Key points of the agreement
On November 15, 2020, 15 countries signed the Regional Comprehensive Economic Partnership (RCEP), arguably the largest free trade agreement in history as it will connect about 30% of the world’s people and output. Some key points of this agreement:
- The economies of North and Southeast Asia will become more efficient, linking their strengths in technology, manufacturing, agriculture, and natural resources.
- The agreement’s intellectual property rules add little to what many members have in place, and the agreement says nothing at all about labor, the environment, or state-owned enterprises.
- China is poised to become the largest beneficiary of RCEP15:
- India is poised to become the largest loser by not joining the RCEP. The figure below shows the results for India’s income in 2030.
RCEP: A new trade agreement that will shape global economics and politics
By: Peter A. Petri, Michael Plummer – Brookings
The impact of RCEP on the EU
Uri Dadush, in this brief, summarizes the possible effects of RCEP on the European economy:
- The EU’s exports to China are composed mainly of machinery and other manufactures, it is therefore expected that some displacement of exports by Japan and South Korea on the Chinese markets can be expected;
- Consumers and the many firms dependent on imports of intermediate inputs from RCEP are likely to benefit from lower prices, reflecting the boost to efficiency in value chains based in the region;
- Exporters to RCEP will benefit at the margin from the region’s higher income and – most likely – faster sustained growth;
- Firms competing with RCEP, whether in Europe or on third markets, will be put at some disadvantage, especially if they are not drawing benefits from the region’s integrated value chains.
Although quantifying these effects is quite difficult at this point, Uri Dadush is suggesting the following strategy for the EU going forward:
- Closer ties with China, the most challenging but also potentially the most beneficial course;
- Joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and;
- Acceleration of bilateral agreements elsewhere in Asia.
The impact of the new Asian trade mega-deal on the European Union
By: Uri Dadush – Bruegel
RCEP and the US
The current CPTPP members would warmly welcome US reengagement in a regional pact, even though the Biden administration would require changes and additions to the existing deal to garner political support for congressional ratification. This would involve a new negotiation that modifies and builds on the current CPTPP, and the deal would have to be approved anew by national legislatures. But the effort would be worth the time and trouble. Had the United States participated in the original TPP, aggregate real income gains for partner countries would have expanded to more than $450 billion by 2030. The United States itself would have been a major beneficiary, accounting for more than a quarter of those income gains. […] That said, it will be difficult to advance US leadership in the region if US policy insists on decoupling from the Chinese market.
Rebuild the Trans-Pacific Partnership back better
By: Jeffrey J. Schott – Peterson Institute for International Economics
