Asia looks to China-focused trade bloc for virus recovery
RCEP is expected to boost trade within the region by 2%, or $ 42 billion, both through increased trade and also through trade diversion as tariff rules change, experts say.
The deal is a coup for China, by far the region’s largest market with more than 1.3 billion people.
More help will be needed: Two years of lockdowns, border closures, mandatory quarantines and other restrictions have cost millions of people their jobs while also contributing to manufacturing and shipping disruptions that are disrupting them. supply chains around the world.
Countries facing outbreaks of the rapidly spreading variant of the omicron coronavirus have held back recent measures to reopen to international travel.
Regional economies contracted 1.5% in 2020. They rebounded, with the Asian Development Bank forecasting 7.0% growth this year, boosted by weak figures from the previous year. But next year, growth is expected to slow to 5.3 percent.
The pandemic has slowed progress in ratifying the trade agreement for some countries.
China was the first to ratify the RCEP, in April, after it was signed in November 2020 at a virtual meeting of the leaders of its 15 member countries. Indonesia, Malaysia and the Philippines have yet to do so, although they are expected to ratify it soon. Myanmar, whose government was overthrown by the military on February 1, has ratified it, but is awaiting acceptance by other members.
Beijing is fully prepared for the new trade bloc, having already fulfilled 701 “binding obligations” for the RCEP, Chinese Vice Commerce Minister Ren Hongbin said Thursday.
“RCEP is of great importance in building new development models and an important step in opening up our economy,” Ren said according to a transcript of a press conference on the ministry’s website. He said the bloc would bring member economies closer together and “significantly boost confidence in economic recovery from the pandemic.”
The Chinese-initiated RCEP appeals to other developing countries as it reduces barriers to trade in agricultural products, manufactures and components, which constitute most of their exports. It says little about trade in services and business access to their respective economies, which the United States and other developed countries want.
RCEP was originally said to have included around 3.6 billion people. Without India, which has withdrawn, it still covers more than 2 billion people and almost a third of all trade and commerce.
The United States-Mexico-Canada Agreement, or USMCA, the revamped version of the North American Free Trade Agreement under Trump, covers slightly less economic activity but less than a tenth of the world’s population. The EU and the Comprehensive and Progressive Trans-Pacific Partnership, the revised version of an agreement that former President Donald Trump rejected, are also smaller. The RCEP comprises six of the remaining 11 members of the CPTPP.
Like any trade agreement, RCEP has its critics.
In a recent legislative hearing broadcast on YouTube, government officials urged Indonesian lawmakers to adopt RCEP, one of three pending trade deals.
But Elly Rachmat Yasin, a member of a committee responsible for agriculture, environment, forestry and maritime affairs, questioned Indonesia’s Minister of Commerce, Muhammad Lutfi, on the wisdom of Indonesia’s involvement. , noting that India had pulled out largely for fear that Chinese imports would overwhelm its markets.
Lutfi responded that the RCEP would help boost exports and attract additional inflows of up to $ 1.7 billion in foreign investment by 2040.
Philippine Commerce Secretary Ramon Lopez said he expects lawmakers to ratify the pact in January, after running out of time to do so in December, when the government was busy dealing with the consequences of ‘a typhoon that struck on December 16, leaving 375 people dead and hundreds of thousands without adequate housing.
The trade bloc is expected to open many jobs in the service sector to workers in member countries – a big draw for countries like the Philippines that rely heavily on remittances from migrant workers.
“RCEP will increase GDP and reduce the incidence of poverty. This will open up more market access for our exports and expand the supply of necessary inputs that will improve the competitiveness of our manufacturing sector and our exporters, ” Lopez said.
“There is no reason or logic not to ratify RCEP,” he said, adding that not to do so would be “catastrophic” as investors would likely favor countries in the trade bloc.