January 22, 2022

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The world’s largest free trade agreement is about to be born

This January 1 marks the birth of the Regional Comprehensive Economic Union Agreement (RCEP), which will be followed by other smaller regional camps such as the United States-Mexico-Canada and the European Union (EU).

The 15 signatories represent about 30 percent of global GDP and almost the same proportion of the world’s population, all committed to liberalizing trade in the world and avoiding the more general protectionist policies.

In fact, any FTA in which China participates is blind, but it also includes powerful economies such as Japan, Australia, New Zealand and South Korea (only one approval is pending, but it will be done in April).

It was concluded by the 10 members of the Association of Southeast Asian Nations (ASEAN): Brunei, Cambodia, Philippines, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand and Vietnam.

The Great Absence

The force of the agreement may still be high, but at the time of signing it (November 2020), India refused, saying it did not guarantee a balanced trade balance. New Delhi demanded greater market access to goods and services and the protection of its companies against unfair practices.

Another that is not in this new integrating framework is the United States, which withdrew from negotiations shortly after Donald Trump became President (2017-January, 2021) as one of the first steps in its controversial US First policy.

According to analysts, Washington has given Beijing a significant geopolitical advantage in the Asia-Pacific region, in addition to resolving trade disputes between the two countries or resolving potential disputes with other countries.

While the benefits of the RCEP have not been seen from the outset, they see it as a viable “vaccine” for member economies that have been more or less affected by the Govt-19 epidemic.

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Some did not rule out the possibility that President Joe Biden would reconsider his predecessor’s decision and bring the United States back to the negotiating table at some point. They point out that India can do the same.

World Trade Center for Gravity

Currently, the United States-Canada-Mexico FDA accounts for 28 percent of world trade; EU, 17.9 percent; African Continental Agreement, 2.9 percent; And the southern general market, 2.4 percent.

The RCEP will be approximately 33 percent, but a study by the United Nations Conference on Trade and Development (Unctad) concluded that this share would increase gradually.

From the outset, the agreement establishes general rules on conventional and e-commerce, investment and intellectual property, and 20 years after it comes into force it removes 90 percent of taxes on general imports.

The signatories wanted to stay away from this liberalization framework, which is seen as a strategy for agriculture and the automotive industry.

According to Unctad, the RCEP will enable its partners to better cope with the economic crisis caused by the Govt-19 epidemic, the timing of which remains a mystery.

In terms of benefits for one or the other, experts believe that in the absence of the US and India, the biggest beneficiaries would be China, Japan and South Korea. Level of utilization of liberalized market.

Some believe that the RCEP will take a long time to show its benefits, but what everyone agrees is that this January 1 will mark the beginning and the end of international trade.

arb / asg

Prinza Latina reporter in Vietnam

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