aiming to sign what would be the world's largest trade agreement in 2020.
The deal, called Regional Comprehensive Economic Partnership or RCEP, involves all 10 countries from the Association of Southeast Asian Nations (ASEAN) bloc and five of its major trading partners: Australia, China, Japan, New Zealand and South Korea.
Together, the 15 countries make up close to one-third of the world population and global gross domestic product, according to a Reuters report. That's larger than other regional trading blocs such as the European Union and the United States-Mexico-Canada Agreement, or USMCA.
The mega-deal started with 16 countries but India decided not to join the trade pact over concerns that it would hurt the South Asian country's domestic producers.
Significance of RCEP
RCEP was launched in November 2012 in Phnom Penh, Cambodia as an initiative by ASEAN to encourage trade among its member states and six other countries.
Those six other countries — Australia, China, India, Japan, New Zealand and South Korea — already have standalone free trade agreements with ASEAN. Coming together under RCEP would boost commerce across the group by lowering tariffs, standardizing customs rules and procedures, and widening market access especially among countries that don't have existing trade deals.
All 16 countries started negotiating RCEP in 2013, when talks for another major trade pact — the Trans-Pacific Partnership or TPP — were underway. Given China's absence in the then U.S.-led TPP, which was slated to be the world's largest trade deal, many observers considered RCEP a way for Beijing to counter American influence in the region.
In 2017, however, U.S. President Donald Trump pulled his country out of the TPP and slapped punitive tariffs on several U.S. trading partners for what he said were unfair trade practices.
In particular, the U.S.-China trade war has hurt many Asian exporters by reducing demand for their goods and slowing down growth. The urgency to conclude RCEP increased after all that.
"RCEP was hard fought, but a choice made easier by the calculation that Asia needed to push back against protectionism even as the United States chose that path," academics from the Australian National University wrote in a report.
What will RCEP do?
The final text with details of the trade agreement will go through legal reviews before being signed and released.
Media and analyst reports have said RCEP is primarily beneficial for goods trade because it will progressively reduce tariffs on many products. In addition, the deal will allow businesses to sell the same goods within the bloc but do away with the need to fill out separate paperwork for each export destination, Reuters reported.
Deborah Elms, executive director at consultancy Asian Trade Centre, told Reuters that would help Asian producers to sell more of their products to the rest of the region.
Even for companies that export goods outside the bloc, there'll be incentives to build their supply chains across RCEP member countries, according to Reuters.
But RCEP is said to lack the quality and scope seen in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or CPTPP. The latter is the agreement that replaced the Trans-Pacific Partnership or TPP after the U.S. withdrawal.
In particular, RCEP — unlike CPTPP — lacks the call for commitments from member countries to protect workers' rights and the environment, according to Reuters.
RCEP also covers fewer service sectors — one reason which some reports said led to India walking away from the deal.
India, involved in RCEP negotiations from the start, declined to join the trade pact over concerns that the deal would hurt its domestic producers. India's apprehension toward the deal had been one of the main hurdles in recent RCEP talks.
Some RCEP members, such as Japan, considered New Delhi's participation crucial "both for economic reasons and as another counterweight to China," according to analysts from risk consultancy Eurasia Group.
India is Asia's third-largest economy and a large consumer market.
But the remaining 15 countries are still expected to bring RCEP into force, according to another consultancy, The Economist Intelligence Unit.
"Without India, RCEP will be less significant, but its path to implementation has become much smoother," the EIU said in a report.