Will RCEP make Asia ‘ center of gravity’ for global commerce?
Everyone knows free trade enhances productivity and creates wealth. With the 15- member RCEP ( Regional Comprehensive Economic Partnership) coming into force at the beginning of 2022, the world’s largest free trade area is born that will bring heightened certainty to open, fair, inclusive and rules- based multinational trade and investment to all the signatories. In sharp contrast to the US government’s penchant for imposing trade tariffs and unilateral economic sanctions against other countries, RCEP is likely to make Asia the “center of gravity” for global commerce and prosperity.
Under RCEP, around 90 percent of trade tariffs within the bloc will eventually be eliminated. The deal is intended to drastically cut red tape as it includes one set of common rules of origin throughout the member economies, which implies 15 members only require “one certificate of origin for trading” and help shore up formation of an efficient supply chain within the bloc. There are varied calculations on how much RCEP will create to the regional economy with some projecting the deal will add approximately $ 500 billion to world trade by 2030.
Through new market access commitments and streamlined, modern rules and disciplines that facilitate trade and investment, RCEP promises to deliver new business and employment opportunities, strengthen supply chains in the region, and promote the participation of micro, small and medium enterprises into the regional value chains and production hubs.
Asia- Pacific regional economic markets are set to gain new momentum, as sharply lowered tariffs and enhanced market access among the 15 member countries will revitalize a whole stream of industries like machinery, steel, automobiles, electronics, medicine, aviation, finance, education and tourism. E- commerce and AI- led technology innovations will also grow in the region thanks to closer corporate cooperation and personnel free flow enabled by the new deal.
RCEP is expected to have a far- reaching impact on regional trade facilitation and economic integration over the coming years. And, under this framework, the three countries in Northeast Asia – China, Japan and South Korea which are among Asia’s four largest economies – are to greet surging trade and investment among them. Based on RCEP framework, the three are likely to ramp up negotiations to form a tripartite free trade agreement soon.
In a time of rising geopolitical volatility due to an increasingly reckless government of the US, RCEP will gear up all 15 members’ confidence in overcoming their businesses’ operational risks, as the agreement brings higher certainty to business demand and supply within the trade bloc.
However, with RCEP now in effect, politicians in Washington are very worried. They fret that lack of participation by the US will “allow Beijing to solidify its role as driver of economic growth in Asia.” Should RCEP serve as igniting a key engine of trade, investment and economic growth in the world, how could the US be left out? Those politicians wonder.
15 Republican senators on US Capitol Hill wrote a letter to the White House in November, urging the Biden administration to begin trade negotiations with American allies in Asia.
Will the US change course and come back to free and fair trade? Very unlikely. Former president Donald Trump made trade a toxic issue, and the Biden administration has all but inherited his predecessor’s protectionist trade and investment policy. The White House only cares about bringing more outsourced factories and jobs back to America and it hates to remove hefty tariffs that would have benefited China and other economies.
But RCEP will hand a good opportunity for Asia, including China, to build up an edge, or a firewall against the US government’s attempts to renege and shake economic globalization. A Chinese saying goes: By a half- sunken boat, a thousand others are sailing. wangyi@ globaltimes. com. cn