RCEP deal a win but 'trade war still casts big shadow'

Prime Minister Jacinda Ardern, Indian Prime Minister Narendra Modi and Chinese Premier Li Keqiang chat ahead of a group photo being taken at the summit in Bangkok. Photo / AP

An agreement on the Regional Comprehensive Economic Partnership (RCEP) is good news for New Zealand but is tempered by the absence of India and the shadow of the ongoing trade war, says Stephen Jacobi, executive director for the NZ International Business Forum.

An agreement on the text for the RCEP agreement has been signed by 15 nations including New Zealand, Australia, China, South Korea and Japan as well as the South East Asian nations of the Asean trade bloc.

But India - the only country in the RCEP group that New Zealand doesn't have an existing trade agreement with - did not agree to the text, leaving open the possibility the deal will be signed without it.

As an alternative to the whole deal falling over it was good news, Jacobi said.

"It's more about the signal it sends to the rest of the world. It's about China standing with Asean."

While that was good, it was likely any commercial gains would be limited until India joined, he said.

"It sends a very positive signal so let's bank that," Jacobi says.

Even without India the RCEP group still represents more than 50 per cent of New Zealand's total exports.

For those other countries it would be a case of incrementally improving existing agreements.

"We'd probably be extending some of the agreements we've got in areas that have been difficult … so I would look for things in the services area, or in investment rules," Jacobi said.

"I doubt that on market access there is much more that can be squeezed out, but you never know."

India opted not to agree to the text, citing significant concerns about opening its markets to goods from China and - crucially for New Zealand - foreign dairy companies.

However it has retained the right to sign up if issues can be worked through.

The next opportunity for progress was likely at a meeting in February, Jacobi said.

The agreement had a least been a boost for those that believed these big plurilateral deals were still possible, he said.

"But the trade war casts a big shadow and I think we've got a lot of work to do to get us back to where we were."

"I'm pleased to see we're still making progress, that our Government is still in the business of being able to deliver trade agreements."

Overall Jacobi said he was still quite pessimistic about the global trade environment.

The fallout from US/China trade tensions has seen global trade volumes falling in the past year, slowing economic growth.

"I think protectionism is still a problem," he said. "The really disturbing part about the [global trade slowdown] is we don't actually need to be here."

"The global economy was actually on a pathway to a very sound recovery and the global community is doing this to itself."