What will the maximum Trade Agreement bring to the conclusion of the RCEP negotiations between the 15 countries with a view to signing them next year?
The past day has been a memorable day for regional integration in Asia. On the 4th, the third meeting of (RCEP) leaders of the Regional Comprehensive Economic Partnership Agreement issued a joint statement announcing that the 15 member states of the RCEP, except India, had concluded all text negotiations and virtually all market access negotiations. And will work to ensure that the agreement is signed next year. This marks a major breakthrough in regional economic integration.
The statement pointed out that there are important issues in India that have not yet been resolved. All RCEP member States will work together to resolve these outstanding issues in a mutually satisfactory manner. India's final decision will depend on the successful resolution of these issues.
"the seven-year long run will finally usher in a 'line collision' moment," said one commentator, describing the outcome of the negotiations as hard-won. Analysts believe that the RCEP has three major implications: first, the role of an engine, boosting market confidence and injecting vitality into the global economy against the backdrop of the erosion of the international multilateral trading system by forces such as anti-globalization and increased downward pressure on the world economy. Second, the demonstration effect will make the western Pacific coast a bright spot in exploring the channels of global economic development, and set a positive example for bilateral and multilateral free trade arrangements in Asia and the world as a whole. Third, social utility has brought tangible benefits and convenience to enterprises and people of all countries in the region, including China.
About 30 rounds of "marathon talks"
While US President Donald Trump has erected tariff barriers, Asia is betting on free trade. Now, the critical moment has come for the largest trade agreement you have ever heard of. " Foreign Policy magazine wrote.
RCEP is the largest and most important free trade agreement in the Asia-Pacific region. It was launched by the ten ASEAN countries in 2012 and invites China, Japan, South Korea, Australia, New Zealand and India to participate. The 16 RCEP members aim to establish a single market free trade agreement by reducing tariff and non-tariff barriers.
Compared with free trade arrangements such as the Comprehensive and Progressive Trans-Pacific Partnership Agreement ((CPTPP)), which entered into force at the end of last year, RCEP is a veritable "big man". It covers about half of the world's population, 32.2 per cent of global GDP,29.1% and 32.5 per cent of global investment, making it the most populous and potential regional free trade agreement in the world. It will also further promote the integration of industries and value chains in the region and inject strong impetus into regional economic integration.
It is obviously not easy for so many countries to sit together and reach an agreement that "satisfy you, and I will not lose". This is why the RCEP has been playing games since the start of the talks, with about 30 rounds of "marathon talks."
Xu Liping, a researcher at the Institute of Asia-Pacific and Global Strategy at the Chinese Academy of Social Sciences, pointed out that the RCEP negotiating countries span the two continents of the northern and southern hemispheres, including Japan, Australia and other developed countries, as well as Cambodia, Laos and other less developed countries. There is also a domestic demand economy such as India, which is driven by domestic consumption and whose market is relatively closed. It can be said that the level of development is uneven and the market difference is significant. For example, the GDP, of Japan, a developed country, is more than 300 times higher than that of Myanmar, the most backward country. One of the cores of RCEP negotiations is the market entry threshold. Whether to set high or low is related to the economic lifeline of all countries, which is the reason for the twists and turns of the negotiations.
More importantly, RCEP members pay close attention to their own sensitive areas, such as India's weak manufacturing capacity, and the average tariff is the highest among RCEP countries, fearing that RCEP will hurt related industries. South Korea and Japan focus on the vital interests of agriculture and food producers; in other countries, the degree of opening up of the service industry is relatively low, and put forward the conditions and specific scope of gradual opening up, and so on. The entanglement of these core issues has delayed the process of RCEP negotiation.
Crisis-driven, accelerated negotiations
Now, why did the RCEP negotiations finally kick the door? In Xu Liping's view, this is first and foremost the result of "crisis-driven".
In the face of the headwinds of trade protectionism triggered by Mr Trump's "America first" policy, countries are building a consensus to protect the free trade order and put the global economy back on track.
Xu Liping said: recently, major international organizations such as the World Bank have repeatedly lowered their global growth forecasts for this year and next, and the world economy is in decline or even in recession, which will bring new and severe challenges to countries around the world, including East Asia. Looking at the economic growth of Asian countries, it is worrying that even Singapore, which used to be stable at 2%-3%, grew by only 0.6% in the first half of the year, which has never been seen before. The economies of Japan, India and other countries are also shrouded in gloom. Asian countries urgently need to find new sources of growth to boost market confidence. These factors have led to the sprint of RCEP, which has been negotiated for many years.
According to Foreign Policy magazine, RCEP members such as Australia and New Zealand were initially unenthusiastic about the moderate terms of the agreement. But as Mr Trump launched a trade dispute that chilled the world and raised fears of the "survival" of the decades-old global trade order, they became willing to compromise just to help prop up a threatened order.
Secondly, a series of small and medium-sized FTA negotiations (such as ASEAN-Australia-New Zealand FTA, China-Singapore FTA, China-Australia FTA, Japan-Philippines FTA, etc.) laid the foundation for RCEP negotiations and reduced the difficulty of mediation among RCEP member states. Their early gains have given member countries a taste of the benefits of trade liberalization and investment facilitation, making them more eager to deepen cooperation in regional economic integration.
Finally, the encouraging progress in the negotiations is also inextricably linked to the constructive role played by China. In the course of RCEP negotiations for many years, China has actively "promoted talks, promoted cooperation, and facilitated". In August this year, the RCEP ministerial meeting was held in Beijing. This is an important meeting held at the critical stage of the RCEP negotiations and has led to important progress in the negotiations.
Focus on tax reduction, there is room for upgrading
How is RCEP different from the free trade arrangements reached in the past?
