Mega trade pact

RCEP to boost open trade in Asia-Pacific

The 10 member states of the Association of Southeast Asian Nations (ASEAN) and five other countries, including South Korea, agreed on a mega Asia-Pacific trade pact during their summit in Bangkok, Monday. The pact aims to create a mammoth economic bloc that accounts for half of the world’s population and one-third of the world’s total gross domestic product (GDP). A formal accord is set to be signed next year.

The agreement is good news for Asia’s fourth-largest economy as the envisaged free trade bloc, known as the Regional Comprehensive Economic Partnership (RCEP), is expected to boost trade and investment among participating countries. The pact, if implemented as scheduled, will be a boon to South Korea, which is suffering setbacks in the face of the global economic downturn caused by the U.S.-China trade war and other negative factors.

The trade deal also comes as Korea is exploring ways of reducing its heavy dependence on exports to China and the U.S. — the country’s two largest trading partners. Thus, the RCEP is likely to provide momentum for the Moon Jae-in administration’s New Southern Policy, which is designed to diversify export markets by beefing up strategic relations with Southeast Asian countries.

That’s why President Moon, who was attending the ASEAN-hosted summit, said the RCEP will open the way for the world’s largest free trade market and economic community that will respect each member’s diversity and strengthen cooperation. As he said, the new pact can offer new opportunities for Korea not only in trade and investment, but also in diplomacy and security.

And yet, the RCEP still has many challenges to be tackled down the road. First, China has led the process of creating the pact since November 2012 when Beijing felt a sense of crisis over the U.S.led negotiations for the so-called Trans-Pacific Partnership. For this reason, China may try to exercise its influence over the new economic bloc, apparently to counter the U.S.’s Indo-Pacific strategy of containing the G2 power in the region.

Second, India has refused to join the China-backed trade deal, fearing that a potential influx of cheap Chinese products could devastate the South Asian country’s domestic industries. The pact, involving 10 ASEAN members and six other countries, including Japan, Australia and New Zealand, is intended to link about 3.6 billion people and cover over 30 percent of global trade and GDP. If India drops out of the deal, the RCEP will include just 2.3 billion people, with its share of global trade also declining.

Third, the rivalry between the U.S. and China may intensify following the birth of the sprawling Asia trade pact. Washington underscored its commitment to the Indo-Pacific region immediately after the deal was announced. The State Department released a 30-page report on the implementation of the strategy aimed at countering China’s military and economic rise in the region.

In this context, China and other participants need to make strenuous efforts to ensure that the RCEP will not be affected by political influence and geostrategic rivalry. They must advocate for free and fair trade to bring prosperity to the Asia-Pacific region. Otherwise, the trade pact will stand little chance of success.