The ten countries of ASEAN and five Asia-Pacific countries, including five members of the G20 (China, Japan, Korea, Australia and New Zealand) have just agreed a major trade deal called The Regional Comprehensive Economic Partnership, or RCEP. This is a mega-regional free trade agreement between the ten member states of the Association of Southeast Asian Nations (ASEAN) Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam and the six states with which ASEAN has existing free trade agreements (Australia, China, India, Japan, South Korea and New Zealand).
After eight years of challenging talks, more than 30 negotiating rounds over eight years, numerous Ministerial meetings and three Leaders’ Summits have resulted in a significant achievement at the 4th RCEP Summit, hosted by Vietnam that brought “an unprecedented mega regional trading arrangement, the agreement was signed on November 15, 2020.
The Regional Comprehensive Economic Partnership, or RCEP comprises a diverse mix of developed, developing and least developed economies of the region.” India was also part of the negotiations, but pulled out last year, over concerns that lower tariffs could hurt local producers. The RCEP as a new free trade zone will be bigger than both the US-Mexico-Canada Agreement and the European Union. Although RCEP is generally less comprehensive than other agreements, including TPP-11, its members constitute approximately 30% of global trade and GDP.
Many viewed RCEP’s signing as an achievement for the multilateral trading system, which faces myriad challenges, including a global economic slowdown and rising protectionism and trade disputes. It also follows the recent entry into force of “mega-regional” trade deals, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP or TPP-11), which includes seven RCEP members.
This signing has created the world’s largest free trade zone stretching from the border of Kazakhstan to the South Pacific. It will covers an area covering 2.2 billion people, 30% of the world’s population and 1/3 of all the GDP economic activity on the planet, giving it the potential to restructure some trade patterns and supply chains in Asia through lower trade costs and streamlined rules.
Free Trade Policy and Geo-Political Considerations
It has triggered many headlines notably about the sheer size of the deal, the prominent role of China and the fact that the US and India are not a party. Trade deals are rarely just about trade: they also have wider political ramifications.
China the Central Player and the Center-Piece of the Regional Deal-Making
China has inked a trade agreement with 14 other countries, hailing the move as a “victory for multilateralism and free trade.” Many have commented on the wider ramifications of these decisions. For Greater China. According to many analysis, amid questions about Washington’s involvement in Asia, the RCEP could strongly reinforce China’s position as an economic partner for Southeast Asia, Japan and Korea, placing it as the second largest economy.
China and the US have been involved in a trade war since 2018 with a number of flashpoint over import taxes and Chinese technology firms operating in America.
Implications and USA reaction
When signing the Trans-Pacific Partnership (TPP) in February 2015, President Obama said that agreements like these allow us “to write the rules of the road in the 21st century.” Many have argued that TPP is a containment strategy aimed at China while the RCEP is expected to reinforce ASEAN ‘centrality’ in the wider Asia-Pacific regional architecture. In 2017, newly inaugurated US president Donald Trump made good on his campaign promise to drop out of the Trans-Pacific Partnership (TPP), negotiations for which involved dozens of countries.
But history took a different turn when President Trump withdrew from the TPP in his first days in office (which eventually went ahead anyway, without the US, and became the CPTPP (link is external)). Another blow came this group that was pushed by former US President Barack Obama followed by K.O. in the form of this signing of the Regional Comprehensive Economic Partnership (RCEP) in Hanoi. Indeed a paper (link is external) by the Peterson Institute for International Economics has suggested that, “The exits [of India and the US] reflect similar motives in both countries, including nationalist policies on one hand, and fears of losing ground to China in economic and strategic competition on the other.”
Now, nearly four years later and at the end of President’s Trump term in office, the US finds itself outside again as another mega trade deal is concluded. The absence of Washington authorities from both RCEP and the successor to the Obama-led Trans-Pacific Partnership (TPP) had eclipsed the United States from two trade groups which are the world’s largest economy covering the world’s fastest-growing region.
As RCEP enters into force, Congress might consider how U.S. commercial interests could be affected by an agreement that allows firms from other developed economies to make supply chains more efficient, as well as the impact of the perceived diminishing U.S. role in shaping trade rules and economic integration in the region and globally.
What is the Stand and the Position of Europe
And by growing the global economy, RCEP will help provide more – not fewer – opportunities for trade with the region, just as our own Single Market provides opportunities for them. As EU we tend to have more ambitious FTAs with almost all countries in the RCEP agreement.
Still, as EU we should pay close attention and be mindful of the strategic stakes involved: the Indo Pacific region is of strategic importance to us. We must enhance our engagement to make sure our voice is heard and the overall architecture of regional cooperation remains open and rules-based.
Brexit from Europe and Brentrance in Asia
Britain has spent much of the past four years unwinding its participation in the European trade bloc, and is now edging closer to a no-deal Brexit. (It is, however, finalizing trade deals with Japan and Canada.)
This week marks a historic week for the UK’s growing relationship with the Asia Pacific region. We have launched trade talks between the UK and Australia and, the UK and New Zealand. We have also reaffirmed our interest in joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Read more
Global Market is the revolving doors with one for Exit from Europe and the next for Ecommerce and International Trade.
The European Doors were not wide enough for British trading interests and were used for the Exit and now the Asia Pacific is becoming the next Door for Entry of UK in the emerging markets
So until UK find new Doors, Asia Pacific is becoming the Deja Vu de l’internationalization of the British economy. Great Britain has implemented a trade policy toward Asia that was an anticipation of/on the the signature of the RCEP by implementing direct negotiation with Asian countries and promoting the building of E-Commerce platform to induce and motivate British companies to trade with the Asian countries.
Here comes the sun of Free-trade run
Here comes the Freedom sun, and I say
It’s all right
Little darling, it’s been a long cold lonely European winter
Little darling, it feels like years since we have been without Union name
Here comes the Asia Pacific sun
Here comes the Far East sun, and I say
It’s all right
Little darling, the smiles returning to the faces
Little darling, it seems like years since it’s been no more United Kingdom
Here comes the sun of Freedom
Here comes the sun of Free Trade, and I say
It’s all right
Soon, soon, soon, here it comes the new UK in the sun
Sun, sun, sun, here the New United Kingdom comes
Little darling, I feel that ice is slowly melting
Little darling, it seems like years since it’s been clear we want the Exit from Europe to welcome the Asia Pacific Sun
Here comes the sun
It’s all right
George Harrison #saidelmansourcherkaoui
UK looks to Asia Pacific in trade push – Published on June 19, 2020
Natalie Black CBE Her Majesty’s Trade Commissioner for Asia Pacific – Read more published works by Natalie Black CBE on Great Britain new trade interests in the ASEAN and Pacific Regions
- Why tech companies should be excited about the new UK-Japan trade deal Natalie Black CBE on LinkedIn
- Building a stronger UK-ASEAN economic relationship Natalie Black CBE on LinkedIn
- UK launches first Digital Trade Network in Asia Pacific Natalie Black CBE on LinkedIn
- How the UK Department for International Trade can support your business in Asia Pacific during COVID-19 Natalie Black CBE on LinkedIn
Who is Next?: Latin America and Africa
The emergence of this gigantic Asian free trade zone should also be a decisive incentive to Africa and Latin America to accelerate their plans of regional integration. Without doubt, the size of the market and the common rules set by RCEP have a direct effect on the investment climate in emerging economies. Both Africa and Latin America should do everything within their reach to adapt to a new competitive landscape.