The Regional Comprehensive Economic Partnership, Explained

The+Regional+Comprehensive+Economic+Partnership%2C+Explained

Arav Wahi

Recently, 15 countries in the Asia-Pacific region signed a free trade deal dubbed the Regional Comprehensive Economic Partnership or the RCEP. This is one of the largest trade deals of all time and includes the names of countries like China, Singapore, South Korea, Japan, New Zealand, and Australia. The major name that has been excluded from this major trade deal is the United States of America, who is currently fighting China to retain the position of the world’s largest economy. The U.S., which has been at the center of global politics, is now being strongly contested by China. This move shows how major economies are starting to shift towards China over the US, which has been the major superpower for almost 100 years. This is a major step for China to overtake the US, not only in terms of economy but for global influence. 

 

China has been catching up to the US in economic power and global influence for years, but President Donald Trump’s ‘America First’ seems to restart US isolationism. The ‘American First’ plan aims for the US to focus on itself rather than on foreign aid like the wars in Afghanistan, Iraq, and Iran. It also focuses on improving the economy of the US and its citizens, rather than giving financial aid to foreign nations. This is one of the reasons that even the EU, a strong trading partner with the US, has started shifting trade to China. 

 

This is one of the many examples of how after decades of being the sole power in the world, the US now has to figure out how it will go about handling China’s growing power over the years. This isolationism could lead to China dominating both global trade and recognition. This will also likely speed up China’s other trade plans like the Belt and Road Initiative (article coming soon), where they are growing diplomatic ties to many nations across Europe and Asia. The strengthened relations can help China to start building military bases or have access to foreign waterways. This will lead to direct competition for China to become the most powerful nation and dominate not only trade but to lead to China having an upper hand in the rise in escalations between Washington and Beijing currently, where sanctions and tariffs are being slapped on lots of products and harming the stock markets of both countries. 

 

The RCEP has been around for a while, and the first summit was held in the Philippines in 2017, but now it has been signed. The RCEP agreement agrees to free trade agreements which means there are no tariffs, sanctions, quotas or other restrictions to be imposed. This would allow the countries in the pact to trade to ship as much or little as they want to these countries while still maintaining ties. For example, before the RCEP, if Australia was exporting wool to China, then China could cap its imports of wool to leave a market for its domestic sellers while importing wool from Australia to meet demand and/or produce a surplus. Now, if there is a demand for wool from a Chinese company, then they could get Australian wool even if past quotas were met. Secondly, all tariffs were barred, meaning that older tariffs countries in the deal imposed on each other would be removed. This would promote trade of the product. For example, if China imposed tariffs on Australian imports of wool, which means to place a tax on a product, then it would be lifted under the RCEP agreement.