Many countries participating in the trade deal fear they will become too economically dependent on China.
Fifteen Asia-Pacific countries, including China, aim to secure the world‘s largest free trade deal this weekend, the culmination of Beijing’s decade-long quest for greater economic integration with a region which encompasses nearly a third of the world‘s gross domestic product.
The Comprehensive Regional Economic Partnership, which includes countries ranging from Japan to Australia and New Zealand, aims to reduce tariffs, strengthen supply chains with common rules of origin and codify new rules on e-commerce. Its passage could put some US companies and other multinationals outside the zone at a disadvantage, particularly after President Donald Trump’s withdrawal from negotiations on a separate Asia-Pacific trade deal formerly known as the Trans-Pacific Partnership.
Following India’s withdrawal from RCEP negotiations last year, the other 15 countries have sought to announce the deal by the end of this week’s ASEAN summit, which Vietnam is virtually hosting. Malaysian Commerce Minister Azmin Ali told reporters the deal would be signed on Sunday, calling it the culmination of “eight years of negotiations with blood, sweat and tears.”
“The TPP has been much more involved in fundamental changes in the economy, while the RCEP is rather ‘open the door to trade and focus on the bottom line’,” said Wellian Wiranto, economist at Oversea-Chinese Banking Corp. “The RCEP will be seen as more China-centric, but I don’t think it would be the same as the TPP was US-centric.”
The impact can extend beyond the region. The progress of the deal illustrates how Trump’s decision to pull out of the TPP – now known as the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership – diminished America’s ability to balance the economic weight of the China with its neighbors. That challenge could soon pass to President-elect Joe Biden if, as expected, he officially certified the winner of the November 3 election.
Whether RCEP changes regional dynamics in favor of China depends on the response from the United States, said William Reinsch, trade manager in the Clinton administration and senior adviser at the Center for Strategic and International Studies in Washington. .
“If the United States continues to ignore or intimidate countries there, the pendulum of influence will tip over to China,” Reinsch said. “If Biden has a credible plan to restore US presence and influence in the region, then the pendulum could turn back.”
While the RCEP is not as ambitious as the TPP, its implementation could make it more difficult for U.S. companies to compete with a China-backed partnership that encompasses 2.2 billion people with a combined GDP of around $ 26 trillion.
Biden and TPP
Yet many countries participating in the trade deal are also concerned about becoming too economically dependent on China. Japan is among the countries that have sought to reassess supply chains in China, and Beijing’s decision to effectively ban major Australian exports after its government called for an investigation into the origin of the coronavirus highlighted the risk of over-dependence on the world‘s second-largest economy. .
While it remains politically difficult for Biden to join the TPP successor, some analysts still see this as the best way for the United States to deepen economic ties with the region.
“The choice for Biden is clear,” said Mary Lovely, professor of economics at Syracuse University. “Return the United States to the Trans-Pacific Partnership to ensure access for American companies.”
Several sticking points remained among RCEP countries, even a few days before the signing. Vietnamese Deputy Foreign Minister Nguyen Quoc Dzung told a briefing on Monday that the signing will depend on the completion of “internal procedures” of participating countries.
“There are still issues with RCEP,” said Deborah Elms, founder and executive director of Singapore-based Asian Trade Center, whose company consults with companies operating across Asia and which is in frequent contact with Asean officials. “The sticking points remain the same: an inability of some member couples to complete the final details of the tariff lists. These are negotiated bilaterally, especially for sensitive products.”
Exit from India
Southeast Asia, which was forced to tackle the virus as it spread from China earlier this year, has seen a patchy recovery. The 10 countries vary widely in their starting economic position, the number and severity of successive outbreaks, the ability and willingness to deliver fiscal and monetary stimulus, the timing and stringency of foreclosure, and the concentration of industries. badly affected.
Thailand’s GDP is among those expected to deteriorate in 2020, contracting by around 7.2% this year, as Vietnam is set to be a rare economy in the world to accelerate its growth.
India surprised participants late last year by dropping the China-backed trade deal. At the time, Prime Minister Narendra Modi said he was guided by the impact this would have on the lives and livelihoods of all Indians, especially the vulnerable segments of society. Despite its pullout, officials said India could resume talks if it chooses to do so at a later date.
India’s exit from the deal ended up removing one of the pact’s biggest obstacles. In June, ministers from RCEP countries reaffirmed their determination to sign the deal as global trade, investment and supply chains face unprecedented challenges due to the Covid-19 pandemic.
“All the big negotiations and even the smallest come down to a mad rush at the last minute,” Elms said. “Officials always hold their best and final offers until there is literally no time left for further compromises.”
– With the help of Isabel Reynolds, Arys Aditya and Kevin Varley.
(Except for the title, this story was not edited by GalacticGaming staff and is posted from a syndicated feed.)
