RCEP – benefiting from “America first”

08:46 by Hubert Fromlet, Kalmar

Only yesterday – on October 15 – the Regional Comprehensive Economic Partnership (RCEP) Agreement finally was signed after eight years of complicated negotiations, altogether over 30 rounds. https://asean.org/storage/2020/11/Summary-of-the-RCEP-Agreement.pdf

These negotiations included the ten already co-operating ASEAN trading partners: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, The Philippines, Singapore, Thailand, Viet Nam and the five “deal newcomers” of China, Japan, South Korea, Australia and New Zealand. These countries amount to as much as 2.2 billion people or around 30 percent of the global population and GDP.

Without more detailed information right now one may conclude that RCEP – after all national ratifications – will be the starting point for the largest free trade zone in the world. Initially, President Obama and the U.S. wanted to be part of the negotiations as well. This plan was shattered by President Trump and his “America first” policy; certainly not a good idea – not even for the U.S. itself.

Comments – the U.S. and the EU in a weakened position (Sweden included) 

¤ Right now: China the main winner – the U.S. and the EU the main losers.
No further explanation is needed to underline that China clearly sticks out as the most powerful economic player of the 15 RCEP countries – in regions geographically not too far away and, consequently, already China’s main trading partners when summarizing the whole RCEP area. The objective of the trade agreement is to include over 90 percent of all traded goods for free trade and roughly two thirds of all cross-border traded services according to the following official source: https://www.mti.gov.sg/-/media/MTI/Newsroom/Press-Releases/2020/11/Press-Release-on-the-Regional-Comprehensive-Economic-Partnership-Signing.pdf.

However, some applicable time horizon cannot be found in available documents. Usually, it takes quite some years until major trade agreements have come into place completely.

¤ Really “fait accompli”?
Currently, I do not see toughly pressing obstacles for the introduction and – later on – continuation of the RCEP. However, new events sometimes change things. We still do not know about the speed of the complete abolition of all the different tariffs – may be much more slowly than many experts assume today.

Furthermore: Will President (Elect) Biden work for an American joining later on which would include new negotiations? We never know. But we probably can expect that Biden will be looking for (somewhat) more relaxed relations to China –whatever this may lead to.

¤ The EU needs much more cross-border co-operation in Asia – but not with India or China.
The EU’s trade with the expanding 14 RCEP states (China excl) is, of course, much more limited than China’s. In my view, only a much more co-operative EU will have a chance of really successfully being able to compete with China in the other RCEP countries.

However, it would be wrong to see India as an alternative to the RCEP. The answer can only be RCEP and India which has been suggested. Besides, India has been invited again to join the RCEP. This is not in line with current Indian ambitions – but who knows what will happen in 10 years or so?

¤  Return to a multilateral trade treaty – indeed good news.
In recent decades China and the U.S. have developed more and more into promoters of bilateral trade agreements. Theory and research, however, prefer clearly multinational trade deals.

The RCEP finally means a step into the right policy direction!

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

 

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