Laos, China, and thirteen other countries have agreed to establish the RCEP, the largest free-trade bloc in the world, comprising nearly a third of all global economic activity.
The Regional Comprehensive Economic Partnership (RCEP) was signed virtually on Sunday on the sidelines of the annual summit of the 10-nation Association of Southeast Asian Nations (ASEAN).
It is hoped that the new trade agreement will help accelerate economic recovery among Asian nations following the coronavirus pandemic.
“RCEP will soon be ratified by signatory countries and take effect, contributing to the post-COVID pandemic economic recovery,” said Nguyen Xuan Phuc, prime minister of Vietnam, which hosted the ceremony as ASEAN chair.
The RCEP deal inclues all ten ASEAN countries, along with Australia, China, Japan, New Zealand and South Korea. While the last five countries are more technically advanced, they face high labor and production costs.
The deal will see increased investment in countries with lower-cost and lesser-skilled workers, such as Laos, Cambodia, and Myanmar, which will be of special interest to manufacturers from Australia, Japan, New Zealand, Singapore, and South Korea.
The RCEP will reduce trade tariffs between member countries, accounting for 30 percent of the global economy, reaching 2.2 billion consumers.
RCEP “will help reduce or remove tariffs on industrial and agricultural products and set out rules for data transmission,” said Luong Hoang Thai, head of the Multilateral Trade Policy Department at Vietnam’s Ministry of Industry and Trade.
The RCEP pact will be effective once enough participating countries ratify the agreement domestically over the next two years.