Recently the largest trade agreement in history has been signed, at least for the population involved. If a few years ago we spoke that the agreement between Mercosur (Argentina, Brazil, Paraguay and Uruguay) and the EU would be the largest trade agreement in the world in terms of population involved by including 773 million people, the RCEP (Regional Economic and Cooperation Partnership) agreement it has left it short, involving more than 2,200 million people, 30% of the world’s population.
This leaves other agreements such as the EU, or those with the EU with Japanny Mercosur or the agreement between the US, Mexico and Canada (also known informally as NAFTA 2.0). It is not only the population size of the economies involved in the agreement, but the growth potential that they will have in the coming years.
This agreement involves ASEAN countries (Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Burma, and Cambodia), to China, Japan, South Korea, Australia and New Zealand. For a time India was also going to join, with 1.3 billion inhabitants it would add a brutal weight to the agreement, but for now it has withdrawn. It remains to be seen whether in the next few years they will be able to involve this giant in their agreement.
What does the RCEP mean?
RCEP may not be as ambitious as many other trade agreements, as it involves only an elimination of tariffs on 90% of products. It includes provisions regarding telecommunications, financial services, professional services and electronic commerce. However, it does not homologate regulations or include environmental provisions. In addition, many of these countries already had trade agreements with each other, so what it does is consolidate trade relations. If it is true that trade friction between these countries decreases, since a product made in Indonesia with Australian components could be taxed by tariffs when exported to Malaysia, for example.
Also is true that relations between some member countries are not very good. Australia and China have a pretty strained relationship at the moment. Like Japan and South Korea. It is true that it has been a great achievement to include countries like Japan and China in the same trade agreement.
We are also talking about the whole of several of the economies that are expected to grow the most in the coming decades. By 2050, The world’s major economies are expected to be China, India, the US, and Indonesia. Brazil, Russia, Mexico, Japan, Germany and the United Kingdom (in this order). This deal would involve three of them, four if they ever get India to join.
With this, more stagnant economies such as Japan are linked to economies with a higher growth rate such as Indonesia, whose companies have greater ease when accessing more developed markets and with higher disposable family income such as New Zealand or South Korea.
When the US withdrew from the Trans-Pacific agreement, it left China free
We can remember the Trans-Pacific Economic Cooperation Agreement. This agreement, promoted by the Obama administration, was designed to orient the Pacific economies more towards the US in the face of growing Chinese influence. The Trans-Pacific agreement also included Latin American countries, thereby forming the germ of a trade agreement that would make the Pacific the new center of the world.
The member countries were to be Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the US. Other countries such as Colombia, the Philippines, Thailand, Taiwan, South Korea, Indonesia, Sri Lanka, China and even the United Kingdom have declared their interest or intention to join. This agreement would have united the third, seventh and eighth economic powers and could have come to rival the magnitude of the RCEP. But in 2017, the US withdrew from the agreement, leaving it on a dead end, only Japan and New Zealand came to ratify it.
This movement has allowed China to take commercial leadership, as we already indicated that it could happen.. China is one of the main beneficiaries of this agreement by reducing its economic dependence on the United States. It also begins to open the door to other, deeper trade agreements or with other more distant countries, such as Africans or Europeans.
Ask readers Will the US be able to counter this trade agreement with another in the Pacific countries?
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