Taps Coogan – November 15th, 2020
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15 nations, including China, officially signed the Regional Comprehensive Economic Partnership (RCEP) today, a free-trade deal aimed at reducing tariffs and regulatory trade barriers between the signatory nations and, more pointedly, diversifying China’s export and import markets away from the US. The following map shows the member countries.
The 15 member countries, including China, Japan, South Korea, Veitnam, Australia, and New Zealand represent about 30% of the global population and roughly 30% of the global economy ($26 billion), making it the largest trading block in the world.
While reductions in tariffs between member countries will likely be modest (they are already low), the deal reportedly establishes a framework for some degree of regulatory convergence, uniform customs filing requirements, and a general path towards integration into what is a de facto China-led economic block.
At least that’s rumor. The deal has been negotiated behind closed doors and the text has never been formally released. Only the broad outlines of the arrangement are known. Apparently, the citizens of member countries have to join it to find out what’s in it.
How much economic convergence actually occurs will likely be a function of how aggressively China abuses the deal’s rules and its position as the dominant member of the trade pact. It’s safe to assume the answer to that question is very aggressively, especially because the deal reportedly doesn’t cover labor, environmental, or government subsidy issues. That leaves China open to continue to engage in literal slave labor with the bonus of guaranteed tariff-free access to its neighbors. Meanwhile, China can presumably continue to block imports from adversarial countries in the pact because China relies on non-official non-tariff measures to block imports, as Australia is learning right now.
Regardless, the agreement further diminishes already waning US economic relevance in the region.
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