Goal in Sight

By Ma Miaomiao

A marathon race lasting for seven years seems to be finally breasting the tape. The fact that 15 countries have announced that they have concluded text-based negotiations for the mega free trade agreement（FTA）， the Regional Comprehensive Economic Partnership （RCEP）， made arrangements for resolving outstanding issues and are set to sign the deal next year is a historic achievement on its own.

With the world economy at the crossroads， the 10 Association of Southeast Asian Nations（ASEAN） countries and their fi ve FTA partners—China， Japan， the Republic of Korea （ROK）， Australia and New Zealand—have chosen globalization， integration and free trade.

With the conclusion of the negotiations， a breakthrough has been achieved in building an East Asian free trade area that would boast the largest population， the most diversified membership structure， and the greatest potential for development in the world， Chinese Premier Li Keqiang said at the Third RCEP Summit in Bangkok on November 4.

Initiated in 2012 by ASEAN， the RCEP originally had 16 countries negotiating but India decided to opt out in November. However， the others have said India can join at a later stage once its concerns are resolved， according to their joint statement released after the summit.

A big step

The past seven years have seen about 30 rounds of talks， during which the negotiators have not only argued for their respective interests， but also showed willingness and fl exibility in search of common ground.

“The negotiations took into full consideration the interests and concerns of relevant parties， which would speed up regional economic integration and help countries join hands to withstand risks in the face of rising protectionism，” Li said.

Once signed， the RCEP will be conducive to dealing with the negative impact of unilateralism， especially the U.S.-initiated trade protectionism， promoting a virtuous circle of international trade and providing a strong new impetus to the world economy， Jiang Yuechun， Director of the Institute of World Economics at the China Institute of International Studies， told Beijing Review.

The RCEP will be the worlds largest free trade bloc， accounting for 45 percent of the world population， 40 percent of global trade and around one third of the worlds GDP.

Given that its participating countries are different in size and population， as well as development level and culture， the RCEP is an inclusive trade agreement. The Asia-Pacific region has been exploring a cooperative path over the past years and the RCEP has proven acceptable to more countries， Jiang said.

Xu Liping， a researcher with the National Institute of International Strategy， Chinese Academy of Social Sciences， told 21st Century Business Herald that against the backdrop of downturn pressure on the world economy and mounting unilateralism， China， as an RCEP core member， had been pushing the negotiations for many years. It wants to promote East Asian regional cooperation and give a new impetus to the world economy.

Given the RCEPs progress， negotiations on the envisioned China-Japan-ROK FTA may accelerate as well. Altogether， they will substan- tially upgrade economic and trade relations across the Asia-Pacific region， boosting local economies， Xu added.

Wang Shouwen， Vice Minister of Commerce of China， said at a press conference on November 6 that the RCEP is a mutually benefi cial FTA. This is mainly refl ected in trade in goods， trade in services， investment and rules to achieve a balance in the interests of the parties involved. In particular， the deal includes provisions on economic and technical cooperation， and makes transitional arrangements for least developed countries in the region， such as Laos， Myanmar and Cambodia. It offers more favorable conditions for these members to better fi t into regional economic integration.

The deal promises to be a big step forward in enhancing regional， even global， growth rates and in fi ghting the recent protectionist impulses of developed nations led by the U.S.， Swaran Singh， Chair of the Center for International Politics at the Jawaharlal Nehru University in New Delhi， told Beijing Review.

But still， FTAs are not going to solve all problems. India， for example， “has had 14 FTAs and each of these has had its own set of hiccups，”Singh said.

FTAs provide preferential treatment in mutual trade and commerce but the most favored nation mechanism of the World Trade Organization has also been fairly effective in enhancing economic cooperation. The ideal practice would be to evolve FTAs in an organic way so that they have the least confusion and contestation for their effective and efficient implementation， he added.

Awaiting Indias decision

During the Seventh RCEP Ministerial Meeting in September， India raised objections about tariffs， trade in services， market access and investment. Prime Minister Narendra Modi then decided to hold off， saying his country had signifi cant core interest issues that remained unresolved.

India is worried that the agreement， which requires gradual elimination of tariffs， will open up its domestic market to a flood of cheap goods and agricultural produce that will harm its local producers， Yao Shumei， a researcher with the Chinese Academy of Macroeconomic Research， said.

According to Singh， India is not shy of FTAs. It already has FTAs with 12 of the 15 RCEP negotiators—ASEAN nations， Japan and the ROK. However， India also has a $108-billion trade deficit with the RCEP participants， with China alone accounting for over half of the fi gure.

Indias economy is slowing down. Figures released by Indias Central Statistics Office under the Ministry of Statistics and Program Implementation in August showed that its GDP growth in the second quarter was 5 percent， hitting a six-year low.

Eliminating tariffs on virtually all commodity exports for all these nations could make the situation worse unless it opens up opportunities for Indias exports as well. But the RCEP remains focused on goods rather than services， where Indias strength lies， Singh said. Indias service sector accounted for about 50 percent of its GDP in 2018， while manufacturing accounted for only 15 percent.

Hopefully， both the RCEP bloc and Asias third largest economy will continue to negotiate to find a middle ground to meet their mutual concerns. Just as India would like to be part of this FTA， the largest in the world， others also see great promise in Indias large market， according to Singh.

In any case， the RCEP is to be finalized by the end of 2020， so both sides still have time to fi nd innovative solutions. The Bangkok meeting is not the end for either India or the RCEP 15， Singh added.