World Economy

RCEP Members Urged to Forge Free Trade Deal by Yearend

Prime Minister Shinzo Abe said: Let us be as one and achieve a free, fair and rules-based market in the region
Japanese Prime Minister Shinzo Abe (C), joins hands with trade ministers from Asian countries for a group photo during the RCEP meeting in Tokyo on Sunday.
Japanese Prime Minister Shinzo Abe (C), joins hands with trade ministers from Asian countries for a group photo during the RCEP meeting in Tokyo on Sunday.

Japan’s Prime Minister Shinzo Abe on Sunday called for an early conclusion of a China-backed regional trade pact that ensures free and rules-based commerce in the face of an increasingly protectionist United States under US President Donald Trump.

At a meeting of the Regional Comprehensive Economic Partnership, in Tokyo, which is co-chaired by Japan and Singapore, trade ministers and officials from 16 countries renewed their commitment to speed up negotiations on outstanding issues by the end of the year, AP reported.

Japan seeks to take leadership in shaping the pact as an alternative to a Pacific Rim free-trade grouping that Trump abandoned early this year.

At a joint news conference after the talks, Japanese Trade Minister Horoshige Seko and his Singaporean counterpart, Chang Chun Sing, said the 16 participants agreed to reach a basic conclusion at a year-end Singapore meeting.

They noted that the participants see it as a chance to show Asia’s commitment to defend free trade.

In a joint statement, the ministers said achieving a pact was important especially “in view of the current global trade environment, which faces serious risks from unilateral trade actions and reactions, as well as their debilitating implications on the multilateral trading system.”

They also pledged to seek breakthroughs in politically challenging areas.

Call for Unity

Earlier Sunday in his opening remarks, Abe said a pact among the countries that together make up half the global population has an enormous growth potential.

“As we are faced with concerns of the rise of protectionism in the world, all of us in Asia must unite, and our future depends on whether we can keep hoisting our flagship principle of free and fair trade,” Abe told the meeting in Tokyo.

“Let us be as one and achieve a free, fair and rules-based market in this region.”

Trump, who says he prefers bilateral deals, has pulled the US out of the Trans-Pacific Partnership, leaving the remaining 11 countries from Chile to New Zealand to work on a revamped version of that pact.

But TPP was dealt a severe blow when Trump announced he was pulling US support earlier this year.

Ironically Washington spent years pushing the pact between 12 Pacific countries that very noticeably excluded its biggest regional rival China.

The remaining 11 countries—dubbed “TPP-11”—have since struggled to reboot the deal now that it doesn’t include access to the world’s largest economy.

Trump has imposed high tariffs on steel and aluminum imports and has threatened to add automobiles to reduce America’s trade deficit. He has singled out China’s products, prompting fears of a trade war.

Retaliation Against Tariffs

Japan, already hit by increased US steel and aluminum tariffs, has told the World Trade Organization it may retaliate against US goods totaling about 50 billion yen ($450 million).

Japan’s government on Friday warned the US Department of Commerce that a higher US tariff on auto imports could backfire, jeopardizing hundreds of thousands of American Jobs created by Japanese automobile industry-related companies, raising prices for US consumers and causing a disaster for the US and global economy.

Trump’s moves have resonated in Asia, where many countries have prospered thanks to free trade and the expansion of global supply chains.

Japan hopes to conclude the RCEP pact by the end of this year.

RCEP's Objectives

RCEP is often described as China’s answer to TPP because it noticeably excludes the US.

Members of the initiative, launched in 2013, however still struggle with issues including tariffs, trade in services and investment rules, as well as protection for intellectual property rights.

Japan is also cautious about China’s influence. China, which is not part of the TPP, plays a key role in RCEP.

RCEP aims to cut tariffs but has far less regulatory standards attached than TPP. It also exempts certain goods from the tariff cuts to protect local sectors and allows less developed members more time to comply.

It’s still in the negotiation stages but interest in it has renewed since the American withdrawal from TPP–a matter of concern for those who wish to see the US taking the lead on global trade.

RCEP is currently being negotiated among the 10 Asean members, China, Japan, Australia, India, New Zealand and South Korea.

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