FEON WONG | LEGAL JARGON WRITER
After eight years of hard work, one of the biggest trade agreements in history, involving 15 Asia-Pacific countries such as Japan, New Zealand, China, Malaysia and others, was finally signed. Named as the “Regional Comprehensive Economic Partnership” (RECP), the trade deal will reduce tariffs among its member countries, allowing an increase of $200 billion a year to the global economy. Had India relaxed its concern about China dominating the production of goods, or the US remaining in the Trans-Pacific Partnership(TPP) in 2017, the trade agreements could have been bigger by adding the stake of another two big nations. Usually, no country would be allowed to join the deal after a certain period of time, however, an exception was made to India – it is free to re-join the agreement at a later date.
Tariffs previously imposed on areas such as intellectual property, telecommunications and financial services will no longer exist. Perhaps what can be said to be the biggest impact brought about by RECP is the new “rule of origins” that aims to standardise the tariffs imposed. In the past, countries involved in the Free Trade Agreement (FTA) did not necessarily enjoy the full benefit of the agreement. This is because products containing components produced in other countries (rather than from the countries involved) had to be taxed accordingly. Under the current trade agreement, the product will be treated as being produced by the member nation locally, thereby freeing the multinational companies from the incurrence of tax.
Some might say that the RECP is not as ambitious as the TPP as it only eliminates 90 per cent of tariffs instead of 100 per cent in TPP. Others expressed their regrets on the e-commerce industry as no consensus could be reached amongst the countries. Notwithstanding these critics, the trade deal is said to have achieved a great milestone given the differences in size, wealth and characteristics of the member countries. Due to the enormous size of the deal, it is also one that can double the annual trade value and combined gross domestic product as compared to TPP.
The agreement has driven Asian stocks to increase to almost its highest record levels. This has demonstrated the investors’ confidence and optimism, as well as a sign of deviation, from the sit-and-wait approach taken during the pandemic. With the 15 Asia-Pacific countries intending to rescue their respective countries from the battering of the pandemic, the RECP would serve as a great opportunity for them to achieve their goals. This, coupled with the successful production of vaccines by Pfizer and Moderna, will pave the way to the new world.
LLB student at The London School of Economics | Communication Officer at Japan Society at LSE
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