Barriers to cross-border commerce in much of Asia could shrink a few years from now, after 16 nations agreed to try to create a free-trade bloc many times larger than the European Union.
Economy ministers agreed to work towards a pact liberalizing trade and investment by the end of 2015, unpicking an existing knot of bilateral free-trade agreements to create a single trading bloc accounting for almost 30 percent of the world's GDP.
“Japan hopes economic growth in East Asia will contribute to its growth,” said Yukio Edano, Japan's trade minister, after the ministerial meeting in Siem Reap, Cambodia, on Aug 30.
The Regional Comprehensive Economic Partnership would create a bloc of 3.4 billion people, encompassing India, China, Japan and South Korea; the 10 Association of Southeast Asian Nations; plus Australia and New Zealand.
National leaders are expected to announce the start of negotiations at an East Asia summit in November. Working parties would then begin meeting early next year.
Given the diversity of economies involved, participants aim to agree initially on less liberalization than in the forthcoming Trans-Pacific Partnership, which includes the United States.
ASEAN already has a free-trade arrangement with each of the six other RCEP nations, but measures such as customs exemptions vary. This would end, leading to simplified operating procedures for companies operating across borders.
Japan might expect a boost in exports to China because the two nations currently have no free-trade and investment pact.
But given the complexity and number of parties involved, some officials involved warned it might be unrealistic to reach agreement by 2015.
"I think it might be impossible to finalize it within three years," one Japanese government official said.
One Indonesian negotiator said 2015 is more an ambition than a deadline, and it could well take more time.
Many are concerned India could hold up negotiations. It has a huge domestic market, where strong conservative forces oppose free trade and investment. Moreover, India has a massive trade deficit with China.
India's commerce minister, Anand Sharma, referred to that when he warned the RCEP could fuel a trade imbalance.
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