China, Singapore, and 13 other Asia-Pacific nations have entered into the largest trade bloc in the world. The sphere of influence created by the RCEP covers an economic reach of over 2.2 billion people and 26 trillion dollars a year, nearly ⅓ of the world's population.
Economic recovery is on the minds of every nation & leader in the world. As RCEP participants came together, the first thing on everyone’s minds was combating the economic distress brought on by the global pandemic. Thankfully, RCEP member nations have discovered a way to stimulate job growth, market expansion & total economic recovery.
Open borders, lowering tariffs, and fostering an inclusive perspective sounds nice. But what will it achieve? What is the ultimate goal behind the new 15 nation strong free trade agreement? Many economists have suggested that the message behind initiating the world's largest free trade agreement may be more powerful than the RCEP itself. An agreement this big that excludes nations like America and India will certainly have geopolitical impacts across the globe. Let’s dive into the RCEP to unlock what the world's largest free trade agreement means for the global economy.
The Regional Comprehensive Economic Partnership (RCEP) Is Shaping Global Economics
When 15 Asia-Pacific nations come together to form the world's largest free trade agreement, the impact ripples across the globe. When RCEP was signed into existence on Nov. 20th, leaders from every nation began taking a look at how this action will impact their economic sovereignty.
The 15 members of RCEP now belong to a trade bloc that contains ⅓ of the world's population. Importers, exporters, resellers, freight brokers, manufacturers, and trucking firms in the Asia-Pacific nation now have an advantage the world doesn’t. This will certainly cause action among other nations seeking to put together an even larger trading bloc.
The RCEP is the largest free trade agreement in history.
This fact can’t be overlooked. Everyone will always remember the biggest and most impressive. International financial markets will be impacted when Asia-Pacific nations begin to show an increase in economic power. Later on in the article, we will discuss how nations like Laos and Cambodia can leverage the RCEP to compete with non-member nations as large as Mongolia.
The largest free trade agreement in the world opens doors for Southeast Asian citizens. With even lower tariffs, increased communication, and collaboration, anyone can enter the global markets with minimal investment. That includes a Cambodian individual with a $250 investment on open markets like Made-in-China.com.
The RCEP will simplify access to the Chinese BRI for Asia-Pacific nations.
The upcoming Chinese Belt and Road Initiative is yet another tool in the Chinese arsenal. Having a trade agreement between nations that the network of railroads will pass through is a win-win for everyone. Resellers buying goods manufactured in Vietnam can now easily transport that merchandise across borders over the BRI with low tariffs and uncomplicated customs thanks to the RCEP.
This simplification of free trade means everything to Asia-Pacific Nations. It empowers everyone to compete in a global economy where nothing stands in your way. The additional collaboration brought on by the RCEP adds an extra layer of cohesion. By minimizing the upfront cost paid for customs documentation & tariffs, importers, retailers, and resellers earn more profits, do more business and in turn, support the economy.
The RCEP will connect 33% of the world's population.
When thinking about the world in a larger context, 2.4 billion people might not sound like a lot. But it’s approximately 33% of the world's population connected by a single trade agreement. The sheer amount of economic power contained within that connection is enormous. While there have been previous trade agreements between nations in the region, the RCEP specifically stands out for its size and scale. Later on in the article, we’ll talk about how some analysts suggest the RCEP is not as comprehensive as some of the other free trade agreements. However, it’s worth noting that previous agreements were not on the same size and scale as the RCEP. This highly debated subject leaves a big gray area that will only be defined by time in the days to come.
The RCEP will stimulate foreign investment.
As the RCEP opens up potentially lucrative trade routes for manufacturers, we can expect more foreign investment to funnel within the 15 member nations. Previously, Asia-Pacific nations found it difficult to compete on a global scale due to governmental restrictions. However, the RCEP opens the floodgates to individuals looking to take place in the global market. Naturally, this will correlate with outside investment coming from around the globe. Both eastern and western financial institutions will begin seeking a foothold by financing trade within the confines of the RCEPs parameters.
The World's Largest Democracy (India) & The World's Largest Economy (USA) Have Not Been Included In The RCEP
So who’s included in the free trade agreement? Here’s a quick list.
The larger nations included in the RCEP are Australia, New Zealand, South Korea, Japan, and China. Additionally, the 10 members from the Association of Southeast Asian Nations (ASEAN) are The Philippines, Indonesia, Singapore, Malaysia, Myanmar, Thailand, Cambodia, Laos, Brunei, and Vietnam.
From a glance, you’ll see that these nations don’t include some of the world’s superpowers like the United States, India, and France. For a long time, western nations have been the recipients of products manufactured by the east. Some analysts taking a deeper look at this free trade agreement recognize that the RCEP is a consolidation of the power in the region.
This consolidation helps sustain a healthy manufacturers market. Simply stated, that means low materials costs, low tariffs, and minimal restrictions for imports & exports. That’s the perfect combination for Asia-Pacific manufacturers producing goods for the world. Products like PPE manufactured in Vietnam can now be shipped to Chinese buyers and sold on international markets cheaper than ever before.
