RCEP goes into effect: the world’s largest FTA, led by China

On January 1, the Regional Comprehensive Economic Association (RCEP). This free trade agreement (FTA) seeks to increase trade by 42,000 million dollars in an area that brings together the second most powerful economy in the world, that of China, almost a third of the world’s population and 30% of the gross domestic product global.

The agreement, considered the largest free trade agreement in the world, includes 15 countries, and hopes for the economic relaunch of the region in the midst of the pandemic are centered on it. In a first stage, the RCEP was activated in Australia, Brunei, Cambodia, China, Japan, Laos, New Zealand, Thailand, Singapore and Vietnam, and on February 1 it will do so in South Korea.

Ratification by Malaysia and the Philippines is still awaited, and Indonesia’s chief economy minister, Airlangga Hartarto, said on Friday that he believes his country will ratify membership in 2022. Myanmar has already approved it, but the bloc has yet to give the go-ahead. for the entry of the nation, whose government was overthrown by a military coup.

The treaty provides for a reduction in tariffs on those products manufactured with at least 40% of parts coming from the RCEP region, which at this time represent 65% of the goods that are exchanged between the signatory countries. It is expected that after 20 years of validity of the agreement, that proportion will reach 90% of the products.

The reduction of income to the states from tariffs should not affect the provision of public services such as health or social spending, which are generally financed with direct taxes, such as income. The RCEP also streamlines business procedures, provides for intellectual property rights and public procurement, and covers areas that grew particularly during the pandemic such as electronic commerce.

RCEP: China with dominance position

The RCEP also has its critics and detractors, who find significant loopholes and disproportionate advantages for the area’s largest economy, China. In fact, India decided not to agree to the agreement, fearing that Chinese imports would sweep away its markets.

“The RCEP reduces barriers in the exchange of agricultural goods, finished goods, and components, which constitute the majority of exports from the countries of the bloc, but offers little insight into trade in services or the operation of companies in economies other than those of the countries. from their countries of origin ”, warned international media specialists.

Nor does it have particularly demanding provisions regarding labor rights or environmental impact, fundamental aspects in any treaty signed with the approval of the European Union and other Western countries.

For example, the Trans-Pacific Association, a pact with many of the same countries -except for China-, includes aspects to reinforce standards of labor law and environmental law, among others.