Fifteen countries, including Japan, China and South Korea, have signed the Regional Comprehensive Economic Partnership, a massive free trade agreement that covers much of East Asia. The creation of this free trade zone in the fast-growing Asian region is of great significance.
But India’s departure from the megadeal and the agreement’s relatively lax rules and standards leave it lacking. We would like to see continued efforts to grow RCEP, both by expanding the number of participating countries and by improving the quality of the trade pact.
RCEP negotiations began among 16 countries, including India, in 2013. Talks over tariff cuts and other issues were difficult, and the conclusion of negotiations was postponed many times.
In addition to spurring growth in Asian economies, the new free trade zone will impede the spread of protectionism throughout the world. It is a welcome development that the RCEP countries were able to overcome the risk of drift over years of negotiations and finalize the agreement.
But there is no denying that the departure of India, which is experiencing increasing economic development and population growth, lowers the value of RCEP. The participation of India, the world’s largest democracy, was critical to mitigate the growing influence of China and its dictatorial Communist Party.
India fears a major economic hit from greater tariff liberalization, so it may be difficult to convince it to return to the agreement. However, the RCEP countries should not give up. Japan, which advocates for a “free and open Indo-Pacific,” also has a responsibility to continue its efforts at persuasion. Participation by other RCEP countries in this endeavor would of course be welcome.
The content of the agreement also is not satisfactory. For example, Japan’s tariff-free rate on industrial exports is 91.5%, less than the 99.9% of the 11-nation Trans-Pacific Partnership agreement.
RCEP does contain rules that require free overseas distribution of digital information and prohibitions on forced technology transfers, but these rules were made lenient to ensure all parties would agree to them. They lack the teeth to force China to change its model of state capitalism.
Now that the agreement is signed, countries need to work to remedy these flaws. There must be a constant effort to increase the level of tariff liberalization and impose more rigorous rules in the agreement.
Even when the administration of President-elect Joe Biden takes office in January, protectionist pressures will likely persist in the U.S. and a quick return to the TPP is unlikely. We hope that Asian countries will continue their efforts to further expand and deepen free trade beyond RCEP.
Just as Tokyo enacted the TPP and the Economic Partnership Agreement with the European Union in the face of the growing protectionism of the Donald Trump administration’s “America First” stance, it should now take the lead in this initiative.