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The Economic Impact Of The Comprehensive Economic And Trade Agreement

After the abandonment of the Trans-Pacific Partnership (TPP) by the Trump administration, Japan is now at the heart of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) Agreement, which coincides with the RCEP, but also includes Canada, Mexico and several Latin American economies. Among the countries that have expressed interest in joining the CPTPP is China, although this is a long way off, given that the necessary reforms in China with respect to the CPTPP, in its current structured form, would be far-reaching compared to the RCEP (1). It should be noted that Japan has played its trade cards well. Japan joined the RCEP shortly after the conclusion of a trade agreement with the United States and sided with the EU and the United States in calling for World Trade Organization reforms that address issues such as industrial subsidies and corporate public trade and target China. Membership of the CPTPP is potentially a promising option for the EU, given the overall and ambitious provisions of the agreement. The CPTPP already covers Asia and North and South America and could also cover Europe. The fact that the EU already has trade agreements with the largest countries, including Canada, Japan, Mexico, South Korea and Vietnam, could facilitate negotiations, but also lead to relatively limited new trade liberalization. The United Kingdom has already expressed interest in joining CPTPP. The direct economic impact of the RCEP on the European economy is expected to be small – although certainly not negligible – and will only be felt gradually. Given that the China/Japan/Korea group is an important exception, the agreement provides for only limited trade liberalization, as there are already many trade agreements between the signatories. Agriculture is only modestly affected by the agreement and tariff reductions in manufacturing are subject to many exceptions, with detailed national plans characterising sensitive sectors.

In addition, the implementation period is exceptionally long for such an agreement, which lasts for 20 years. Customs and other types of trade-friendly legislation will help accelerate the region`s integration, but the agreement will do little to free trade in services, which will only benefit selected sectors. There is no provision on environmental and labour standards that are still required in negotiations between the EU and the US. The agreement is subject to a ratification process which, if experience is a guide, will prove laborious and will stand out in several cases, particularly given the disagreement of many RCEP members with China. It should be noted, however, that the ASEAN members, who were the architects of the RCEP idea a decade ago, have a long history of gradually expanding and deepening their trade agreement as part of an evolutionary process, and the RCEP could prove to be a dynamic process, not just a single agreement. President-elect Biden has promised to take tough action against China, but it is not clear at this stage what that means or how his Asian strategy will be designed. Certainly, the arrival of RCEP will increase the likelihood that the United States will resume the TPP in the form of a modified CPTPP. Either way, it is unlikely that Mr. Trump`s approach to confrontation with China will continue on all fronts (trade, technology, popular movement, diplomacy, military). This approach does not work, as shown by the latest trade and investment data and the RCEP agreement.