The U.S. exit from the CPTPP meant a withdrawal for a country that was once a global defender of free trade. China`s inclusion in the RCEP and the absence of the United States indicate that the Asia-Pacific region is moving forward alone. The agreements may be less comprehensive, but they are still being finalized. The hole in EU trade policy is China, where the risk of trade diversion linked to the RCEP is also highest. The EU is China`s largest trading partner, while China is the EU`s second fastest growing export market. Progress in trade with China would require accelerated negotiations on the investment agreement with China, which has been under negotiation since 2014 and has proved highly problematic due to a combination of strict EU requirements and China`s lack of willingness to yield on important market access issues. But if a way is found to break the deadlock, an investment agreement could pave the way for a trade deal. Indeed, if Japan, South Korea and Switzerland – high-income industrialized countries – can conclude limited free trade agreements with China, it is not impossible to imagine an agreement between China and the EU. “This agreement means a lot to China because it will give it wide access to the Japanese and South Korean markets, as the three countries have not yet reached a free trade agreement,” said Amitendu Palit, Senior Research Fellow and Research Lead (Trade and Economics), at the Institute of South Asian Studies at the National University of Singapore. “The fact that this happened despite the pandemic is certainly a lever for China and shows that the idea of decoupling China in the regional sense is not a matter of substance.” India ended RCEP negotiations last November on terms deemed contrary to its interests. In May, the Hindu reported that, according to high-level official sources, concerns about China in the post-coronavirus scenario had prevented Delhi from resuming negotiations on RCEP membership. India has not returned to the negotiations, despite a request from RCEP members who have been discussing the trade pact for nearly eight years.
From the point of view of European companies, RCEP is better understood as a free trade agreement between three production centres – China, Japan and the Republic of Korea – and their joint contact with a vast outskirts of Asia. For example, under the RCEP, China is committed to removing tariffs on 86% of Japan`s exports, including auto parts. The three nations combined generated $5.3 trillion in value added in the manufacturing sector in 2019, more than a trillion dollars more than the United States and the EU combined. In addition to the population of 1.6 billion in China/Japan/Korea, the RCEP provides an additional 675 million people in ASEAN, Australia and New Zealand, a larger population than the European Union.