The Regional Comprehensive Economic Partnership (RCEP) was finally signed in November after eight years of difficult negotiations. Its members -- the 10 Asean nations plus Australia, China, Japan, New Zealand and South Korea -- represent a very diverse mix, with varying interests and priorities.
It is significant to note that China, Japan and South Korea have signed a single trade agreement together for the very first time. It would otherwise have been an arduous task for the three countries to negotiate a pact among themselves.
It took more than 30 negotiating sessions to bring to fruition the biggest free trade agreement (FTA) ever signed, covering 30% of the world's gross domestic product and population.
Participants believe the deal will be as "comprehensive" as its name claims, by increasing market access and removing tariffs on approximately 90% of goods traded, attracting more trade in the process, and advancing investment opportunities in Asia Pacific. It will also be a spur for greater economic integration in the region.
The RCEP will allow businesses to trade with any country in the 15-nation group, without having to adhere to different individual requirements of each country. This will greatly decrease trading and transaction costs, and time spent, and improve supply chain management.
For example, there is only a single rule of origin framework to adhere to, which will deal with all the RCEP member states. This should lead to a faster and greater flow of goods between the countries.
We could also see an increase in manufacturing activities and capabilities as manufacturers can operate in countries with lower labour costs.
A study done by the Brookings Institution predicts that the gains from the RCEP will help offset the losses suffered by members because of the US-China trade war.
The US-based think tank also predicts that by 2030, the RCEP will contribute US$500 billion to international trade.
The European Union has often emphasised the importance of the Asia Pacific region as the main driver of growth in the global economy for the next few decades.
Even though the EU is not part of the deal, it will lead to more trading opportunities with Asean.
Since the different rules of origin descriptions will be integrated into one, this will ensure that European firms can trade their goods and services in Asean with greater ease, and enjoy reduced costs at the same time. European firms can then pass on these cost savings to consumers.
The RCEP is the first multilateral trade agreement that China has ever signed, and is a momentous geopolitical victory for Beijing. It is crucial for consolidating the superpower's influence and soft power in Asia Pacific, especially in Southeast Asia, which will now be integrated more closely with China's economic sphere.
According to the Singapore-based bank DBS, from 2015-19, China was the third biggest source of foreign direct investment (FDI) in Southeast Asia, as it stepped up its Belt & Road and Digital Silk Road initiatives. As an RCEP member, China will be encouraged to increase FDI in Asean.
As well, consumer goods from China will become more competitive in countries such as Japan as tariffs are reduced.
Americans should be concerned that the RCEP has gone ahead without the US. The Trump administration's protectionist stance and America's withdrawal from the Trans-Pacific Partnership have led to reduced US involvement in economic cooperation globally, especially in Asia. To some extent, America has failed to counter China's influence in the region.
Nevertheless, President-elect Joe Biden is likely to prioritise Asean and Asia Pacific, and will look to expand America's influence and involvement in economic partnerships.
It is also worth noting the absence of India, which withdrew from the RCEP amid fears that it would pose a credible threat to the profits of domestic farmers and producers.
However, members remain receptive to India joining the RCEP in the future.
Chinese Premier Li Keqiang believes the agreement further promotes the values and importance of free trade and multilateralism, at a time when nationalistic sentiment and protectionism have grown in the West.
Experts believe the RCEP will push investment and trade in Asia Pacific to new heights over the next few decades. The region will also be a more systematic and orderly trading area, similar to Europe and North America.
Singapore-based Ong Bo Yang, a student at the University of Warwick, majoring in Programme and Project Management, has written for six Asean newspapers including the Phnom Penh Post, VnExpress and The Myanmar Times.