15 countries are part of the agreement, considered the largest free trade agreement in the world. Almost a third of the population and 30% of the global gross domestic product are concentrated in the area covered by the agreement, whose members – among which is not the United States – exchange a greater volume of trade with each other than with the United States and Europe together. Critics believe it is too focused on favoring China and lacks regulation on labor rights and the environment.
On January 1, the Regional Comprehensive Economic Association (RCEP) came into force, a free trade agreement that seeks to increase exchange by 42,000 million dollars in an area that brings together the second most powerful economy in the world. , that of China, almost a third of the world population and 30% of the global gross domestic product.
The agreement, considered the largest free trade agreement in the world, includes 15 countries, and on it are centered the hopes of the economic relaunch of the region in the middle of the pandemic.
In a first stage, the RCEP was activated in Australia, Brunei, Cambodia, China, Japan, Laos, New Zealand, Thailand, Singapore and Vietnam, and on February 1 it will do so in South Korea.
Ratification by Malaysia and the Philippines is still awaited, and Indonesia’s chief economy minister, Airlangga Hartarto, said on Friday that he believes his country will ratify membership in 2022. Myanmar has already approved it, but the bloc has yet to give the go-ahead. for the entry of the nation, whose government was overthrown by a military coup.
Meanwhile, the presence of the United States in a treaty is conspicuous by its absence that is considered a springboard for China to continue consolidating its economy in the coming years and decades, as well as a lever to strengthen its area of influence after the crisis created by the pandemic.
What will be the benefits that RCEP will bring to its members?
The treaty provides for a reduction in tariffs on those products manufactured with at least 40% of parts coming from the RCEP region, which at this time represent 65% of the goods that are exchanged between the signatory countries. It is expected that after 20 years of validity of the agreement, that proportion will reach 90% of the products.
The reduction of income to the states from tariffs should not affect the provision of public services such as health or social spending, which are generally financed with direct taxes, such as income.
The RCEP also streamlines business procedures, provides for intellectual property rights and public procurement, and covers areas that grew particularly during the pandemic such as electronic commerce.
The RCEP, the world’s largest free trade agreement, enters into force
During the two years that have passed since Covid-19 emerged, the countries of the region have seen their economy and production capacity contract. In 2020 that reduction was 1.5% and according to forecasts by the Asian Development Bank, the year that ended should have recovered by 7%, but a further slowdown of 5.3% is expected in 2022.
Millions of jobs have been lost, and that has resulted in a lower volume of manufacturing and shipping that is affecting supply chains globally. Being involved in the largest free trade agreement on the planet will represent an impulse to alleviate the effects of the pandemic.
Not everything is perfect in the RCEP
However, the RCEP also has its critics and detractors, who find significant loopholes and disproportionate advantages for the area’s largest economy, China. In fact, India decided not to agree to the agreement, fearing that Chinese imports would sweep away its markets.
The RCEP reduces barriers in the exchange of agricultural goods, finished goods and components, which constitute the majority of exports from the countries of the bloc, but offers little insight into trade in services or the operation of companies in economies other than those of the United States. their countries of origin.
Nor does it have particularly demanding provisions regarding labor rights or environmental impact, fundamental aspects in any treaty signed with the approval of the European Union and other Western countries. For example, the Trans-Pacific Association, a pact with many of the same countries -except for China-, includes aspects to reinforce standards of labor law and environmental law, among others.
According to some economic newspapers, peasant organizations also fear that the treaty will lead to a loss of land to small owners in favor of large companies. In the last decade, 9.6 million hectares of these lands have passed to large multinationals like the South Korean Daewoo, the Singaporean company Wilmar, or the Chinese Beidahuang, according to the NGO Grain.
Balance is another aspect where analysts see cracks. A report of the United Nations Conference on Trade and Development prepared in March warns that the RCEP will benefit the trade balance of highly developed countries, such as Japan, but not that of others with less powerful economies such as Cambodia.
In the midst of these chiaroscuro, the signatories see in the treaty an opportunity to fight poverty, open up to new markets and expand the sources of imports of parts, which will strengthen the competitiveness of the manufacturing sector, as assured by the Secretary of Commerce of the Philippines, Ramón López, when recommending to Congress the approval of accession.
With AP, EFE and Reuters
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