• Asian trade ministers took another step toward creating what could be the world’s biggest trading bloc, expressing hope that a deal could be signed by the end of this year.
• Ministers from the 16-nation Regional Comprehensive Economic Partnership, which includes China, Japan and India, met in Tokyo to try and thrash out differences.
What is a trading bloc?
• A regional trading bloc is a group of countries within a geographical region that protect themselves from imports from non-members.
• Trading blocs are a form of economic integration and increasingly shape the pattern of world trade.
• Regional Comprehensive Economic Partnership (RCEP) is an ASEAN-centered proposal for a regional free trade area.
• It covers one third of the world’s economy and almost half its population.
Why it matters?
• As protectionism concerns increase globally, it’s important that the Asian region flies the flag of free trade.
• Any further progress on RCEP could put pressure on the U.S. to consider rejoining the TPP, as the US-China trade war continues.
• India’s requirement that any agreement to reduce tariffs on goods and services should allow for free movement of people, something India wants for its highly skilled information technology sector.
Why India wants services pact in RCEP?
• Services are becoming a dominant driver of growth in both developed and developing countries
• Services contribute almost two-thirds of India’s GDP
• Surplus in services trade finances almost half of India’s trade deficit
• India is pushing for greater liberalization in services sectors for easier movement of its professionals to RCEP member countries