The RCEP: the largest trade agreement in history is born

With the aim of supplying the United States in its trade balance, China promotes, and signs, the largest trade agreement in history.

The crisis that originated COVID-19 was a shock of historic dimensions throughout the planet. Without precedent, COVID, as if it were a black swan, shook the foundations on which our current society was sustained, dismantling that great welfare state in which we believed we lived. A situation that has turned the world upside down, generating, as well as threats, opportunities that, in the case of certain countries, they intend to take advantage of.

The forced paralysis of the economy, in order to contain the spread of the virus in other unexplored territories for it, aroused great tensions that, for the moment and given the current context, remained suspended. Tensions that had to do with international trade in which China and the United States, the two economic powers on the planet, debated between the rupture and the alliance between both economies. A conflict that, before the pandemic, was presented as one of the great economic challenges, according to the World Trade Organization (WTO).

Thus, the trade war, which Donald Trump was maintaining with the Chinese president, Xi Jinping, represented a strong paralysis in trade flows throughout the planet. The imposition of tariffs and sanctions, in a scenario of great hostility, caused a tug of war between the two economies, thus causing those transactions that fed back their relationship to decrease significantly. Which, in the light of trade data at a global level, registered very deep falls at the end of last year.

In the case of the United States, the response, while holding talks with China to reach an agreement, was support in other treaties that, such as the T-MEC, have been very fruitful for the US economy. Relations with Mexico and Canada experienced a strong boost, registering trade data with the Aztec country never seen before. So much so that, according to the data provided by the WTO, Mexico, in addition to having registered a volume of transactions that was not due to the pessimism of the pandemic, has become, instead of China, the country’s main trading partner Anglo-Saxon.

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A situation that “left lame” the Chinese economy, which, unlike the United States, saw how its trade with what until now had been its main trading partner had been declining since the beginning of the tensions. That is why, according to the trade data shown by the Asian country, China, at the end of last year, registered a trade surplus much less bulky than the one it showed when relations were not suspended. During the last four months of the year, this indicator registered decreases that showed the strong impact, very damaging, incidentally, of said conflict for the Asian dragon.

The answer was yet to come

As previously mentioned, the United States’ response, in a scenario in which negotiations were practically suspended, was the support of its two main trading partners. The T-MEC, which renamed the agreement reached in 1994 with both countries, NAFTA, became the best pressure tool for a country that needed to regain relations with its main buyer. And it is that, so much so that, from 1994 to the end of 2018, the volume of commercialization between Mexico and the US went from 82,000 to 612,000 million dollars, an increase of 651%, while exchanges between Mexico and Canada they increased 808% during the same period of time. Some data that served to demonstrate to China the power of the US economy, as well as the limited need for the United States to depend on China for trade.

To this, the statements made by the president at the beginning of the pandemic were added. The forced paralysis of the economy, which paralyzed the border crossing of goods, left the countries cut off, given the need for the largest supplier of manufacturing in the world, the first link in the global value chains, to begin to reactivate its Commerce. A situation that, in the face of the anger that the shortage entailed, unleashed all the anger of the then president of the United States, Donald Trump. A president who, given the situation, asked his partners for support to promote a retreat and a new configuration of value chains and trade.

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All these events, which have occurred throughout these months, have been worrying the Chinese economy, which, quiet as always, expected a friendly response from the United States, as well as a new configuration in its relations; more prosperous and beneficial. However, the suspension of the negotiations, as well as the continuous attacks on the Asian country due to the contagions that came from China, caused the Chinese president, in search of alternatives that, like Mexico, compensate for this decrease in the country’s trade surplus. , seek new tools to promote trade, based on the same strategy on which Donald Trump was based.

Thus, in recent weeks, there has been talk about a new trade agreement that would end the leadership of other agreements such as the T-MEC or the European Union. A new agreement that, made up of the large Asian economies, would boost trade in China, without the need to reach agreements with a country that, until now, had only offered animosity. An agreement that, while it seemed that it was going to be, like the new Silk Road, a project that would end up in oblivion, has ended up materializing. In this way, giving rise to a new free trade agreement, which bears the name of RCEP (Regional Comprehensive Economic Partnership).

The agreement was signed by Asian leaders last Sunday in Hanoi, and it includes the ten members of the Association of Southeast Asian Countries (ASEAN) as well as China, Japan, South Korea, Australia and New Zealand. An agreement that, as we said, pretends to be much larger than the existing ones.

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A devastating response

As we can see, the silence did not mean that China was not preparing the new offensive. As with Europe and the United Kingdom, the wait has ended up causing so much tension that, at present, any agreement seems unattainable. Well, taking into account that the United States had already made a move with other alternative partners, and that China still did not compensate for the drop in the surplus that the Asian country had, China had to look for options to solve the situation and, incidentally, recover from the hard blow that this rupture has supposed.

Thus, the answer is RCEP. An agreement that, considering its dimensions, presents devastating data, in contrast to other agreements. Well, in light of the data, we are talking about an agreement that integrates 15 countries, with an aggregate population of 2.2 billion people. An agreement that, combining the different levels of gross domestic product (GDP), represents an aggregate of 22.14 trillion dollars. An agreement that, also, would monopolize 28% of world trade, being able to absorb a higher quota in the coming years. At the same time, in the same way, it would suppose an agreement in which 30% of world GDP would be integrated.

Rcep

As we can see, neither the European Union, nor the T-MEC, can combat these figures. In relation to the figures presented, we speak that the T-MEC shows a commercial flow of 1.2 trillion dollars between the participating countries, so it is quite far from what said treaty promises. On the other hand, the European Union, despite accounting for about 15% of world trade, as well as a combined GDP that accounts for 20% of world GDP, also presents a volume of merchandise, as well as data such as those mentioned, which are They move away from the agreement reached by the Asian powers.

In short, we are talking about a large-scale agreement that, in a way, “turns the tables” on the trade war between the two powers on the planet. Tired of waiting, China has taken up arms against the United States, commercially speaking. An initiative that, in the same way that it seeks to supply the United States in that commercial relationship that both countries had, aims to boost the Asian economy until it becomes the dominant economy in trade worldwide; a situation that will give a lot to talk about in the coming months.

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