Together with 14 other countries – China signs the world’s largest free trade agreement
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Together with 14 states in the Asia-Pacific region, China concludes a historic free trade agreement after marathon negotiations. The allies were already responsible for 29 percent of the global trade volume – and could become even more influential. Regardless of the trade conflict with the USA, China has signed the largest free trade agreement in the world with 14 Asia-Pacific countries. After eight years of negotiations, the signing of the virtual summit of the Southeast Asian community of states Asean in Vietnam’s capital Hanoi took place. The “regional, comprehensive economic partnership” or RCEP, as the pact is abbreviated, comprises 2.2 billion people and around a third of global economic output. The agreement reduces tariffs, sets common trade rules and thus also facilitates supply chains. It encompasses trade, services, investment, e-commerce, telecommunications and copyright.
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RCEP stands for “Regional Comprehensive Economic Partnership”. In addition to the second largest economy, China and the ten Asean countries Vietnam, Singapore, Indonesia, Malaysia, Thailand, the Philippines, Myanmar, Brunei, Laos and Cambodia, Japan, Australia, South Korea and New Zealand are also participating. Against the background of the ongoing trade war with the USA, the free trade pact is a great success for the communist leadership in Beijing.
Free trade pact is of “massive importance”
According to experts, the agreement will advance economic integration in the Asia-Pacific region and counteract protectionist tendencies. Before the Corona crisis, the RCEP countries accounted for 29 percent of the global trade volume – slightly less than the EU with 33 percent. The share of the RCEP community is likely to increase, as experts expect. “RCEP will redraw the economic and strategic map of the Indo-Pacific,” said Jeffrey Wilson of the Australian Strategic Policy Institute (ASPI). The free trade pact is of “massive importance”. He will also “give a boost” to efforts for an economic recovery after the pandemic.
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The agreement was preceded by 31 rounds of negotiations and 18 ministerial meetings. Self-imposed deadlines were not met six times. In the end, the agreement was particularly dependent on India, which did not want to open up that far. But when New Delhi withdrew from the negotiations at the end of last year, the way was paved for the agreement. The pact forms a further free trade area alongside the community of the other Asia-Pacific free trade agreement, the CPTPP, which is abbreviated to “Comprehensive and Progressive Agreement for a Trans-Pacific Partnership”. However, the CPTPP only represents 13 percent of global economic output. It is left over from the more ambitious Trans-Pacific Partnership (TPP) project after US President Donald Trump withdrew the US from the deal in 2017. Although the Asean talks were only held virtually, Trump did not attend the summit for the third year in a row.
Conflicts between Australia and China
While the US has lost weight in the Asia-Pacific region under him, China is extending its influence even further with the new free trade pact. RCEP is more far-reaching than CPTPP, but does not go as deep as experts describe. The trans-Pacific partnership CPTPP between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam has so far been ratified by seven states and comprises 480 million people.
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It remains to be seen whether the USA will rejoin the trans-Pacific partnership under the new President Joe Biden, which would also require the approval of Congress. Experts pointed out that both free trade pacts are not in competition with each other and membership is not mutually exclusive. Rather, the new RCEP agreement with China works as a supplement. Japan, Vietnam, Singapore, Brunei, Malaysia, Australia and New Zealand belong to both. The new free trade pact does not mean, however, that all problems between the trading partners have been resolved or that individual countries are not concerned about the growing dependence on China.Japan is currently reviewing its supply chains in China.There are also conflicts between Australia and China because Beijing is restricting imports from Australia due to political tensions.The agreement nonetheless demonstrates that Asia-Pacific economies are very skeptical of the technological and economic “decoupling” from China propagated by the US under Trump.
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CC 7200, SNCF,
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