Therefore, the fact that the RCEP doesn’t include members from superpower nations like the US & India helps further cement the notion that China is still the manufacturers of the world.
Let’s Talk About Tariffs & Investments
Asia-Pacific nations have always benefited from low tariffs between each other. However, The RCEP helps reduce those tariffs even lower than they already were. When looking at the technical language contained within the RCEP, we see that its objectives are very modest, to say the least. We won’t immediately see any economic impact from policies that stimulate investment, lower tariffs, and increase communication. It’s going to take some time before those benefits convert themselves into tangible revenue for various firms.
Additionally, while the RCEP will stimulate investment from around the globe, it doesn’t offer any expedited licensing provisions. Therefore, those interested in taking advantage of these free trade benefits still must go through the proper channels to become registered entities allowed to operate in the region. So in short, tariffs are lower than ever and investors are ready to jump in. Even so, only the market will determine how the RCEP is remembered by history.
The RCEP Will Help Poorer Countries Like Laos Compete With Wealthier Nations Like Singapore
It’s no secret that countries like Cambodia don’t have the same wealth as countries like Japan. By bringing in a mix of both wealthier and poor nations, the RCEP becomes a system by which those less fortunate benefit from their more fortunate neighbors. When countries like New Zealand leverage the RCEP to establish a relationship with raw material exporters from Vietnam, a new relationship is created. These types of deals are win-win for both nations and give the little guy a chance to compete on a global level.
What Kind of Geopolitical Significance Does The RCEP Have
To begin, the RCEP helps align Chinese goals with its ASEAN neighbors. By strengthening the relationship between these neighbors, the whole region becomes more flexible. Traditionally, Western Chinese regions have not experienced rapid growth as fast as the Eastern Chinese nations. However, this new free trade agreement wills kickstart new growth in Western Asian economic regions. The world knows how slow free trade agreements can take to accomplish. The rapid signing of RCEP highlights the region's willingness to foster increased collaboration, communication, and negotiations.
Take for example the trilateral China-South Korea-Japan free trade agreement. Now that the RCEP has been concluded, Japan's Minister of Foreign Affairs mentioned how those frozen negotiations could be possibly reignited. It seems that the RCEP has solidified friendships and opened new partnerships across neighbors in the Asia-Pacific region.
As far as the economy is concerned, the RCEP further cements Chinese reputation as the world’s manufacturer. By prioritizing their objectives of importing raw materials and exporting finished products, the RCEP gives China more access and influence than ever before. Chinese wholesale manufacturers, freight forwarding agencies, financial service providers, freight transportation companies, and other third-party logistics services now have uninhibited access to all of the Asia-Pacific region. This is mutually beneficial growth for someone looking to import wholesale Chinese products into the ASEAN economy and vice versa.
Geopolitically, we are living in unprecedented times. Free trade and the free market influence political decisions that can impact billions of people. Since the signing of our RCEP, many leaders from around the world have expressed their interest in negotiating their own free trade agreements with China. That gives added influence to the Beijing government when trying to accomplish their goals. Additionally, these deals help Chinese manufacturers and wholesale Chinese products attract buyers from around the world.
What Does The World Think About The RCEP?
In the wake of the global pandemic, world leaders have been trying to come together rather than apart. Even US president-elect Joe Biden has been credited with saying after the RCEP was signed that the United States does about 25% of the world's trading and therefore should be aligned with other nations that do the same.
The reality is that China's position in the region has dramatically matured. Their increasing role and responsibilities are incredibly complex. Also, other nations like America have seen their influence wither away within the region over the past decade. Therefore, this new free trade agreement further reinforces China’s commitment to helping the region overcome the economic catastrophe brought on by the global pandemic. Even so, this isn’t the first free trade agreement in the region. So what about the RCEP makes it unique besides being the largest in history?
How Does The RCEP Compare Against The Trans-Pacific Partnership
The comprehensive nature of the trans-pacific partnership highlighted its unwavering coverage of labor laws and environmental regulations. However, the RCEP doesn’t outline environmental protections or constraints on manufactures that don’t comply with labor standards or eco-friendly manufacturing processes. Buying wholesale Chinese products on made-in-china.com and selling them in your city gives you the peace of mind that all manufacturer's licenses are available for you to view. While the RCEP focuses on helping compete in the global economy, the trans-pacific agreement was more comprehensive in its consideration for limiting state-owned enterprises from capitalizing on their position of power.
How Does The RCEP Compare To The CPTPP?
The RCEPs economic zone is approximately five times larger than the CPTPP. However, the RCEP doesn’t cover the subjects of intellectual property protection and dispute resolution procedures. These are big deals in the world of international trade. Even so, the CPTPP was more comprehensive in those specific areas. As the United States gained influence in Southeast Asia, China began implementing a series of efforts that would progressively consolidate Beijing’s economic dominance over the region. Those economic firms that understand how to leverage the RCEP will benefit from its wide-sweeping language that allows free trade to flow like water.
It’s a Victory for the World
Now, wholesale Chinese products can freely make their way around the globe faster & cheaper than ever before.
