One of the most interesting announcements last week (and perhaps for the entire year) is the birth of a new Free Trade Area (FTA) in Asia. The trade bloc, dubbed RCEP (Regional Comprehensive Economic Partnership), cements the existing tariff-free trade in goods between various Asian countries.
The event is a milestone by all means. First, it shows that Asia is moving forward despite the coronavirus pandemic. While the West struggles to contain the spread, Asia did so very well, and life continues beyond COVID-19.
Second, this will be the world’s largest trade bloc, with more than 30% of global GDP. Third, the fifteen countries involved are led by China – four years after Trump signed the United States out of the TPP (Trans-Pacific Partnership).
RCEP and What It Means for the Region and the World
This is a free-trade agreement between fifteen Asian nations led by China. It is for the first time when China, Japan, and South Korea, the Asian powerhouses, agree to be part of a single FTA. While it may not look significant, the implications for the region and the world are tremendous on a long and very-long term horizon.
For example, think of demographics and economic growth. Asia is where most economic growth is forecast to take place in the decades ahead. Moreover, most of the world’s population lives there.
The four years of Trump’s presidency were marked by endless trade wars. The U.S.-China trade deal was the most polarized one, but the U.S. threatened tariffs with its neighbors (e.g., Canada, Mexico) and allies (e.g., European Union). By the time the U.S. signed out of the TPP, the intentions of that administration were clear – isolationism, protectionism, deglobalization.
However, the world keeps spinning with or without the United States. The new RCEP announcement is a blow-off to America’s influence in the world and reflects how much the spheres of influence changed.
The deal also shows an important factor for the world’s politics – China was able to bring together a large group of countries and get a deal signed. Let’s not forget that these are times dominated by a pandemic with most of the efforts toward solving the health crisis. Yet, somehow the Asian countries managed to put together the largest FTA in the world.
Impressive, to say the least, as it sets the base for increased welfare for the population living in that part of the world. What will the United States’ response be, considering the new administration that prepares to lead the nation for the next four years?