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On Sunday, 15 Asian countries, including China, South Korea and Japan, signed the largest free trade agreement in history at the 37th Asia Summit, which was held largely due to the coronavirus epidemic. The Regional Comprehensive Economic Association (RCEP) brings together 2.2 billion people and almost 30 percent of the Earth’s gross domestic product (GDP) ($ 26.2 trillion). The Association of Southeast Asian Nations (ASEAN) tried to keep the treaty signing indoors for nine years, and finally succeeded.
This is the first multilateral free trade association that China has joined.
I’m glad even India was active at the beginning of the process, but it blew up last year. However, the RCEP left the door open. The agreement has not yet been ratified, so in legal terms the common commercial zone for Southeast Asia has not yet been established.
Given that Asia looms as a gigantic global trade space in terms of its scope, it is worth examining the impact that the deal could have on world trade, particularly with respect to the economies of the United States and the European Union. Is the EU or the US preparing with any response, should they be prepared with one and of course who can gain more from signing?
It is part of a geopolitical and geoeconomic game in which, with the creation of RCEP, in my opinion, China has now won the biggest
– He said to the Tamás Matura Index. The global competition for dominance in investment matters, international standards, trade networks has been going on between the United States and China for more than 10 years. The Corvinus instructor said that in the 20th century, the United States was the largest and most competitive industrial producer in the world, so it was more interested in breaking down barriers to trade, in trade associations. “Since the early 2000s, China took on this role, strictly in terms of industrial production,” he explained.
A professor from the Department of International Relations at Corvinus University pointed out that at the World Economic Forum in Davos in January 2018, which the president of the United States had not even attended, it was already Chinese President Xi Qing-ping who spoke about the need for globalization to continue We must tear down the walls of protectionism. The United States once wanted to host Europe and Asia Pacific with the TPP (Trans-Pacific Partnership) and TTIP (Transatlantic Trade and Investment Association) partnerships, partly in response to China’s “One Silk Road.” road) and the RCEP now concluded. The Chinese have generously stated that the United States can join these associations at any time, knowing that this will never happen. That’s where Donald Trump came in in 2017, and he did an incredibly gallant favor to China by quitting the TPP.
By some interpretations, this has shaped the MAGA (Make America Great Again) announced by Trump at MCGA (Make China Great Again), and China could have reversed the Monroe doctrine: Asia belongs to Asians. As for what percentage of the GDP of the member states the RCEP agreement could yield, so far there are only forecasts, we will see. In the global competition, this was now a great launch for the Chinese, ”says Matura.
The TPP was already backed by Republicans during the Bush reign, followed by Obama and Joe Biden as vice president at the time. Although it would be premature to wait after the rather ruinous presidential elections, the government has yet to receive any indication that it is in favor of free trade agreements.
“Both US analysts and the US Chamber of Commerce have read for the moment that a free trade agreement will not be the top priority for the government in the current period. And it also seems that amid the management of the epidemic, social and minority tensions, internal economic affairs will now be the ones that will most dominate the government’s economic activities, ”explains the Corvinus instructor. However, if there is a resurgence of the TPP by the United States, it may not be in the interest of the United States, given the benefits of the duty-free treatment, that countries that are also members of the RCEP ratify the treaty.
But it is certain that America’s Southeast Asian partners will certainly have strong expectations from the Biden administration to warm up multilateral ties rather than Trump’s MAGA.
For example, a Japanese diplomat, true Keisuke Hanyuda, who had previously held a prominent position in foreign affairs, pointed out this need immediately Monday.
The special shape
India, after being part of the RCEP process for years, left the association last year, arguing that its citizens would not necessarily benefit from the deal. It should be noted that the second most populous country in the world sells almost twice as many products in the United States as in China (compared to South Korea, Taiwan or the Philippines that sell at least three times more products in China than in the US. One reason why he did not sign the current agreement. Regarding the other reason, Tamás Matura says that the security policy rivalry between China and India in the Kashmir region has intensified in the last year. The Indian public has reacted very badly to attempts to influence China, and this affects other decisions, such as an RCEP partnership. However, the main reason for the jump may certainly be that
the Indians calculated that the deal would simply not be worth it financially for them, so they would not open their markets to Chinese goods.
Recently, in our interview with him, László Csaba also referred to the strength of Asia in global competition, but according to him, the lag of countries here in the field of technology does not support the view that the focus of growth is would concentrate here. Matura sees that László Csaba is right in economic terms, the teacher of Corvinus simply puts the emphasis elsewhere.
“The East Asia region has also moved from lower value-added production to higher production, which translates into growth, but after reaching a certain level, growth always slows down. What I’m more optimistic about than the professor is the Southeast Asian model based on smart government intervention, which is about positively managing investment, thus contributing to growth. Also in Hungary there is an aspiration towards this model, only here we omit one of the most important steps: a large-scale investment in human resources.
By comparison, China spends more on research and development as a share of GDP than the EU average, a total amount that already rivals US spending on R&D. The budget of a single Chinese university is larger than that of all institutions. Hungarian higher education institutions together.
It is clear that the engine of the world economy has moved to Asia, but in terms of per capita or quality of life, they are far behind the Atlantic average ”.
For many, the question now is: is the RCEP Treaty in any way jeopardizing the influence of the US or the EU in the world economy? According to Tamás Matura, this is not decided at all by external effects on an economy the size of the United States, it is not to be feared. “RCEP does not take the ground out from under the feet of the US or EU economy. These societies have internal problems that they have to solve, because current competitiveness comes from the strength of the national economy. Therefore, the future of economies is decided “within”.
Union make force
The essence of the RCEP is that the products of the association members enjoy huge tariff reductions in the common market and are subject to negligible bureaucratic burden. The size of the agreement is illustrated by the fact that the member states add a larger total product than the European Union or the USMCA association (USA, Mexico, Canada).
RCEP Treaty Signatories: Vietnam, Thailand, Philippines, Singapore, South Korea, Malaysia, New Zealand, Myanmar, Laos, Japan, China, Indonesia, Cambodia, Brunei, Australia.
(Top Image: Vietnamese Prime Minister Nguyen Xuan Phuc. (Right) applauds on a television monitor along with other participants at the RCEP signing ceremony held online in Hanoi on November 15, 2020. Photo: Nhac Nguyen / AFP)
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