Bigger than the EU: Australia joins world’s largest trade bloc

Australia has joined 14 Asian countries to create the world’s largest trade bloc, in a move exporters hope will improve strained relations with China.

The Regional Comprehensive Economic Partnership (RCEP) was finalised at a meeting of the the Association of Southeast Asian Nations (ASEAN) on November 15, 2020. Picture: AFP

Australia has joined its Asian regional partners including powerhouses China and Japan to create the world’s largest single trade bloc, in a move exporters hope will pave the way for a thawing in chilled relations with our largest trading partner.

Following eight years of negotiations, Trade Minister Simon Birmingham on Sunday announced the formal establishment of the Regional Comprehensive Economic Partnership, or RCEP, which will knit together an array of bilateral agreements, including Australia’s 10 regional free-trade agreements, into a European Union-style single set of trade rules governing the Indo-Pacific region.

“This is a huge accomplishment,” Senator Birmingham said of a deal which will cover 15 countries across an area accounting for 30 per cent of the world’s population and total economic output.

Ahead of Scott Morrison’s trip to Japan this week, Senator Birmingham said “this is an incredibly important agreement in terms of the timing”.

“Symbolically, we see huge pressures globally on the trading system and of course pressures that Australia faces, too. This agreement signifies that our region, which has been the most economically dynamic region of the world in recent decades, is still committed to openness.”

RCEP will provide a uniform set of principles applying to trade between signatories, and become a centralised location for dispute resolutions.

The announcement triggered hopes that the deal would reset the country’s fraught relations with China, which has seen our most important economic partner throw up barriers to Australian wheat, beef, barley, coal, timber and wine exports.

National Farmers Federation president Fiona Simson told Sky News that “this could be a start for a new chapter in our relationship”.

Senator Birmingham said China’s willingness to participate was “an important sign of our willingness to continue to work in regional co-operation and regional economic partnership”, as he urged the Chinese to respect not only the letter of the agreement, but also its “spirit”.

Perth USAsia research director Jeffrey Wilson, who has spent the past decade working in and around the RCEP process, said while the deal would not open up any new markets or lower tariffs for Australian exporters, it would radically simplify the process by which local businesses are able to do business with other signatories.

Wheat exporters, for example, would only be required to complete a single set of customs forms.

“It’s a big deal,” Mr Wilson said. “This is the biggest trade deal since the WTO was created. Over the next six months this is not going to address the fact there are no flights for cargo” as a result of the pandemic, he said. “But when the covers come up this will supercharge our ability to get back to where we were before COVID.”

Of the 16 countries involved in 32 rounds of negotiations, only India failed to sign up to RCEP.

Senator Birmingham said it was “regrettable” that India chose not to be included in a final deal, and that “we would welcome India back to the table”.

“That diminishes some of the value for Australia, particularly given India would have been the one RCEP partner with whom we did not previously have any type of FTA,” he said.