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Fifteen countries have launched the largest trade bloc; It covers about a third of the world economy and strengthens China’s position on the world trade stage, while the United States is absent.
The bloc called the Regional Comprehensive Economic Association (RCEP) is seen as an extension of China’s influence in the region.
What countries are participating؟
This new trading bloc includes ten countries in Southeast Asia, plus South Korea, China, Japan, Australia and New Zealand.
The bloc does not include the United States, which withdrew from a rival bloc, the Trans-Pacific Partnership Agreement, in 2017.
US President Donald Trump withdrew his country from the deal shortly after taking office.
Negotiations on the new agreement began in 2012 and concluded on Sunday on the sidelines of the meeting of the Association of Southeast Asian Nations, known by the acronym “ASEAN”.
Why is this agreement important?
Although the Regional Comprehensive Economic Partnership (RCEP) agreement is no match for the Trans-Pacific Partnership in terms of inclusion and rate reduction, many analysts believe that the size of the new agreement alone makes it more important.
“Membership of the agreement includes a larger group of countries, most notably China, which largely supports the total GDP of the agreement’s members,” said Rajiv Biswas, chief economist for the Asia Pacific region at IHS.
China has entered into several bilateral trade agreements, but this is the first time that Beijing has signed a regional multilateral trade agreement.
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Fifteen countries form the new trade bloc
Viability of the agreement
In principle, the leaders hope that the new agreement will help stimulate the process of recovery from the effects of the Corona epidemic.
“The conclusion of the comprehensive regional economic association agreement after eight years of negotiations, under the current global conditions, brings a ray of light and hope amid dark clouds,” said Chinese Premier Li Kiqiang.
Li Keqiang described the agreement as a “victory for multilateralism and free trade.”
India had been involved in negotiations to launch the deal, but withdrew last year due to concerns that low tariffs would hurt local producers.
The signatory states said the door was still open for India to join in the future.
The member states of the Comprehensive Economic Partnership Agreement represent about a third of the world’s population and about 29 percent of world GDP.
This trading bloc is larger than its counterpart, which includes the United States, Mexico and Canada, and it is also larger than the European Union.
What fruits are desired of the?
The BBC’s Singapore Economic Correspondent Tim MacDonald says experts expect the Regional Comprehensive Economic Partnership (RCAP) agreement to cancel a tariff package based on some imports within 20 years.
The agreement provides clauses related to intellectual property, technical communications, financial services, e-commerce and the liberal professions, but the biggest impact, according to expectations, will be the clause on “rules of origin” that defines the identity of the product, says MacDonald.
Many of the signatories to the agreement are subject to free trade agreements with each other, but these agreements are riddled with restrictions.
Deborah Elms of the Asian Trade Center says that “the existing trade agreements between these countries are very complex compared to the Comprehensive Regional Economic Partnership Agreement.”
Business operations that involve global supply chains can face tariffs even under free trade agreements, because their products contain ingredients made in other countries.
Therefore, an Indonesian-made product that contains Australian-made parts, for example, may encounter tariffs in the ASEAN Free Trade Area.
According to the Comprehensive Regional Economic Association agreement, parts manufactured in any of the member states receive similar treatment, which may incentivize companies in the agreement’s member states to seek suppliers within the limits of the commercial area.
Who benefits? Agree؟
The Peterson Institute for International Economics estimates that the agreement will result in an increase in global national income of $ 186 billion annually by 2030, as well as an addition of 0.2 percent to the economies of the signatory countries.
Some analysts believe that the agreement will benefit China, Japan and South Korea more than other signatories.
Economist Nick Marrow says: “The economic benefits of the deal may be only marginal for Southeast Asian countries, but there are benefits that Northeast Asian countries can get as a result of trade and tariffs.”
However, no rewards are expected for some time, as six ASEAN member countries and three others must ratify the agreement before it enters into force. Maru believes that the process may take some time and encounter some obstacles in national parliaments.
