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The RCEP Agreement has created the world’s largest free trade area in Asia. As a result, the previous big players were left behind, says Asia expert Hanns Hilpert. Explain how Europe and the United States can benefit.
tagesschau.de: Mr. Hilpert, who will benefit from this free trade agreement called RCEP?
Hanns Hilpert: The 15 participating states will also benefit from it. These are China, Japan, South Korea, Australia, New Zealand, and the ten ASEAN countries. But they benefit to different degrees.
There are estimates on the alleged prosperity gains from this deal, with roughly half of the estimated $ 200 billion profit going to China, a quarter to Japan, and the other quarter to the remaining states.
tagesschau.de: Does this also increase Beijing’s dominance in East Asia?
Hilpert: China already dominates in trade policy. On the one hand, the new agreement paves the way for China to gain a greater advantage, but it also appreciates it by setting binding rules. As the largest industrialized country and the largest trading nation in Asia and the world, China will benefit from low tariffs, the dismantling of trade barriers, and uniform rules, especially for supply chains. By 2035, China wants to be the state that sets international standards. This agreement will help.
tagesschau.de: Japan, South Korea, and Vietnam are also competitors to China. What concessions has Beijing made for the other countries to join?
Hilpert: China wants to open its markets. Asian states have been working on such an agreement for several decades. The fact that it happened was due to the fact that the leadership did not come from Beijing, but from the ASEAN states. RCEP is a consolidation of the agreements that ASEAN has already made with other countries. The agreement now allows ASEAN states to form and expand supplier networks with Japan, China and South Korea. In fact, everyone involved wins through RCEP.
“It is increasingly difficult to enforce European standards”
tagesschau.de: The world’s largest free trade zone is created. What does this mean for Europe and European companies?
Hilpert: On the one hand, access to a broader market is simplified. On the other hand, tariff reductions within RCEP countries discriminate against all who do not participate. German and European companies will suffer from this. When it comes to setting new international standards, European and American companies lag a bit behind. You will have less weight. With this agreement, Asia goes from the world factory to the world market. The European internal market is losing weight in trade policy.
European companies can use these provider networks themselves by operating in the region. They are free to invest and build something there and benefit from its advantages. It is becoming increasingly difficult to enforce European standards. They still apply to exports to the EU, but they no longer play an important role in the region itself. That will put Europe at a disadvantage in the long run.
tagesschau.de: Under President Obama, the United States wanted to limit China’s influence. The RCEP agreement now shows that this was not successful.
Hilpert: America is now like a wet poodle. They do not participate in any deal and therefore give up potential gains in prosperity. It is currently in a bad strategic position. Trump did that because there was a lot of resistance in the United States to the trade deals. With that he won his election. In the US there are many losers from globalization who would have seen few of the potential benefits in prosperity as a result of trade deals. How to deal with globalization and free trade is an internal political question in the United States. There is still no real answer to that for the post-Trump era.
tagesschau.de: Is it better to bury your head in the sand so that you do not even notice the conclusion of trade agreements?
Hilpert: That reaction would be wrong, but politicians have to explain the benefits of free trade agreements, and they have to conclude deals that ensure that the gains are well distributed between society and the economy and that potential losers are compensated.
“You cannot wish for globalization to disappear”
tagesschau.de: Does an increasingly powerful China pose a threat to prosperity and stability in Europe?
Hilpert: I would say yes, but not because of the RCEP agreement. China is primarily a threat to prosperity and stability because Beijing uses economic power to intimidate countries and also political opponents abroad. China spreads dubious legal standards around the world and supplies repressive technologies. An economically strong nation is more likely to be successful in all of this than a weak one. China competes under unfair conditions. The keywords here are: technology losses for China, industrial policy subsidies, interaction between the state and companies in foreign markets.
tagesschau.de: How can Europe meet the Chinese challenge?
Hilpert: The EU, the US, Japan and other countries should join forces and influence China under the World Trade Organization and push for fair rules.
This RCEP deal shows that deglobalization as a result of the corona pandemic is more of a myth. There is further development of the international trading system, regardless of whether we participate or not. You cannot wish for globalization to disappear. You have to deal with that in some way and try to bring your own interests, such as sustainability, human rights compliance, environmental standards, and climate protection to influence the negotiations.
The interview was conducted by Reinhard Baumgarten, SWR.
