Leaders from 15 countries signed the Regional Comprehensive Economic Partnership, a pan-Asian trade agreement, after a decade of negotiations.

The agreement covers about a third of global economic output and represents a major step towards the region’s economic integration. Here are five things that explain one of the biggest trade deals in history.

What is RCEP?

The RCEP It is one of the largest free trade agreements in the world. It takes most of the existing agreements signed by the 10 ASEAN members – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam – and combines them into one multilateral agreement with Australia, China, Japan, New Zealand and South Korea.

“By some measures, this is the largest free trade agreement in history,” said Peter Petrie, professor of international finance at Brandeis University. “About 30 percent of the world’s population is covered.”

The deal could have been bigger however India withdrew From the 2019 talks and has so far refused to return.

to me Estimates By Professor Petrie and Michael Plummer, Professor of International Economics at Johns Hopkins University, RCEP will add $ 186 billion to the size of the global economy and 0.2 percent to the GDP of its members.

Japan and South Korea are among the biggest gainers, but the benefits of cheap goods will spread to Europe and the United States.

What’s in the deal?

The agreement contains all the usual chapters of a free trade agreement – tariffs, customs administration, health measures, services, investment, and more – but there are two elements that are particularly important.

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The first is the rules of origin, the standards that determine where the product is made. All ASEAN trade agreements have different rules of origin, for example, if a company in Indonesia manufactures a bike, it may qualify under a free trade agreement with Japan but will need different components to be eligible under an agreement with South Korea.

RCEP will sweep it all away. “When a product is manufactured for RCEP, it works in all 15 countries. There is only one piece of paper you need,” said Deborah Elms, Executive Director of Asian Trade Center Consulting in Singapore.

The second crucial factor is that it represents the first free trade agreement between China, Japan and South Korea. Although the RCEP is a rather shallow agreement, it is still a big step. Professor Petrie said, “RCEP allows them to accomplish something that would have been very difficult politically if they only did it between them.”

What did he leave?

As opposed to overlapping Trans-Pacific Trade Partnership Agreement, RCEP is relatively unambitious, eliminating 90 percent of tariffs compared to nearly 100 percent in TPP. Agriculture is largely absent and service coverage is mixed. RCEP does relatively little to common product standards.

“The crucial point in RCEP is that the region is very diverse. There are big countries, small countries, rich countries and poor countries.” “The bases have basically absorbed all of these divergent interests,” said Professor Petrie.

Ms Elms said the e-commerce separation was a particular disappointment. The fifteen countries were unable to agree on any rules on cross-border data flows or customs suspensions on data transfers.

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However, the biggest absence is India. As a huge economy with relatively few free trade agreements, the Indian participation could have resulted in a significant increase in trade. But New Delhi feared that its manufacturers would be flooded with cheap Chinese competition.

However, the agreement is expected to contain clauses if India chooses to join.

What does this mean for China and the United States?

A common criticism of RCEP is the overwhelming size of China within it – a fear that became much stronger when India withdrew. The agreement gives China an important voice in setting regional trade standards, and if Beijing uses this power cooperatively, its soft power will grow. Professor Petrie said: “It will probably be very good for China.”

Ms Elms said the sheer size of China would make it an important player in the deal. “RCEP has never been led by China or driven by China. This was the ASEAN agreement. But once the agreement enters into force, it will be difficult for ASEAN to remain in the driving seat.”

The United States now sits outside the two major trading groups in Asia after President Donald Trump withdrew from the Trans-Pacific Partnership. This means that neither the European Union nor the United States – the world’s traditional great trading powers – will have any voice when Asia sets its trade rules.

what happened after that?

It will take some time to certify the RCEP and even longer for some tariff provisions to take effect. But the RCEP is likely to shape the future of trade in Asia. “The ASEAN agreements could be improved over time,” said Professor Petrie. “The process is often slow but this is not the end.”

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Now that they have done so in the context of RCEP, one of the most important effects may be to accelerate talks on a free trade agreement between China, Japan and South Korea. Given that the three are the forces of manufacturing and technology, that would be a major development for global trade.

But the biggest consequence may be taking the first step toward the emergence of Asia as a cohesive trading region, like Europe or North America. “Asia is integrated, but its purpose is to get goods to other markets,” said Ms. Elms. “RCEP changes that.”