Many economists agree that free trade agreements and lower or no tariffs will stimulate growth in a country’s economy. Tariffs, which are taxes on the import or export of goods, increase the price of traded goods and in turn force countries to isolate themselves from the global economy. This isolation from international trade also has negative effects for companies that have a desire to expand their business and ship products internationally. Within the nut and dried fruit industry, international trade plays an important role and global imports of tree nuts, peanuts, and dried fruits have continued to trend upward over the last decade.
A Closer Look into the RCEP
Prior to the RCEP, the largest free trade blocs were the United States-Mexico-Canada Agreement (USMCA), previously known as the North American Free Trade Agreement, and the Euro Zone. Now, the newly signed RCEP will become the largest trade bloc in the world. The fifteen countries that form the RCEP represent almost one-third of the world population and close to 30% of global gross domestic product (GDP). The deal will also represent nearly 28% of trade in the world. The size and impact of the RCEP cannot be understated, and there is significant reason to believe that it could jumpstart the economic recovery of Asia after COVID-19. The timing of the signing is also important as it signifies a joint international collaboration during an unprecedented time.
The agreement plans to eliminate a wide range of tariffs on imports over the next twenty years and it is likely to spur investment among the member parties and provide stability along the supply chain. Many of the countries involved in the partnership previously had bilateral free trade agreements in place, but the RCEP will provide a less complicated path to conduct international trade within the region.
Apart from tariff reductions, the agreement will cover rules of origin, intellectual property, electronic commerce, competition, small and medium-sized businesses, economic and technical cooperation, and government procurement.
In 2016, the US-led negotiations for the Trans-Pacific Partnership (TPP) which aimed to create a large Asian-centered free trade agreement, although notably, it excluded China. However, in 2017 before the agreement was ratified, the Trump administration withdrew the US from the agreement. This decision by the Trump administration paved the way for the RCEP to come to fruition and now, the agreement includes China but leaves the US out. Moreover, the RCEP does not include India, which is viewed as a market full of opportunities and growth. The Indian Prime Minister decided to withdraw India from the agreement in 2019 due to concerns that the agreement could hurt local producers. Now, the next step is for the participating countries to ratify the agreement and then the RCEP should come into effect later in 2021 or early 2022.
Sources:
1. https://www.bbc.com/news/world-asia-54949260
2.https://www.dfat.gov.au/trade/agreements/not-yet-in-force/rcep/news/joint-leaders-statement-regional-comprehensive-economic-partnership-rcep
The agreement plans to eliminate a wide range of tariffs on imports over the next twenty years and it is likely to spur investment among the member parties and provide stability along the supply chain. Many of the countries involved in the partnership previously had bilateral free trade agreements in place, but the RCEP will provide a less complicated path to conduct international trade within the region.
Apart from tariff reductions, the agreement will cover rules of origin, intellectual property, electronic commerce, competition, small and medium-sized businesses, economic and technical cooperation, and government procurement.In 2016, the US-led negotiations for the Trans-Pacific Partnership (TPP) which aimed to create a large Asian-centered free trade agreement, although notably, it excluded China. However, in 2017 before the agreement was ratified, the Trump administration withdrew the US from the agreement. This decision by the Trump administration paved the way for the RCEP to come to fruition and now, the agreement includes China but leaves the US out. Moreover, the RCEP does not include India, which is viewed as a market full of opportunities and growth. The Indian Prime Minister decided to withdraw India from the agreement in 2019 due to concerns that the agreement could hurt local producers. Now, the next step is for the participating countries to ratify the agreement and then the RCEP should come into effect later in 2021 or early 2022.
Sources:
1. https://www.bbc.com/news/world-asia-54949260
2.https://www.dfat.gov.au/trade/agreements/not-yet-in-force/rcep/news/joint-leaders-statement-regional-comprehensive-economic-partnership-rcep