RCEP: Asia-Pacific Countries Form World’s Largest Trading Bloc With China

China and 14 other countries have agreed to form the world’s largest free-trade bloc, encompassing nearly a third of all economic activity, in a deal many in Asia are hoping will help hasten recovery from the shocks of the coronavirus pandemic. The Regional Comprehensive Economic Partnership, or RCEP, was signed virtually on Sunday on the sidelines of the annual summit of the 10-nation Association of Southeast Asian Nations (ASEAN). The Regional Comprehensive Economic Partnership (RCEP) Agreement is an agreement to broaden and deepen ASEAN’s engagement with Australia, China, Japan, Korea, and New Zealand.  

RCEP’s economic significance

RCEP will connect about 30% of the world’s people and output and, in the right political context, will generate significant gains. RCEP could add $209 billion annually to world incomes, and $500 billion to world trade by 2030. According to ET, RCEP aims is to lower tariffs, open up trade in services, and promote investment to help emerging economies catch up with the rest of the world.

 

Member States

Member states of ASEAN and their FTA partners are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, China, Japan, India, South Korea, Australia and New Zealand.

 

The Objectives of RCEP

Specifically, RCEP is expected to help reduce costs and time for companies by allowing them to export a product anywhere within the bloc without meeting separate requirements for each country. The objective of the RCEP Agreement is to establish a modern, comprehensive, high-quality, and mutually beneficial economic partnership that will facilitate the expansion of regional trade and investment and contribute to global economic growth and development.

China’s Role

RCEP was pushed by Beijing in 2012 in order to counter another FTA that was in the works at the time: The Trans-Pacific Partnership (TPP). The US-led TPP excluded China. However, in 2016 US President Donald Trump withdrew his country from the TPP. Since then, the RCEP has become a major tool for China to counter the US efforts to prevent trade with Beijing. The accord is a coup for China, by far the biggest market in the region with more than 1.3 billion people, allowing Beijing to cast itself as a “champion of globalization and multilateral cooperation” and giving it greater influence over rules governing regional trade, Gareth Leather, senior Asian economist for Capital Economics, said in a report.

Now that Trump’s opponent Joe Biden has been declared president-elect, the region is watching to see how US policy on trade and other issues will evolve.

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Sino-American Relationship on A More Positive Path Under Joe Biden

The Democratic candidate Joe Biden’s victory in the US presidential election has ushered in new hopes and possibilities in among businesses not only in the USA but all across the globe. There might be some improvements in the US-China relations. Business world can expect new opportunities as a natural outcome of an improved relations between these two countries.

Suing a Chinese Company

We can expect that under the presidency of Biden, Chinese-U.S. ties, which are currently under extreme duress, are likely to become better. 2021 offers an excellent chance for the new government to engage in a constructive engagement with the China and reenergize the business sector dwindling from the effects of global Corona pandemic. Biden and many in Washington may feel a renewal of the U.S.’s China strategy will reshape the economy.

 

China has a long history of sending subtle signals to start new diplomatic conversations. Biden administration should respond positively if any such offers come from China or they should make an attempt to set the Sino-American relationship on a more positive path. Bernstein analyst Doug Harned expects spending priorities to be similar under either Biden or Trump because global threats are high, and building more planes and ships is a way to preserve U.S. jobs and jolt the economy. Biden is widely expected to raise corporate taxes in line with his plan of hiking the rate to 28% from 20% currently.

 

On China, it is thought that Joe Biden will continue the tough line on trade as his predecessor. But he will deal with the matters in a different way. Rather than trying to bullying allies as Trump did, he is expected to treat disputes rather intelligently. Biden has railed against Trump’s trade war, and he could roll back many of the tariffs the Trump administration implemented. This is the aspect businesses are looking for.

 

China’s State mouthpiece the Global Times said in an article that a Biden presidency could “usher in a ‘buffering period’ for already-tense China-US relations, and offer an opportunity for breakthroughs in resuming high-level communication and rebuilding mutual strategic trust between the two countries.”

 

China might, of course, try to find advantage in Joe Biden’s willingness to seek co-operation on big issues like climate change. IT stocks all across the world surged as the Democrats win the US elections, considered more liberal on immigration, foreign policy, international trade and climate change. Entire segments of the economy that have yet to recover from the initial outbreak of the virus — including the travel, IT and hospitality industries — are expected to grow under the Biden government.

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