British media say RCEP is a wake-up call for free trade

An article on the Financial Times website on November 17, entitled "An Asia Deal Wakes up Free Trade", said the signing of a pan-Asian trade agreement was symbolic at a time when the benefits of free trade were being questioned and concerns about globalisation were being raised around the world. The signing of the Regional Comprehensive Economic Partnership (RCEP) is a milestone in Asia's economic integration. It covers 15 countries that together account for about a third of the world's gross domestic product. It was the first trade agreement to bring China, Japan and South Korea together, taking a step toward forming a united trading bloc in Asia.

Just as important, however, it illustrates the decline of American influence in the region. Trump pulled the US out of the Trans-Pacific Partnership (TPP) trade deal at the beginning of his presidency. As his term neared its end, Trump watched China sign agreements with 14 other Asia-Pacific countries. Us President-elect Joe Biden has made clear he intends to call on US Allies to join forces to counter Beijing's growing global influence. The signing of the RCEP underscores the enormity of the task.

It must be said that, for all its symbolic importance, the RCEP is a relatively shallow 20th-century trade mechanism that focuses on reducing tariffs and largely sidesteps more complex issues. At the same time, it is not clear that RCEP's dispute-settlement mechanism will do much good.

Nevertheless, the RCEP will strengthen China's regional position in several important ways. Most important, it liberalised and harmonised rules of origin for goods traded within the group. This would make it easier to create flexible supply chains, which would be in China's interest for a number of reasons, including US sanctions on Chinese goods. Harmonisation of rules of origin could also allow regulators to make broader progress in standard-setting, which might have spillovers beyond the RCEP as the group's trading partners respond to their demands. To achieve this, China must make joint efforts with other RCEP members and cannot make a fuss.

These developments challenge the Biden administration's stated goal of reestablishing American leadership in trade and countering China's influence. Diplomatically, the obvious move would be to bring the United States into a new version of the TPP -- the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), reassembled without the United States. This makes diplomatic and economic sense, but is politically difficult in the current climate in the United States.

India must also think about what to do. Mr Modi's government aspires to emulate China's rapid industrial growth and make India the second Asian superpower of this century. However, it pulled out of the RCEP talks out of fear that the nascent Indian industry would be crushed by cheap Chinese exports. But India must be careful not to retreat into an inward - looking defence attitude that has worked against it so badly in the past.

Whatever its practical limitations, the RCEP is important at a time when the West is sceptical about liberalising economic relations. It is a reminder that free trade is the best route to rising prosperity.