RCEP – Foundation for the new era globalization!

Trading of goods and services have always been associated with human civilizations. History tells us that the ancient Asia and the Silk Road played an important role in promoting the trade in different parts of the world that was later termed as the “globalization” where goods, products, and services exchanged hands freely through bartering. In the beginning of the current century, China and the US played an especially important role in creating a global village where cotton produced in Texas farms was exported to China where it was converted into fabric that was used for manufacturing of the T-shirts. Semi-finished T-shirts were shipped back to the US where they were customized and shipped back to the third world and marketed in other parts of the world for their consumers to wear them in their everyday lives. This created the borderless global village and thus the true globalization of the century started, as is very well documented in “The Travels of a T-Shirt in the Global Economy” (by Dr. Pietro Rivoli) and in “The World is Flat” (by Thomas Friedman).
After Chinese entry into the WTO, new dynamics and concerns were born, and they escalated with the time as China continued to export more and more its manufactured goods by becoming the “world factory” for the commodities by using one of the provisions available for the developing countries under the WTO charter. As the Chinese trade balances started to balloon against the advanced economies, in particular in the USA and the EU, the leaderships of these countries started raising concerns and asking their governments to stop the accumulation of never stopping trade imbalances against China. Under the Trump administration, this notion was exploited openly, initially by walking out of the CTPP framework negotiations, followed by cancelling of the multilateral NAFTA between USA, Canada and Mexico and replacing it with two (2) bilateral agreements between USA -Canada and USA-Mexico and later imposing tariffs & trade barriers on China and other trading partners. While the USA was busy in cancelling the old agreements with its allies and partners and threatening and imposing tariffs unilaterally everywhere, a new spirit was getting its roots in Asia. The Regional Comprehensive Economic Partnership agreement (RCEP) was picking up momentum by going through its final stages of approvals among its fifteen (15) member countries.
As a matter of fact, the RCEP was conceived almost ten (10) years ago during the 19th ASEAN summit held in Bali (Indonesia) in 2011. Thus, it is fair to say that it is an extension& enlargement of the previous Free Trade Agreements (FTA) between ASEAN (Indonesia, Thailand, Singapore, Malaysia, Philippines, Vietnam, Brunei, Cambodia, Myanmar, and Laos) and non-ASEAN (China, Japan, South Korea, Australia, and New Zealand) block of nations. Initially, China was not part of the RCEP,and later India dropped out of the agreement citing unfavorable conditions for its fragile industries as it already had trade deficits with eleven (11) of its members, even before further curtailing of the tariffs and trade barriers among its members. In wake of the non-stop tariffs and trade barriers onslaught against China by the Trump administration, China was very instrumental in pushing the RCEP members to expediting the agreement quickly which was progressing slowly since its negotiation’s initiation in 2012. In late 2020, China also joined the RCEP and provided the desperately needed leadership for RCEP’s success.
In terms of the scope and size, the RCEP is the first World’s largest Free Trade Agreement (FTA) in the history with the commitment to eliminate all the trade barriers (90% of the tariffs) among its member countries(within twenty (20) years after coming into effect) in every aspect of bilateral/multilateral transactions (trade, finance, agriculture, manufacturing, forestry, fishery, mining, intellectual property, e-commerce, competition, public procurement, etc.).
According to the agreement, each member country has to follow their own national approval process. The RCEP will be fully implemented after its ratification by at least nine (9) member states of the total fifteen signatories with a minimum of six (6) of the ASEAN group and at least three (3) out of the developed member states that include China, Japan, South Korea, Australia, and New Zealand. According to Chinese Commerce Minister, Mr. Wang Wentao, China has already ratified the RCEP agreement.
RCEP being the only World’s largest FTA, it encompasses an enormous consumer base by reaching out to almost 2.3 billion (about 30% of the global population) people with large young middleclass having enormous purchasing potential, that translates into US$26.6 trillion of combined GDP (30% of the global GDP) and almost 28% of the global trade, according to 2019 trade data.
The agreement has been applauded by all of the RCEP member countries and their ministers have out loud stated last year that this agreement will not only enhance business confidence in the region but will also be a working model for an “open, inclusive and rules-based multilateral trading agreement.”
Against the backdrop of the international disorder, rising protectionism by the right-wing governments, increase in nationalism attitude all across the globe and exploitation of the rising sentiments against China by the nationalist politicians; a multilateral convergence of the similar minded nations of the region for breaking the trade barriers, reducing tariffs, harmonizing rules of origin, etc. among its member nations is really a great miracle.
It is expected that the RCEP will be fully ratified and starts its implementation by its member countries by the middle of 2021. Coincidentally, this is the same time that is projected by the CDC and WHO when the pandemic will start leveling off most likely first in the advanced economies followed by the developing and underdeveloped economies as the vaccine supplies will become accessible to these nations. This means that in the post-pandemic period, the RCEP will play a very dynamic and robust role for the economic revival among its member countries that already have collectively highly diversified industrial base, technological advantages, and skilled & non-skilled labor pools. Even during the current pandemic period, China is already showing good economic growth than any other nation in the world (advanced and the developing economies). Thus, China will be ready to play a pivotal role in the region during the post-pandemic period and will be an engine for the revival, growth, stability, and prosperity of the regional as well as the global economy.
According to the RCEP’sregional experts and academia, the post-pandemic will significantly benefit Singapore, South Korea, Cambodia, Thailand, and Vietnam in their GDP growth by steep increase in their exports to the RCEP members. The key sectors that will outshine during this period will be the construction, food processing, electronics/digitization, telecommunication, and manufacturing.
China being the largest global trading country will dominate the landscape of the nations, regionally as well as globally. Its solid manufacturing base and stellar technical knowhow will help in upgrading the value chains of the other RCEP member countries that are lagging behind in these areas. The vast knowledge and experience in the infrastructure and willingness of financial assistance offers will jump start the massive economic regional activity in East Asia that will transform into the breeding ground for the global economic growth and sustainable prosperity all across the nations. Literally, it is going to be a “win-win” situation for all the fifteen (15) members of the RCEP.
This unprecedented FTA in the history of nations offers a great opportunity for Pakistan to request the RCEP to include it as its 16th member state. Since India has already dropped out of the agreement, it will be easier for Pakistan to reach out individual members and convince them with facts and figures what Pakistan has to offer and how RCEP members will benefit having access to a market of another 230 million people above and beyond of its existing consumer base of 2.3 billion. If needed, Pakistan should approach China, its “Iron-brother” for help and in the absence of India it will be easier to make its case for the membership. If for whatever reason, Pakistan cannot be accepted as the full member of the RCEP, Pakistan should make its case to its governing body to participate at least as an “associate” member. Membership in any capacity, will allow Pakistan to reach out with its products and services to the 2.3 billion citizens, whose middle class is growing like Pakistan and will have more and more discretionary incomes to spend on imported products and services that are not produced locally or fromits existing fifteen member nations. In addition to the export opportunities, the RCEP will also provide a great platform and alandmark for innovations, productivity, e-commerce, cutting edge greenhouse agriculture, digital technologies (AI & ML), etc. Remember, Pakistan shares so many common things with the RCEP members, like multi-ethnic population, diverse cultures, multi-spoken dialects, manyreligions, diverse customs, and cuisines, thus a prime opportunity for enlarging its “brotherhood” scope under his “Iron-brother’s” patronage.