SINGAPORE (ICIS)--China and fourteen other Asia-Pacific countries on Sunday signed the Regional Comprehensive Economic Partnership (RCEP), forming the world's largest trading bloc.
The RCEP comprises the 10 member states of ASEAN - Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam – as well as China, Japan, South Korea, Australia and New Zealand.
The RCEP is the world’s biggest trade agreement which nearly accounts for a third of the world’s population and 29% of global GDP, and will aim to progressively lower tariffs in the coming years, according to Singapore's UOB Global Markets & Research.
"The RCEP establishes a modern, comprehensive, high-quality and mutually beneficial economic partnership that builds on existing bilateral ASEAN agreements with its five Free Trade Agreement (FTA) Partners," Singapore's Ministry of Trade and Industry said in a statement.
RCEP will reduce tariffs and establish rules in around 20 areas, according to research firm Fitch Solutions.
"Over the long-term, the positive impact of the trade pact will include increased market access and variety of goods and services for participants, as well as improved prospects for regional economic cooperation," it said.
"These will far outweigh potential negatives arising from increased competition that domestic businesses would face as a result of the trade pact," Fitch Solutions said.
Southeast Asia as a region has a high level of intra-industry trade owing to its large and growing electronics sector.
Considering the ongoing supply chain relocation trend out of China, as well as companies adopting a ‘China plus one’ manufacturing hub strategy to increase supply chain resilience to disruptions, the RCEP should also help strengthen the integration of regional supply chains which will benefit participants over the long run, according to Fitch Solutions.
"ASEAN economies can also stand to gain from increased technical cooperation with advanced economies in the bloc to improve their competitiveness," it added.
The RCEP was signed on the sidelines of the 37th ASEAN Summit, hosted virtually by Vietnam.
Photo: The RCEP signing ceremony held via a video conference in Hanoi, Vietnam on 15 November 2020. (Photo by Xinhua/Shutterstock)
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