June 19, 2021

Asia consume commercial integration | Economy

Asia consume commercial integration | Economy

Certain protectionist winds from the West make it difficult, but not slow, the advance of free trade in Asia. Two major agreements, one on the verge of entering into force and the other in full negotiation, show the resolution of the continent to continue with the integration without the tutelage of the US, outside the process. A scenario that has allowed China to reinforce its role as a regional leader and defend its questionable story: that of presenting itself as a new champion of multilateralism.

On December 30, the Trans-Pacific Partnership Integral and Progressive Treaty (the CPTPP, better known as TPP11) will enter into force. after fulfilling the requirement that it be ratified in more than half of the signatory countries. The agreement resurged – after a resounding US rebuttal to the original text – thanks to the impetus shown by the remaining countries, especially Japan, to move it forward. Its liberalizing effects will be lower when the world's largest economy is out, but its application will achieve, under conservative assumptions, increase the income of member countries by 0.87% on average by the year 2030, according to the World Bank. These calculations consider that Vietnam will be the most benefited by the agreement (2.8%) and Mexico the least would gain (0.13%) due to this reduction of tariffs and common investment framework.

Beijing has taken the opportunity to present itself as the champion of multilateralism

Beyond the purely commercial, Donald Trump's decision to withdraw from this agreement has damaged the credibility of the United States with its allies Asians and China has taken the opportunity to project itself as the new great defender of free trade. "Do people in Washington realize that the current policy is contrary to the fundamental interest of Asia? When the US decided to withdraw from the TPP, it was a big blow for the region, "said Tommy Koh, former Singapore ambassador to the United Nations, during a forum in November in the Asian city-state on the margins of the summit of the Association of Nations of Southeast Asia (ASEAN).

In fact, the other mega-project in question is the Regional Economic Integral Association (RCEP), which was sponsored by Beijing in 2013. Composed of the ten ASEAN countries plus China, Japan, Australia, India, South Korea and New Zealand, his signature would change the rules of the game for its participants, becoming the largest free trade agreement signed to date in terms of population and percentage of the world economy.

Although the negotiations are slow – the initial goal was to be signed in 2015, and the recent ASEAN summit disappointed that an anticipated agreement was not reached – it seems that there are sufficient reasons to trust it to move forward next year, as they have proposed their members. For one fundamental reason: the commercial war has increased the desire to seek alternatives (as in this case the RCEP) to cushion its consequences. "China remains very positive towards the RCEP. And now India and Japan too. I think they agree that what the United States does generates uncertainty, and that makes them look better at the RCEP, which facilitates negotiations, "says Ding Yifan, researcher at the Development Research Center of the Chinese State Council.

But there are still many details to negotiate. So far, its members have only reached an agreement on five of the eighteen chapters of the treaty. The main disagreements revolve around how much each country is willing to lower its tariffs and which industries will be left out of the treaty to protect certain sectors. Access to the agricultural market is, for example, a sensitive issue for India, Australia or New Zealand. India, in turn, calls for more freedom of movement for its workers, something that some ASEAN economies do not seem willing to grant, according to Kaewkamol Pitakdumrongkit, of the Rajaratnam School of International Studies (RSIS) in Singapore.

The continent feels abandoned by Washington since the triumph of Trump

However, the returns would far outweigh the possible losses; it is an agreement that would cover 50% of the world's population and whose benefits could be almost double those generated by the TPP11, according to RSIS figures. If signed, China would win an important game. First, to see facilitated the access of its products to markets with great potential like the Indian or the Japanese; second, to see cleared part of the doubts that cunden on his commitment with the free commerce. Although this does not convince everyone; From some Asian countries, Beijing's movements are also seen as an attempt to overwrite the rules that dictate the multilateral system. "China is desperate to change the narrative around its commercial and investment practices. And that is finally leading to some concrete actions, "said the Trivium consultancy.

Instead, it loses positions. Representing Trump in the recent summits of ASEAN in Singapore and APEC in Papua New Guinea, Vice President Mike Pence shielded himself in some figures to defend the permanence of the US in the continent: among them, that direct investment in the region round 1.4 trillion dollars. Washington also announced in July a package of 113 million for infrastructure spending in the area, as an alternative to Beijing's New Silk Road. But the plans of the US do not just convince. Its commercial commitments to China or the recent Trump sit-down to individual summits Asians are viewed with suspicion by a region that feels abandoned since it reached the White House. "Leaving TPP11 is seen by the business community as one of the biggest mistakes made by a US administration. And we have not even begun to see the consequences, "says Michael Michalak, vice president of the US-ASEAN business council.

Main magnitudes

CPTPP. The Trans-Pacific Partnership Comprehensive and Progressive Treaty (CPTPP), affects 11 countries (Canada, Mexico, Chile, Peru, Singapore, Malaysia, Brunei, Japan, Australia, New Zealand and Vietnam) that have a weight of 13.4% in world GDP and a combined population of 495 million people. It is signed and ratified by seven countries and is pending entry into force on December 30.

RCEP. The Regional Comprehensive Economic Association (RCEP) includes 16 countries (Indonesia, Malaysia, Thailand, Myanmar, Brunei, Singapore, the Philippines, Cambodia, Vietnam, Laos, Australia, New Zealand, Japan, China, South Korea and India). It is still under negotiation and is expected to be signed in 2019.


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