The Regional Comprehensive Economic Association, or RCEP, was signed virtually Sunday during the annual summit of the 10-nation Association of Southeast Asian Nations (ASEAN).
Fourteen countries under China’s initiative have formally agreed to form the world’s largest free trade bloc, encompassing nearly a third of all economic activity. After 8 long years of negotiations, the deal has finally been sealed as leaders around the world are eager to get economies affected by the pandemic back on track.
What is RCEP?
The RCEP is a trade bloc conceptualized in 2012 that includes China, Japan, South Korea, Australia, New Zealand and the 10 members of the Association of Southeast Asian Nations (ASEAN): Brunei, Vietnam, Laos, Cambodia, Thailand, Myanmar, Malaysia. , Singapore, Indonesia and the Philippines. India was also part of the negotiations, but withdrew last year.
The bloc encompasses 2.1 billion people, and RCEP members represent around 30 percent of global GDP. Its aim is to reduce tariffs, open up trade in services and promote investment to help Australia’s Asian economies keep up with the rest of the world. It also briefly covers intellectual property, but does not mention environmental protections and labor rights.
The RCEP was born after former US President Barack Obama announced a multinational trade agreement, the Trans-Pacific Partnership (TPP), which would have excluded China.
Why is India not a signatory?
Indian pharmaceutical companies were all in favor of RCEP because they wanted to import generic drugs into China, but fear that cheaper products from China would “flood” the market, and a $ 50 billion trade deficit with China prevented the Indian government from seizing. join.
Textiles, agriculture and dairy were three industries that were expected to be particularly affected if cheaper products were available on the market. Although the doors have been kept open for India, Secretary (east) of the Ministry of Foreign Affairs (MEA) (east), Riva Ganguly Das, said at the 17th ASEAN-India virtual summit: “Our position is known. When it comes to India, we did not join RCEP because it does not address our outstanding issues and concerns. ”
Why is China pushing for RCEP?
The TPP, the largest regional trade agreement in history, would have established new terms for trade and business investment between the United States and 11 other nations in the Pacific Rim. It became a source of discontent in the United States across partisan lines, and when Donald Trump took office, all plans for the TPP were shelved.
Obama’s successor launched a long-standing trade war with China, abandoning all plans to seek cooperation with emerging Asian economies and hitting China with high tariffs. Unable to find a market for its products, China began looking for consumers within Asia, and thus RCEP began to gain prominence.
China has an annual surplus of almost $ 1 trillion, that is, it sells much more than it buys from other countries. Almost half of that surplus is due to its trade with the US An entrenched trade war with the United States threatens China with dire consequences, no other country can buy as much as the United States. In the first half of 2019, after the trade war started, China’s overall exports to the US declined 8.5% and increased only 2.1% with the rest of the world.
Faced with a production surplus, China was forced to cut its own high tariffs in May last year. Emphasis was placed on low-tech, labor-intensive industries that produced goods that their immediate neighbors would be most interested in purchasing.
This current push to seal the RCEP deal comes from China’s anxiety over the policies of U.S. President-elect Joe Biden, who has given no indication that Trump’s policies in China are being withdrawn. The European Union has also been opening its eyes to the atrocities committed by the Chinese communist parties in the Xinjiang region. Both Trump’s and the EU’s push to stop doing business with Chinese military-backed tech companies like Hikvision and Huawei, among others, has added to the anxieties of the communist nation as it continues to move forward with renewed vigor for a comprehensive trade pact to insulate itself from the storm Beijing knows is coming.
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