Will Washington be happy with the 15-country FTA?
South Korea has officially joined the 15-country free-trade block of the Regional Comprehensive Economic Partnership (RCEP), which is widely believed to be spearheaded by China.
Korean President Moon Jae-in signed the free trade agreement on Sunday during a virtual summit with leaders of 14 partner countries, which include Japan, Australia, New Zealand, and 10 Southeast Asian states.
The agreement would cover a market of 2.2 billion people with a combined gross domestic product (GDP) of $26.2 trillion, or about 30 percent of global GDP.
In a joint statement, the leaders expressed their commitment to ensuring that RCEP remains an open and inclusive agreement.
“We note that the RCEP Agreement is an unprecedented mega-regional trading arrangement that comprises a diverse mix of developed, developing and least-developed economies of the region,” it said.
“We believe that RCEP, being the world’s largest free trade arrangement, represents an important step forward towards an ideal framework of global trade and investment rules,” it added.
The agreement will enter into force after its members gain domestic ratification.
When the RCEP goes into effect, the tariffs inside the economic block is expected to dramatically go down. For example, Korean exporters of car parts currently face 40-percent tariffs in Indonesia, which would go down to nil thanks to the RCEP, according to the presidential house.
“By launching a mega-sized economic block despite the COVID-19-caused global crisis, we gave an alarm to protectionism and shared the significance of free trade,” Moon said.
Efforts to form the RCEP started in 2012. India dropped out of the talks last year due to concerns that the trade pact would mostly benefit China at the expense of India.
There are also concerns that Washington might not be happy with the trade pact as China has pushed for it. But some counter that ASEAN countries are actually leading the RCEP.
The United States originally tried to go ahead with the Trans-Pacific Partnership (TPP). President Donald Trump pulled his country out of the 12-country pact supported by his predecessor Back Obama.