China and 14 other nations that make up ASEAN, Japan, South Korea, New Zealand and Australia have formally signed one of the world's largest regional free trade agreements, the Regional Comprehensive Economic Partnership (RCEP). Negotiations have been underway for 8 years and the new trade agreement covers 2.2 billion people within the region. The pact is most likely to formalize business between the countries rather than remake.
The RCEP would eliminate tariffs for goods that already qualify for duty-free treatment under existing free trade agreements. That means that countries are able to keep tariffs on imports in sectors regarded as important or sensitive. The so-called rules of origin will set common standards for how much a product must be produced within the region for the final product to qualify for duty-free treatment making it simpler for companies to set supply chains within several countries.
The pact does not go deeper into legal work, accounting or intellectual property protections. Nor does it address sensitive issues such as protecting independent labor unions, the environment or limiting government subsidies to SOEs (state-owned enterprises).
This pact is seen as a challenge to the United States former hegemonic influence in the Asian region by China. Due to the U.S. withdrawing from the TPP (Trans-Pacific Partnership), an Obama administration's response to China's growing influence in the region. It is unclear how the U.S. will respond to the new trade pact considering fraught tensions with China and the unpopularity of the TPP amongst politicians, Democrat or Republican. Either way, this new trade agreement can be seen as the rest of the world no longer waiting around for the U.S. and instead are moving forward as the U.S. tries to reset itself.
https://www.nytimes.com/2020/11/15/business/china-trade-rcep.html
I think we will see more China-led trade agreements in the near future. In China's most recently published 5 year plan (2021-2025), the Chinese government announced a dual strategy of both remaining involved in the global economy while relocating supply chains to home. To bolster its international prestige and keep its GDP growth at the high levels it believes it needs to maintain social stability, China will have to enter into free trade deals such as the one mentioned in the article: agreements to lower tariffs, but with few concessions on industries deemed "sensitive" or the influence of SOEs in the economy.
ReplyDeleteDue to other countries seeing the current struggles in the United States, including the virus and the state of the presidency, we can expect to see other superpowers such as China improve their international affairs with other countries while the US tries to get back in order.
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