Backed by China, the Regional Comprehensive Economic Partnership (RCEP) is seen as a coup for Beijing in extending its influence across the region and marks its dominance in Asian trade. After eight years of wrangling over details, the trade pact - the world's largest in terms of GDP - was signed on Sunday (Nov 15).
Launched in 2012, RCEP is a trade pact between the 10-member ASEAN bloc, along with China, Japan, South Korea, Australia and New Zealand. India had been due to sign but pulled out last year. The deal includes 2.1 billion people, with RCEP's members accounting for around 30 per cent of global GDP.
Its aim is to lower tariffs, open up trade in services and promote investment to help emerging economies catch up with the rest of the world. Specifically, RCEP is expected to help reduce costs and time for companies by allowing them to export a product anywhere within the bloc without meeting separate requirements for each country.
It also touches on intellectual property, but will not cover environmental protections and labour rights. However, observers say the RCEP is not as extensive as the TPP, or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), as its successor is known.
It "is not a fully completed, fully rationalised agreement," said Alexander Capri, a trade expert at the National University of Singapore Business School.
"The problem with RCEP is that you have 15 incredibly diverse countries at different stages of development and with completely internal priorities," he added.
India withdrew last year over concerns about cheap Chinese goods entering the country, though it can join at a later date if it chooses.
It raised alarm about market access issues, fearing its domestic producers could be hard hit if the country was flooded with cheap Chinese goods.
Textiles, dairy, and agriculture were flagged as three vulnerable industries.
Prime Minister Narendra Modi faced mounting pressures at home to take a tougher stance on the terms, and proved unbending as the RCEP negotiations came to a close.
What does it mean for Malaysia?
Klang MP, Charles Santiago warned that SMEs will lose out under RCEP. Assuming 100% of goods are on zero tariffs, the result is Malaysia will have an import surge and negative trade balance. SMEs may not be able to compete with cheaper goods from China. Now with Covid, more than 30,000 SMEs have shut down. RCEP could also dampen efforts to a more equitable access to vaccines and other medical products with intellectual property rights protected over public health.
Then there is a lack of consultation. It is all done in secret with no debate in Parliament. The MITI minister, however, said that it has received approval from Cabinet. We may know something more when it is ratified in Parliament and enforced in 2021.
1.What is the RCEP trade deal? Channel News Asia, 15 Nov 2020
2.RCEP could hurt SMEs, warns Santiago, Jason Thomas, Free Malaysia Today, 12 Nov 2020