The World’s Largest Free Trade Agreement, A Gift To China

Videoconference for the signing of RCEP trade deal

The free trade agreement signed this weekend by 15 Asia-Pacific nations, led by China and Japan, will apply to a total population of 2.2 billion and a total GDP of 26.2 trillion, about a third of the world economy. It will also mean a 65% tariff reduction.

After eight years of work and the abandonment of the former TTP, firstly by the US and then by India, the fifteen nations have finally signed this free trade agreement. It will mean tariffs will be reduced on a wide variety of products, production lines will be strengthened with standardised rules, and a new common label will be created for electronic commerce. These new rules may weaken the position or entry of new multinationals which are outside the treaty. Furthermore, the closing of the RCEP (Regional Comprehensive Economic Partnership) further strengthens the growing political and economic influence of China in the region.

According to Banca March:

“This agreement strategically benefits China’s position vis-à-vis the United States, which adopted a more protectionist policy after Trump came to power. And it is part of the dual circulation plan Beijing is seeking for its economy over the next few years.”

In the opinion of Intermoney :

“The agreement is very superficial, but it implies that China guarantees itself an advantageous position in an area that dominates and will dominate world power. A circumstance that will make the country less economically dependent on the US in the future.”

The last macroeconomic data known in China has been industrial production, which continued to grow solidly in October. It increased by 6.9% year on year, beating the consensus growth estimate for 6.7%. The National Statistics Office highlighted that 34 of the 41 industrial groups reported growth.

Meanwhile, Japan’s Q3’20 GDP rebounded 21.4% quarterly in annualised terms. This was the highest increase since 1968, exceeding the consensus’ expected figure for an 18.9% rise, and following the previous quarter’s 28.8% contraction.