It is a trade agreement that establishes trade in Asia for Asia. We had a lot of trade in Asia, of course, we had a lot of raw materials, parts and components coming and going. And they often get the final assembly [in Asia], but then they`re usually shipped to the U.S. or Europe. We don`t have a lot of final production that ends up in Asia. One of the reasons we don`t have this is that trade in the region, especially for finished products, is too difficult and too expensive – tariffs, non-tariff challenges, etc. – and so you have less trade in the region than you should. It`s not a perfect deal, but RCEP makes it more likely that companies will create supply chains in Asia for Asia. As the agreement enters into force and becomes more important to businesses, it will accelerate over time. Southeast Asia will benefit significantly from RCEP ($19 billion per year by 2030), but less than Northeast Asia, as it already has free trade agreements with its RCEP partners. However, RCEP could improve access to China`s Belt and Road (BRI) funds and increase the benefits of market access by strengthening the links between transport, energy and communication.
RCEP`s favourable rules of origin will also attract foreign investment. It depends on who you talk to, but especially for the Japanese, it was a very big problem. It was a blow because, although they all have a lot of trade agreements in the region, we have very bad trade agreements with India, if they exist. It was a loss of both opportunities for RCEP members in India and, in my opinion, India`s ability to be part of supply chains. In 2016, the Electronic Frontier Foundation described RCEP`s first draft intellectual property regulation as “simply the worst copyright provisions ever seen in a trade agreement.” [71] The impact of the RCEP is impressive, even though the agreement is not as strict as the CPTPP. It creates incentives for supply chains across the region, but also takes into account political sensitivities. Intellectual property rules contribute little to what many members have, and the agreement says nothing at all about labour, the environment or state-owned enterprises – all key chapters of the CPTPP. However, ASEAN-centric trade agreements tend to improve over time. Other TPP members advanced the agreement and renamed it the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
The trade ministers of the remaining 11 countries have signed it and seven have ratified it. But Trump`s withdrawal has significantly reduced its impact, and US influence and the conclusion of the RCEP negotiations give China an edge in setting up trade conditions in the Asia-Pacific region. RCEP is the first free trade agreement between China, Japan and South Korea, three of Asia`s four largest economies. [9] At the time of signing, analysts predicted that this would help stimulate the economy amid the COVID-19 pandemic, “bring the economic focus back to Asia,” and amplify the U.S. economic and political decline. [7] [10] [11] This is also the first time that Japan has concluded an agreement with China and South Korea. India and the United States should be members of RCEP and RCEP respectively. of the CPTPP, but withdrew under the Modi and Trump administrations. Now that the agreements are set up (see Figure 1), they are strongly stimulating intra-Asian integration in China and Japan.
This is partly the result of American policy. The United States must rebalance its economic and security strategies to promote not only its economic interests, but also its security objectives. Officially, it is possible. There is a footnote indicating that the entire agreement will be open to new members 18 months after the effective date. But India has received a special provision that if India decides to join at any time, it can simply come back, it doesn`t have to wait 18 months. But even before COVID, there wasn`t enough interest in it. There are too many groups that don`t like it. RCEP is not as comprehensive as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, another free trade agreement in the region that includes some of the same countries. [9] RCEP “does not establish uniform standards for labour and the environment and does not oblige countries to open up services and other vulnerable sectors of their economies.” [16] There is a big gap in quality, coverage, depth and breadth, and this is largely due to one very simple thing: in the TPP, you volunteered to join, you wanted to submit to high ambition and high quality, which inspired you. At RCEP, you joined because you had to, because you are a member of ASEAN or because you had an existing agreement with ASEAN. The diversity among RCEP members is also breathtaking. In all dimensions: population size, prosperity, landlocked countries versus island countries, services versus trade in goods, imports versus exports, RCEP is really, really diverse.
Trying to reconcile all these goals meant that the final agreement in RCEP is less ambitious by default and has more loopholes. But that doesn`t mean it`s going to stay that way – it`s likely to be improved over time. It follows ASEAN`s own models, which are every five to 10 years, we have a full upgrade. ASEAN has also a proven track record of changing deadlines. We have very long time horizons at RCEP, 20, 21 years. I think this will manifest itself over time as everyone feels comfortable and familiar with this agreement. RCEP is especially important in the post-COVID era because you need to keep trade routes open – and it`s a trade-dependent region. But we also need new sources of economic growth. It seems clear that we will have uneven recovery from COVID, so you want to be used to various possible engines to drive recovery.
I think it`s really useful to have an Asian agreement with the Asian power plant economies. This is useful, not only for these economies and not only for large multinational companies, but also for small businesses, because you have to start this recovery of growth in one way or another. And it will be a challenge – [COVID-19 cases] The numbers are going crazy. This region is really struggling, including many of our ASEAN members, such as Laos and Cambodia. The numbers in the Philippines continue to rise. Thailand had to close again and again. This is a region that will be hit very hard by COVID and that I think will need everything it can to support recovery. The agreement aims to reduce tariffs and bureaucracy. It contains uniform rules of origin across the bloc that can facilitate international supply chains and trade in the region. [14] [15] It also prohibits certain customs duties. It does not focus on trade unions, environmental protection or government subsidies. [14] According to a forecast for 2020, the agreement is expected to boost the global economy by $186 billion.
[7] [15] Most trade experts don`t like trade agreements because they are preferred and there are advocacy benefits and penalties for leaving. Once you start entering into large regional trade agreements, the incentives for you to align your supply chain – whether it`s goods, services or investments – with that geographic area increase. Once you set them up, they are very difficult to remove. There will be commercial changes as a result of RCEP, even for companies that do not use RCEP. Once you have CEOs who start “thinking about Asia,” no matter if the deal covers what`s important to you, your brain says, “There are benefits in Asia, I should invest in Asia, I should plan sales in Asia.” This is going to be very new and it reinforces itself. The more CEOs you have who say, I think, Asian First, the more Asian results you get. We will therefore see a split in this direction. RCEP will also accelerate the economic integration of Northeast Asia. A spokesman for Japan`s Foreign Ministry noted last year that negotiations on the trilateral free trade agreement between China, South Korea and Japan, which has been stalled for many years, will take action “as soon as they are able to conclude the RCEP negotiations.” In a high-profile speech in early November, President Xi Jinping promised to “accelerate negotiations on an investment agreement between China and the EU and a free trade agreement between China, Japan and South Korea.” I don`t want to say never, but I`d be surprised. Partly because many of these countries see their own comparative advantage in different labour standards and environmental regulations. That doesn`t mean they`re against the environment or against workers, it just means they say it`s impossible for us to progress in a truly diverse region anyway and have something that makes everyone happy..
