Leaders of 15 countries sign Asian Trade Agreement, Regional Comprehensive Economic Partnership Agreement
News Time
After a decade of negotiations, the leaders of 15 countries have signed the Asian Trade Agreement and the Comprehensive Economic Partnership Agreement. “We signed the RCEP today after eight years of hard work,” said Lee Hsien Loong, Prime Minister of Singapore. “This is a big step for our region,” he said. Especially at a time when the multilateral system is losing its impact and global development is slowing down. In the RCEP, Asian countries have expressed support for free and integrated supply chains, free trade and close interdependence. The agreement covers one-third of global economic output and is a major step towards economic integration in the region. Here are five things that explain the biggest trade deal in history.
What is RCEP?
RCEP is one of the largest free trade agreements. Most of the existing agreements are signed by the 10 member countries of the Association of Southeast Asian Nations, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. And they have been included in the same multilateral agreement with Australia, China, Japan, New Zealand and South Korea. Peter Petrie, professor of international finance at Brandeis University, said it was the largest deal in history due to a number of initiatives which covers 30% of the world’s population. The deal would have been even bigger, but in 2019 India was out of it and refused to come back. According to estimates by Michael G. Plummer, Professor of International Economics at Johns Hopkins University and Professor Matry, RCEP contributes 18 186 billion to the global economy and its GDP Will increase by 0.2%.The biggest beneficiaries are Japan and South Korea, but the benefits of cheaper goods will spread to Europe and the United States.
What is in this agreement?
The agreement covers all the general chapters of a free trade agreement, such as tariffs, customs administration, health care measures, services, investments, and more, but two elements stand out. The first place rule is that the test will determine where the product was made. All ASEAN trade agreements have different rules regarding location, for example, if a company manufactures bicycles in Indonesia, it may be eligible under a free trade agreement with Japan. But the agreement would require different components to qualify for trade with South Korea.
RCEP will clear them all. Deborah Elms, executive director of ASEAN Trade Center Consultancy in Singapore, said that when you develop products for RCEP, it will be useful for 15 countries. And all you need is a piece of paper. Another important factor is that it is the first free trade agreement between China, Japan and South Korea. While the RCEP is largely a superficial agreement, it is still a major initiative. Professor Peter Petrie said the RCEP allows them to do whatever they want to do politically if they do it themselves.
What’s left?
The RCEP is relatively neutral, in contrast to the Trans-Pacific Partnership trade agreement approach. The TPP abolished 90 per cent of the revenue, compared to almost 100 per cent. Agriculture is largely absent and services are mixed. RCEP has done relatively little to set common standards for products. Professor Peter Petrie said that the important point about RCEP is that it is very diverse. It has small countries, big countries, rich countries and small countries. The law basically accommodates all these conflicting interests. Deborah Elms said the e-commerce chapter is particularly disappointing. Fifteen countries were unable to agree on any rules on the flow of data across borders or customs legal deadlines for the delivery of data. However, the biggest absenteeism is in India. India’s involvement as a large economy with relatively few free trade agreements could lead to a dramatic increase in trade. But India fears that its manufacturers will be mired in competition with cheaper Chinese products. However, the agreement is expected to include conditions that India should choose to join.
What does this mean for China and the United States?
The general criticism of the RCEP is China’s influence within it. This fear was further strengthened when India withdrew from it. The agreement provides an important voice for China in setting the standard for regional trade, and if China uses this power cooperatively, its positive attraction will increase. Professor Peter Petrie said it was probably great for China. Deborah Elms said a large part of China would make her a key player in the deal. He said that RCEP has never been led by China or run by China.
This was the ASEAN agreement.
But once the agreement goes into effect, it will be difficult for ASEAN to stay in its driving seat. Following President Donald Trump’s withdrawal from the TPP, the United States is now outside the two major trading blocs in Asia. This means that when Asia sets its trade rules, the traditional world powers, the United States and the European Union, will have no say.
What will happen next?
It will take some time to ratify the RCEP and it will also take a long time for some of the tariff provisions to take effect. However, it is likely that RCEP will shape the future of trade in Asia. Professor Peter Petrie said ASEAN agreements could improve over time. It’s often slow, but it’s not the end. Now that they have done so in the context of the RCEP, one of the most significant implications may be that negotiations on a free trade agreement between China, Japan and South Korea will accelerate. The three countries are the powerhouses of manufacturing and technology, which will be a great development for world trade. Deborah Elms said the biggest result could be the first step towards Asia’s emergence as a trade zone, like Europe or North America. Asia is connected but the agreement is to supply goods to other markets. RCEP changes that.
