Asia links 7 Jan 2021: RCEP, Chinese…

Insight #1 – Asia’s RCEP agreement is a win for China, but not so much for other Asian countries RCEP stands for “Regional Comprehensive Economic Partnership” and is the new trade pact closed between 15 Asian nations. It will come into effect in late 2021 or early 2022. On the face of it, RCEP looks like it’s benefitting smaller Asian countries, with lower tariffs across the board. But it's a massively inferior deal than what the alternative TPP could have achieved. The main issues with RCEP are that there are no rules covering competition, subsidies to SOEs or product standards. Rules on environmental standards were dropped at the last minute. While TPP followed the Union Nation’s declaration of labour rights, RCEP does not make any commitments on fair labour practices such as worker exploitation or prison labour. With no unified food safety standards, cheaper tainted products will find it easier to cross borders. At the last minute, the Chinese Communist Party managed to insert a special provision, making state-owned enterprises exempt from oversight. And in contrast with TPP, there are no rules at all for cross-border data transfers and cyber security. As economics textbooks tell us, free trade usually increases overall utility. But if there is a lack of IP protection, environmental rules, labour laws and product safety standards, free trade is likely to lead to a race-to-the-bottom. The cheapest product wins and other countries will be forced to copy China’s lax regulation in order to compete.

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