Liu Qing, director of the Asia-Pacific Institute of the China Academy of International Studies, pointed out that the first difference is that the participants in the RCEP are mainly Asian developing countries, highlighting the strong momentum of economic integration in East Asia. The cooperation between ASEAN and China, ASEAN and China, Japan and South Korea is becoming more and more relevant, and the development of regional cooperation has reached a certain extent, so it is time to further expand the space.
Secondly, precisely because the standard of RCEP is set according to the actual situation of developing countries, it is not as high as the standard of TPP/CPTPP, but shows greater flexibility and comfort, fully reflecting the maximum common divisor of the development aspirations of the participants. There is also room for future upgrades to a higher level. According to Foreign Policy magazine, the RCEP aims to reduce tariffs among member countries, take some measures to open up trade in services, coordinate the settlement of disputes, and so on. But it does not include any strict labour or environmental standards.
The third feature is that RCEP covers a wide range of countries and is the largest free trade agreement in the Asia-Pacific region. Mainly to reduce and reduce tariffs on trade in goods and services, and reduce the threshold of market entry. How wide is the tax cut? We don't know until we see the final text. But in 2017, ASEAN agreed that signatories to RCEP should remove at least 90.3 per cent of product trade barriers within five to 10 years, according to Singapore's Straits Times website. In the future, it will not be ruled out that 95% or more of the tax items will be included in the scope of zero tariffs.
In particular, Ms Lau said, India's temporary "absence" from RCEP, could be based on two points. First, economic factors. India's economic growth has slowed and domestic protectionist forces are on the rise, fearing that once joined, a large number of low-cost foreign goods will flow into the Indian market and hit the domestic industry. Second, domestic political factors. Opposition parties in India have used the RCEP issue to put pressure on Modi's government to take responsibility for "economic slowdown, soaring unemployment and agricultural crisis", putting Modi under pressure to lose political points. "but the door to RCEP is still open to India, which can join in more mature conditions."
Nataraj, professor of economics at the Indian Institute of Public Administration in New Delhi, said RCEP is an excellent opportunity for both India and China to raise their cooperation in all areas of common interest to a new level and show the world a unified front. Indian industry needs to become more competitive and effectively prepared to cope with an influx of imports from all major trading partners. And the government must make concerted efforts.
Biswas, an analyst at IHS Markit, said that while RCEP's long-term economic gains on merchandise trade were expected to be relatively modest, India would still benefit from trade in services and investment flows. Another analysis pointed out that India's attitude of opening to the outside world has been warming in recent years, and it is actively promoting the South Asian Association for Regional Cooperation (SAARC) and working with countries in the region to reduce tariffs.
Free trade system injects "heart strengthening agent"
What will RCEP bring to China, Asia and the world?
"the most intuitive feeling for ordinary Chinese is that tariffs on dairy products from Australia and New Zealand and fruit from Southeast Asia will be lower and cheaper. And China's mobile phones, textiles can also be more exported to each other's market. " Xu Liping said.
"it will also be more convenient and faster for Chinese to travel abroad, because one of the key points of regional economic integration is the free movement of people." "the greatest advantage for Chinese enterprises is that there is an institutional guarantee for 'going out'. When they do business with Japan and ASEAN countries, they will operate within the institutional framework of trade agreements to protect their overseas interests," Xu said. "
From a regional point of view, investment is behind trade. RCEP will promote the flow of trade in services and investment in the region, promote in-depth connectivity of the economic networks of member countries in the region, and better complement each other's advantages. Mechanisms such as rules of origin and mutual recognition can also be simplified through trade facilitation. This is a significant improvement in the development of production networks and the business environment in the region as a whole.
Xu Liping said: from a regional point of view, China can make better use of RCEP to integrate the value chain and supply chain in the Asia-Pacific region, serve China's domestic supply-side reform, and continue to move towards a new pattern of high-quality development and higher-level opening up. The "Belt and Road Initiative" cooperation advocated by China will also be injected with new impetus. For other regional partners, there are more market options to tap more cooperation potential.
In a word, the achievement of RCEP reflects the appreciation and upgrading of regional economic integration, the continuous enrichment of the connotation of East Asian cooperation, and the continuous progress of East Asian countries towards the goal of building an East Asian community.
Around the world, the significance of RCEP is also to be reckoned with. Liu Qing and Xu Liping believe that the RCEP has injected a "heart-strengthening agent" into safeguarding the free trade system, boosting market confidence at a time when the international multilateral trading system has been eroded by forces such as anti-globalization and increased downward pressure on the world economy. Inject vitality into the global economy. In addition, RCEP also has a positive demonstration effect on other bilateral and multilateral free trade arrangements being negotiated in Asia and the world.
Turning to the challenges facing the RCEP, the two experts pointed out that the first is that the RCEP agreement will be adopted by the national authorities of member countries before it is signed, and the possibility of twists and turns will not be ruled out. Second, there are many free trade arrangements in the Asia-Pacific region, showing a "spaghetti bowl effect." Whether each other can form a complementary, promote relationship rather than hedging, competitive relationship, test the wisdom of all parties. Third, the United States, as the number one economy in the world, is courting India and other countries under the framework of Indo-Pacific strategy. At present, Europe and the United States want to talk about free trade agreements with India. It is worth observing whether the free trade arrangements led by Western countries will have an impact on RCEP.
Experts believe that in recent years, a variety of large-scale and small free trade arrangements have been issued one after another. This year alone, the construction of the African Free Trade area was launched and the SADC EU Free Trade Agreement was reached. This shows that the greater the rise of global protectionism and the intensification of trade risks, the stronger the political will of all parties to open up and cooperate, and they all recognize that opening up and cooperation is the general trend of the times. And this is the deep logic of RCEP's leap forward. (Zhang Quan)