MANILA, Philippines – The HongKong and Shanghai Banking Corp. (HSBC) believes the establishment of a mega-regional trade bloc would provide much needed stimulus in the face of weak economic conditions in Asia.
HSBC senior trade economist Douglas Lippoldt said ministers in the region are confident of finalizing the Regional Comprehensive Economic Partnership (RCEP) deal next year.
RCEP is a joint initiative of Australia, Brunei, Cambodia, China, India, Indonesia, Japan, Korea, Laos, Malaysia, Myanmar, New Zealand, Philippines, Singapore, Thailand, and Vietnam.
The countries are looking at liberalizing trade and investment, going beyond what has been feasible at the World Trade Organization (WTO).
HSBC pointed out the economic potential of the RCEP is huge as member countries are home to more than 3.4 billion people, with a combined gross domestic product (GDP) of about $21.7 trillion.
Likewise, these countries account for nearly 30 percent of global trade and 30 percent of global foreign direct investment inflows.
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The trade bloc hopes to facilitate trade and investment enhance transparency in trade and investment relations facilitate engagement of participants in global and regional supply chains provide special and differential treatment for developing countries, plus additional flexibility for least developed countries provide technical assistance and capacity building eliminate tariff and non-tariff barriers on substantially all trade and eliminate restrictions and discriminatory measures with respect to trade in services among RCEP participants.
According to one estimate, the implementation of the objectives could deliver welfare gains for the participants of about $600 billion equivalent to a boost in GDP of 1.8 percent.
Trade ministers from the proposed mega-regional trade bloc “were encouraged” that substantive market access negotiations would commence soon and that work on draft texts for various chapters had accelerated.
Ministers agreed that gaps remain as there is a need for a well-crafted, balanced agreement taking into account the “individual and diverse circumstances of the RCEP participating countries ranging from amongst the most developed to least developed countries in the region.”
They agreed the RCEP deal remains a challenging task and the outcome is uncertain.
In seeking to bridge differences across a diverse group of participating nations, the RCEP objectives provide for a degree of flexibility including, for example, recourse to special and differential treatment for the least developed countries
Likewise, some industries have expressed concern about the costs from market opening and the associated adjustment.
Although ambitious, the RCEP objectives remain less than those for the Trans-Pacific Partnership (TPP) that includes 12 Pacific Basin countries such as Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, US, and Vietnam.