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Understanding the Free Trade Agreement with China: Benefits, Challenges, and Implications
In November 2020, after eight years of negotiations, the leaders of China and 14 other Asia-Pacific countries signed the Regional Comprehensive Economic Partnership (RCEP), one of the largest free trade agreements (FTA) in history. As the second-largest economy in the world and a major trading partner of many countries, China played a central role in shaping the RCEP, which aims to promote greater economic integration and liberalization among its members. For countries outside the RCEP, especially those that have close ties with China, the new FTA may also have significant impacts on their trade policies and strategies. In this article, we will explore some key aspects of the free trade agreement with China and its implications for different stakeholders.
What is the RCEP and how does it relate to China?
The RCEP is a FTA that covers 2.2 billion people and accounts for about 30% of the world`s gross domestic product (GDP). It includes the ten member states of the Association of Southeast Asian Nations (ASEAN), plus China, Japan, South Korea, Australia, and New Zealand. The RCEP aims to eliminate or reduce tariffs, increase market access, facilitate investment and services trade, harmonize rules and standards, and promote cooperation in various areas such as intellectual property, e-commerce, and sustainable development. The agreement also includes provisions for dispute settlement and safeguard measures.
For China, the RCEP represents a major achievement in its efforts to enhance its economic ties with neighboring countries and to counterbalance the influence of the United States and other Western powers. China already has FTAs or preferential trade agreements with most RCEP members, but the new FTA will deepen and widen the existing partnerships. By creating a more integrated regional market, the RCEP may also help China to diversify its trade and investment sources and to reduce its dependence on the oversea markets, which have been affected by the Covid-19 pandemic and the geopolitical tensions.
What are the potential benefits of the RCEP for its members?
For the RCEP members, the agreement offers several potential benefits. First, it creates a larger and more open market for goods, services, and investment, which can boost economic growth, job creation, and innovation. Second, it enhances the supply chain connectivity and reduces the trade costs, which can improve the competitiveness of the RCEP companies and the attractiveness of the region for foreign investors. Third, it harmonizes some of the rules and standards related to trade, which can facilitate the cross-border transactions and reduce the regulatory barriers. Fourth, it promotes the regional cooperation and the peaceful settlement of disputes, which can enhance the stability and sustainability of the regional economy and security.
However, the RCEP also faces some challenges and concerns. Some critics argue that the agreement may not provide enough protections for human rights, labor standards, and the environment, and may exacerbate the inequality and the exploitation of workers and the natural resources. Some others worry that the RCEP may undermine the existing FTAs or multilateral trade frameworks, such as the World Trade Organization (WTO), and create new geopolitical tensions or economic imbalances. Moreover, some RCEP members, especially those who have trade deficits with China, may face greater competition from Chinese products and services, which may affect their domestic industries and jobs.
What are the implications of the RCEP for countries outside the agreement, especially the United States?
For countries outside the RCEP, the new FTA may have various implications, depending on their trade relations and interests. For the United States, which has been pursuing a more protectionist trade policy under the Trump administration and has strained ties with China, the RCEP may pose both economic and strategic challenges. Economically, the RCEP may divert some of the US exports and investments to the RCEP markets, especially in the Asia-Pacific region, and limit the access of the US companies to the RCEP advantages, such as the reduced tariffs and the simplified regulations. Strategically, the RCEP may enhance China`s regional influence and its leverage in the global trade and diplomacy, which may complicate the US efforts to contain China or to promote its own vision of free and fair trade. Moreover, the RCEP may expose the limitations and weaknesses of the US trade policy and the multilateral system, and stimulate the US to reconsider its stance and approach towards the trade liberalization and cooperation.
In conclusion, the free trade agreement with China, as embodied by the RCEP, represents a significant development in the global trade landscape, with potential benefits and challenges for its members and implications for other countries. As the world grapples with the Covid-19 pandemic, the economic recovery, and the geopolitical uncertainties, the RCEP may serve as a test case for the viability and desirability of regionalism and cooperation in the 21st century. By understanding the complexities and the opportunities of the free trade agreement with China, we can better navigate the evolving dynamics of the global economy and the politics of trade.