Launching of the world largest free trade bloc—Regional Comprehensive Economic Partnership (RCEP)-- appears to be a major breakthrough in the pandemic hit global economy.
The enormous significance of the deal not just lies in its size as it accounts for around 30% of the global population, global gross domestic product and 28% of global trade.
Its timing is significant too. It came at a time when economists and thinkers across the world are calling for global cooperation for a healthy recovery of the pandemic hit economy.
Three of the four Asian major economies joined the deal.
Therefore, the deal perked the hopes that this would act as a game changer in future.
The pact aims to break down trade barriers and promote investment to help emerging economies catch up with the rest of the world.
All the signatory nations hope that the pact will vigorously boost confidence in regional trade and investment, enhance the ability of all parties to cooperate in fighting the pandemic, and hasten the economic recovery in all countries.
A good number of strong reasons fueled the optimism.
Compared with Europe and America, Asia is doing well in fighting the pandemic. In Asia, two of the four major economies--China and South Korea--have set examples for the rest of the world on how to fight and control the virus.
The pace of China's economic recovery sparked the hopes that the Asian giant will lead the global recovery again as it has done a decade ago when the world economy was in recession. In similar fashion, Asian economies are leading the way when it comes to showing signs of recovery.
Point to be noted that China is the only major economy in the world that has recorded growth by about 2% this year while other major economies are facing contraction during the pandemic.
Latest, the world's third biggest economy, Japan, another key player in the RCEP, has come up with a good news coinciding with the day of signing the free trade deal. Its economy has bounced back from recession with growth of 5% in the third quarter of this year.
Japan had seen its economy shrink during 2020 as lockdowns hit its manufacturing sector and consumer spending. Its economy is now showing signs of recovery.
The other largest economy in Asia, India, though pulling out of the agreement last year, is also seen recovering faster than expected, according to global forecasting firm Oxford Economics. This will give a boost to the Asian economy.
India last year pulled out of the negotiation. Modi and his ministers have sold the refusal to join RCEP as a victory for India's poor. The leaders of the free trade bloc have kept the window open for India so it can join anytime.
'Hugely significant deal'
Signing of the deal after almost a decade of "negotiating with blood, sweat and tears," as Malaysia's trade minister put it is also hugely significant in context of the tensed up global political order.
Take note of the Chinese prime minister's remarks. "This is not only a monumental achievement in East Asian regional cooperation, but more important, a victory of multilateralism and free trade."
At a time when the US under Trump's "America First" policy spurred nationalism, China's emergence as a leader of the world largest free trade zone is immensely significant in its effort to reshape its global standing in a race with the USA. This is a great victory for China and it will help China to solidify its influence in the Asia-Pacific Region.
The Chinese official news agency, Xinhua, described the pact as a "a move considered a massive coup for regional economic integration, multilateralism and free trade."
What the USA news agency, AP –Associated Press- said about the deal is also significant.
"The deal has powerful symbolic ramifications, showing that nearly four years after Donald Trump launched his "America First" policy of forging trade deals with individual countries, Asia remains committed to multi-nation efforts toward free trade that are seen as a formula for future prosperity. The accord is also a coup for China, by far the biggest market in the region," said AP.
The headline of The New York Times' report "China-Led Trade Pact Is Signed, in Challenge to U.S." is also noteworthy.
"The deal sealed on Sunday stands as a potent symbol of Beijing's growing economic sway in Southeast Asia at a time of uncertainty over Washington's economic ties with the region," says the NYT report.
Question has been raised whether the USA, especially the upcoming Biden administration, will reconsider its rejoining with TPP- Trans Pacific Partnership, a broader agreement between 12 Pacific Rim countries that was being touted as the biggest trade deal the world has seen in two decades.
Concern in Washington
The prospect of China's forging closer economic ties with its neighbors had prompted concern in Washington. Then President Barack Obama's response was the TPP that called for limits on state sponsorship of industries, serving as both a challenge to China and an enticement for Beijing to relax its grip on its economy.
It accounted for more than 40% of the world's economy and included superpowers such as the US and Japan. China was not part of the TPP which was later restructured as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP, after the USA's withdrawal from TPP.
The RCEP comes after a retreat by the US from sweeping trade deals that reshape global relationships. Nearly four years ago, President Trump pulled the US out of the TPP.
Joseph R. Biden Jr., the president-elect, has been noncommittal on whether he would join the TPP's successor, says the NYT.
With the US remaining undecided about its rejoining the TPP, China can sail smoothly.
Future of the newly launched bloc however largely depends on the three major economies, especially on giant China. Their cooperation with other developing economies not only help them to grow but also contribute to solidifying the foothold of the bloc.