Big questions over UK’s economic future as the world’s biggest trade deal is signed

The Regional Comprehensive Economic Partnership will create Asia's largest free trade zone

Trade deal

On Sunday, sixteen countries signed the world’s biggest free trade deal – ever.

The Regional Comprehensive Economic Partnership (RCEP) consists of China, Japan, South Korea, the ten members of the Association of Southeast Asian Nations, (Singapore, Brunei, Malaysia, Thailand, Philippines, Indonesia, Vietnam, Laos and Myanmar and Cambodia), plus Australia and New Zealand.

It will create Asia’s largest free trade zone and will cover 30% of global gross domestic product and trade.

Originally India had been involved when talks began in 2013, but the country withdrew amid concerns over their trade deficit. India will be allowed to join at some point.

Why is this important to the UK?

The Tory Government has been scrambling around looking to join a free trade deal to make up for the losses of leaving the EU.

The possible free trade deal with the US (which is said to have made some progress in the last month) now faces Joe Biden’s concerns about the Good Friday Agreement being wrecked by Johnson, and only slow progress is being made in the UK, Australia and New Zealand talks – with unions in both countries saying they have severe doubts about an agreement being reached which they would be happy with.

Any agreement with both would be economically minimal.

And any thoughts of the UK Government may have of tagging itself to the RCEP deal is a non-starter. No other counties except India will be allowed to join for ‘some time’.

RCEP will cut tariffs and establish rules including cross-border digital data flows. It will remove duties on 61% of imports from Association of Southeast Asian Nations members, Australia and New Zealand, along with 56% from China and 49% from South Korea.

RCEP also made significant progress on rules of origin, intellectual property and tariff reduction, but there are some matters it does not cover, compared with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which the UK Government is eager to join.

The CPTPP was born out of the doomed Trans-Pacific Partnership (TPP), which had been a key policy of former US president Barack Obama. Donald Trump thought he had sunk it, but the remaining countries decided to go ahead with it anyway. The UK is using the possibility of trade deals with Australia and New Zealand to open the door to joining the CPTPP.

The CPTTP is more open and more comprehensive than the RCEP, involving greater elimination of tariffs (99%) on imports between members. It also includes provisions on employment rights clauses including ILO and environmental standards, the right to freedom of association and collective bargaining.

But joining the CTPPT may prove to be difficult for the Government, as it is an agreement that is up and running. Founders are unlikely to want to change much to suit the Tories’ propensity to meddle – it may well be a case of take it or leave it.

These deepening ties would sit uneasily among Tory right wingers and Brextremists who only see a mythological swashbuckling future for the UK.

Could the UK’s hopes lie in bilateral deals? One option is China, which has reached bilateral FTAs with seventeen countries and regional blocs, and is in free-trade talks with fifteen countries, according to the Chinese commerce ministry. China is also involved in negotiations with the EU over an investment treaty, with market access a major stumbling block.

For China, RCEP sits alongside its Belt And Road Initiative (BRI) the centrepiece China’s international economic strategy. It is the world’s largest infrastructure project, aimed at re-building and expanding the ‘Silk Road’ between Europe and China.

Interestingly, the UK is forecast to be among the top 10 beneficiaries of BRI – sitting seventh in the table of nations that will see the largest economic impact of Chinese investment in infrastructure.

But these deepening ties would sit uneasily among Tory right wingers and Brextremists who only see a mythological swashbuckling future for the UK.

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