China pulls one over US in world’s biggest free trade deal

China pulls one over US in world’s biggest free trade deal

By Tracy Cabrera

TAKING advantage of the euphoria streaking across the United States with the election of Democrat Joe Biden, Beijing has certainly pulled one over Washington with fifteen Asia-Pacific countries signing what is believed to be the world’s biggest free trade deal of the century.

Seen as a huge coup for China in extending its influence in the region, the trade deal has been finally sealed at the end of the recent Southeast Asian summit with leaders and stakeholders pushing to get their pandemic-hit economies back on track and on the road to recovery.

The summit was bannered by the Regional Comprehensive Economic Partnership (RCEP) which includes ten Southeast Asian economies along with China, Japan, South Korea, New Zealand and Australia. Members of the partnership account for around 30 percent of global gross domestic product (GDP).

“Under the current global circumstances, the fact the RCEP has been signed after eight years of negotiations brings a ray of light and hope amid the clouds,” Chinese Premier Li Keqiang enthused after the virtual signing.

“It clearly shows that multilateralism is the right way, and represents the right direction of the global economy and humanity’s progress,” Li added.

The agreement to lower tariffs and open up the services trade within the bloc does not include the United States and is viewed as a Chinese-led alternative to a now-defunct Washington trade initiative.

The RCEP “solidifies China’s broader regional geopolitical ambitions around the Belt and Road initiative,” trade expert Alexander Capri of the National University of Singapore Business School pointed out in reference to Beijing’s signature investment project that envisions Chinese infrastructure and influence spanning the globe.

“It’s sort of a complementary element,” Capri noted.

However, many of the signatories are battling severe coronavirus outbreaks and they are also hoping the RCEP will help mitigate the crippling economic cost of the pandemic.

Indonesia recently tumbled into its first recession for two decades while the Philippine economy shrunk by 11.5 percent on-year in the latest quarter.

“Covid has reminded the region of why trade matters and governments are more eager than ever to have positive economic growth,” said Deborah Elms, executive director of the Singapore-based consultancy firm Asian Trade Centre.

Last year, Delhi pulled out of the agreement over concerns about cheap Chinese goods entering the Indian market and was a notable absentee during the trade deal’s virtual signing.

Signatories to the agreement said they hoped India would rejoin in the future, acknowledging its ‘strategic importance’ to the deal which already covers more than two billion people.

The pact should help shrink costs and make life easier for companies by letting them export products anywhere within the bloc without meeting separate requirements for each country.

The agreement touches on intellectual property, but environmental protections and labor rights are not part of the pact.

The deal is also seen as a way for China to draft the rules of trade in the region, after years of US retreat under President Donald Trump which have seen Washington pull out of a trade pact of its own, the Trans-Pacific Partnership (TPP).

Though US multinationals will be able to benefit from RCEP through subsidiaries within member countries, analysts said the deal may cause President-elect Joe Biden to rethink Washington’s engagement in the region.

This could see the US eye the potential benefits of joining the TPP’s successor deal, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), said APAC chief economist Rajiv Biswas.

“However, this is not expected to be an immediate priority issue… given the considerable negative response to the TPP negotiations from many segments of the US electorate due to concerns about US job losses to Asian countries,” Biswas concluded. (AI/MTVN)

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