China leads RCEP, the world's largest free trade agreement
On the first day of 2022, the world's largest free trade agreement, the Regional Comprehensive Economic Partnership (RCEP), came into force. This treaty, which seeks economic integration among 15 countries in the Asia-Pacific region, has already begun to operate in China, Australia, Brunei, Cambodia, Japan, Laos, New Zealand, Thailand, Vietnam and Singapore. South Korea is scheduled to go live on 1 February. On the other hand, Indonesia, Malaysia, and the Philippines have not yet ratified, although Jakarta is expected to do so early this year, as reported by Indonesian Finance Minister Airlangga Hartarto. Another country that is not yet part of the RCEP is Myanmar. Although the country's authorities have accepted it, the rest of the members must give the go-ahead for the country, whose legitimate government was overthrown in a coup in February last year, to join.
This agreement, which began to be negotiated in 2012, will further stimulate economic development in the Asia-Pacific area. The region, in addition to experiencing the world's fastest economic growth and having the second largest global economic power (China), accounts for 25 % of world trade and its market comprises some 2.3 billion people, almost 30 % of the population. Moreover, the gross domestic product (GDP) of the signatory countries as a whole amounts to 26.2 trillion dollars (22.14 trillion euros), which is equivalent to 30% of the world's GDP. With all this favourable data, the RCEP aims to increase trade in the area by 42 billion dollars. Likewise, according to the Asian Development Bank, the gains from this treaty will reach some 174 billion dollars (153 billion euros) by 2030.
The trade alliance provides for a tariff reduction on goods manufactured with at least 40% of the parts coming from the RCEP region, a measure that seeks to protect regional products from those coming from other parts of the world. The agreement will also streamline trade procedures, as well as address intellectual property rules and aspects of the digital economy and e-commerce. This regional economic partnership is the first free trade agreement involving Japan, China and South Korea; it is also the first mega-treaty to which Beijing is a party.
However, RCEP also has its detractors. Activists and regional trade unions warn that trade and economic liberalisation will lead to a worsening of public services. They also point out that the agreement has failed to take civil society into account and contains little in the way of measures to protect the environment and labour rights. The agreement could also intensify differences between countries in the region, as experts from the United Nations Conference on Trade and Development (UNCTAD) explained. UNCTAD predicted that the RCEP will benefit the economies of more developed countries such as Japan to the detriment of disadvantaged countries such as Thailand, Indonesia and Cambodia. In addition, there is criticism of the prominence that Chinese products will have over the rest, which is why India decided to leave the treaty in 2019.
In this sense, it is worth noting that the RCEP can be considered a threat by other world economic powers. The current trade of the treaty countries is greater among themselves than with Europe and the United States combined. Moreover, given that China is the main power in this mega-agreement, the entry into force of the RCEP may create misgivings in Washington and Brussels at a time when their relations with Beijing are not at their best. The West accuses the Chinese authorities of violating the human rights of ethnic Uighurs in the Xinjiang region and citizens of Tibet, as well as repressing protests in Hong Kong. On the other hand, the economic war between China and the United States, initiated by former US President Donald Trump, is worth mentioning. The current president, Joe Biden, has maintained the line set by the Republican and has increased measures against Chinese companies, including the technology giant Huawei.
The RCEP will greatly benefit all countries in the region, especially China, which could use it to increase its influence in the area, especially now that the United States is also seeking to position itself in the Asia-Pacific to confront its main competitor. Washington was part of a similar mega-trade deal in the region, the Trans-Pacific Partnership (TPP), but abandoned it in 2017 on Trump's orders with the aim of protecting the US economy and workers in line with the protectionism carried out by the former president. Now, with the entry into force of the RCEP, many US business sectors have urged Biden to return to the TPP to confront China's economic presence in the region.
On the other hand, within this trade agreement it is important to highlight the participation of Australia and New Zealand, two key allies of the United States in the region. For this reason, the decision by Canberra and Wellington could be seen as a betrayal by Washington to position itself economically close to China. In the military and defence field, however, Australia remains loyal to the United States. In September last year, the US and Australia, together with the UK, signed the AUKUS military alliance to "defend shared interests in the Indo-Pacific". Through the treaty, the US agreed to provide nuclear-powered submarines to the Australian fleet.
The entry into force of this agreement intensifies the trade race between China and the United States and their struggle to expand their influence in the Pacific area. With the RCEP, Beijing will strengthen its hegemony in the area, although Washington will also work to maintain its presence. Biden already showed his commitment to the region last October, when he announced a $100 million fund to strengthen ties with members of the Association of Southeast Asian Nations (ASEAN).
