Leaders from nations negotiating the Regional Comprehensive Economic Partnership (RCEP) have given up on reaching an agreement by the end of the year, a goal they had continued to pursue.
The RCEP is meant to establish a free trade bloc comprising 16 countries, including Japan, China and South Korea as well as members of the Association of Southeast Asian Nations. Can the collapse of this framework be prevented? The matter has reached a critical point.
The situation is serious, as India has announced its decision to exit the RCEP talks. The remaining 15 nations have said they will proceed with relevant procedures, in the hope of signing a treaty by the end of next year. The situation can be described as critical, as there is no predicting the RCEP’s future.
The significance of the RCEP lies in a scenario in which China and India, which each have a population of more than 1.3 billion, would join it. The combined population of the 16 countries accounts for nearly half of the world’s entire population, and their gross domestic product is about 30 percent of the total.
If realized, the RCEP is expected to invigorate trade and investment while also boosting the growth of its region. It will also restrain the United States at a time when the country has leaned toward protectionism.
India remained cautious about lowering or abolishing tariffs. It was apparently concerned about a massive influx of inexpensive products from China. Behind this was a slowdown in India’s economic growth and increased objections within the country.
Participation in the RCEP would likely boost India’s efforts to expand its exports in the field of information technology, which include software, an area in which it enjoys an advantage.
There is also the possibility that participation would lead to Indian business operations in overseas markets, utilizing domestic personnel with IT-related expertise.
It is important for Japan to emphasize such advantages and tenaciously urge India to return to the RCEP talks. It was understandable for Foreign Minister Toshimitsu Motegi to say at a press conference, “[Japan] wants to take the initiative in working to get a treaty signed by the 16 countries.”
China has great expectations for the RCEP, as it wants to emphasize its positive attitude toward international cooperation in rivalry with the United States. Beijing will surely hasten to have a treaty signed by the 15 nations. If the RCEP takes effect without India, there are concerns that China will increase its influence in East Asia.
The RCEP will also benefit Japan. It can be expected to help increase Japanese exports to China and South Korea, given that our nation has not yet concluded an economic partnership agreement (EPA) with either country.
EPA accords already reached among RCEP participating countries are not easy for corporations to utilize, as there are subtle differences in the details of the respective deals.
If the rules involved are standardized due to the RCEP’s effectuation, it will make it easier for the many Japanese-owned corporations that conduct business operations in Asia to devise strategies for such moves as procuring raw materials.
Under the Trans-Pacific Partnership (TPP) free trade pact, to which 11 nations, including Japan and Australia, belong, regulations have been established such as those aimed at imposing checks on unfair subsidies to state-owned enterprises and violations of intellectual property rights.
The details of the RCEP have not yet been made public. Out of consideration for China, however, they are not believed to include any rules as strict as the TPP regulations. It is necessary to improve the content of the RCEP, with a view to scrapping unfair trade practices.