The Japanese business community is increasingly looking to the expected benefits from the Regional Comprehensive Economic Partnership (RCEP), which made significant progress on Sunday toward coming into force.
Nevertheless, the degree of trade liberalization is still lower than that of the Trans-Pacific Partnership (TPP) and other similar agreements, as the RCEP comprises countries with different levels of economic development. How to curb China's growing influence in the partnership is also an issue.
-- Protecting domestic industry
"[After starting talks in 2012], we have officially brought RCEP negotiations to a conclusion for signing," Vietnamese Prime Minister Nguyen Xuan Phuc said at the outset of the summit, speaking in his capacity as the leader of the host country. He stressed the significance of the RCEP, describing the deal as "the largest free trade agreement in the world," even though India -- with its population of more than 1.3 billion -- withdrew from the negotiations.
The focus of the RCEP was whether a high level of trade liberalization could be achieved among a membership of both developed and developing countries.
Each nation has a very different view of opening markets. Japan, Australia and New Zealand, which favor trade liberalization, are at odds with China and the others, which want to protect their industries. The conclusion of the negotiations was delayed multiple times, despite the initial target of within 2015, and there were times when an agreement was not expected.
-- Emphasizing achievement
Ultimately, the RCEP deal realized tariff elimination rates of over 90% -- the benchmark for multilateral economic agreements such as the TPP -- among the 15 participating countries as a whole. The proportion of tariff-free items among Japan's industrial exports to China, for example, will rise from 8% to 86%.
"The agreement will lead to more exports to the Asian region," Economy, Trade and Industry Minister Hiroshi Kajiyama told reporters after signing.
According to a survey, there are more than 40,000 Japanese-affiliated companies in RCEP member nations. Japanese business leaders are welcoming the move, with Japan Business Federation (Keidanren) Chairman Hiroaki Nakanishi saying: "Many Japanese companies are operating in the Asia-Pacific region. [The agreement will] lead to the expansion of trade and investment and the establishment of an efficient supply chain."
However, some government officials have voiced concerns about the outcome of the negotiations. One diplomatic official said, "The rate of [tariff] abolition is not high as compared to the TPP, which is nearly 100% overall."
Regarding exports to China, Tokyo and Beijing have not yet reached an agreement on eliminating tariffs on finished vehicles. It will also take more than 10 years to remove the tariffs on items for which demand is expected to increase, such as engine parts for gas vehicles and battery materials for electric vehicles.
-- Integrating China
Also of concern are the actions by China, which changed its course to bring the negotiations to a close.
The Chinese government announced that Premier Li Keqiang said Sunday at the summit meeting that the RCEP was "a victory of multilateralism and free trade."
While intensifying confrontation with the United States under the administration of President Donald Trump, China has turned the current U.S. policy of turning its back on global cooperation as an opportunity to increase China's presence in the international community as a "promoter" of free trade. However, China has been noted for effectively forcing joint ventures between Chinese and foreign companies to transfer technology and heightening data management by the government.
"By incorporating China into the RCEP and other such deals, [the international community] can monitor the status of China's implementation of multilateral trade and investment rules," a Japanese negotiator said.
Whether RCEP members can get China to abide by the rules will be key to determining the future of the mega-economic bloc.
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