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Vietnamese Prime Minister Nguyen Xuan Phuc, left, and Minister of Trade Tran Tuan Anh, right, applaud next to a screen showing Chinese Premier Li Keqiang and Minister of Commerce Zhong Shan holding up signed RCEP agreement, in Hanoi, Veitnam. China and 14 other countries have agreed to set up the world’s largest trading bloc, encompassing nearly a third of all economic activity, in a deal many in Asia are hoping will help hasten a recovery from the shocks of the pandemic. (AP Photo/Hau Dinh)

 

by Jiaolin Tian and Nandika Ravi

On November 15, 2020, 15 countries signed the Regional Comprehensive Economic Partnership (RCEP), the largest free trade agreement in history.

The countries include China, Japan, South Korea, Australia, New Zealand and the 10 members of the Association of South East Asian Nations (ASEAN): Brunei, Vietnam, Laos, Cambodia, Thailand, Myanmar, Malaysia, Singapore, Indonesia and the Philippines.

The RCEP looks at progressively lowering tariffs and aims to boost investment and will allow free movement of goods within the regions in the agreement.

“RCEP will fasten regional recovery, boost the growth of global economy, “said Zhao Lijian, the spokesperson for the Ministry of Foreign Affairs in China.

International trade scholars believe that after the United States pursued a series of anti-globalization actions, such as unilateralism and Brexit, and  signing the RCEP at this time was a beneficial move. Especially for China, it is a win-win in both economy and politics. Unfortunately, not so much for developing trade in Canada.

China has already stated that it will strive to reduce tariffs to zero between member states immediately or within the next 10 years. Former ambassador to China Guy Saint-Jacques, and academic in global management, Dr. Sui Sui, both agree that the signing of RCEP is sending message to Canada to reconsider its trade policies.

“Countries in Asia forming their own alliance means that Canada may lose its advantage in terms of international trade with these countries, as we can’t enjoy the benefits from RCEP,” said Sui, an associate professor at Ryerson University.

Canada’s trade structure has been criticized for being too dependent on the United States.  Sui said 70 per cent of domestic products are exported to the United States, and the United States is the only export target for 65 per cent of domestic companies. Saint-Jacques pointed out that the signing of the RCEP is reminding Canada to diversify its trading partners.

“I think for the Canadian government, it will be a question of deciding how much more attention it should devote to Asia. Let’s make the full use of the CPTPP. Also I think that Canada has to look at the RCEP to see whether it would make sense to join,” Saint-Jacques said. 

Back in September, Minister of Foreign Affairs of Canada François-Philippe Champagne said that Canada has dropped its free trade talk, which was rooted in 2016, as he “doesn’t see the conditions being present now for these discussions to continue at this time”. One of the conditions, according to Saint-Jacques, is the confidence between the two countries.

“If you want to enter a free trade agreement, you have to have the confidence of your partner, that your partner will play by the rule, will be fair and reasonable,” Champagne said.

“China is not showing this attitude right now.”

The Canada-United States-Mexico Agreement (CUSMA) pushed by the Trump government clearly said that if any of the members begin free trade with a non-market country, they would face the risk of being removed from CUSMA, with China being the non-market country targeted, according to analysists.

It isn’t still clear whether the RCEP will have an impact on the trading relationship between the United States and China, who have been in a rift over trade for the last few years.

“Traditionally, Democrats are more protectionist than Republicans. I would expect that (U.S. president-elect) Joe Biden will be more protectionist,” Saint- Jacques said.

“In his campaign, he has already stated a fact that he would (promote) big projects in the United States. That will complicate the life of Canada.”