In Asia, birth of the largest free trade area in the world

Asia is taking an important step towards its economic and trade integration. The Regional Comprehensive Economic Partnership (RCEP), negotiated since 2011 and which comes into force on 1is January 2022, should give birth to the largest free trade area in the world after a gradual reduction in tariffs spread over twenty years. This new bloc, which includes China, Japan, Australia and South Korea, alone accounts for a third of the planet’s gross domestic product (GDP) and a third of the world’s population.

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The tariff cuts will mainly concern the manufacturing industry, the engine of regional growth, more than services or agriculture, a sector still very sensitive politically and which supports many inhabitants. According to the analysis carried out in 2020 by the Peterson Institute for International Economics, an American research center, this agreement is expected to increase the GDP of its signatory countries by 0.2%, in particular that of Japan, China and the United States. South Korea.

Together, these three countries represent 80% of the GDP of the new trade bloc, and they are not, unlike the countries of Southeast Asia united in the Association of Southeast Asian Nations (Asean ), a free trade agreement in the region. It is the first time that such an ambitious trade treaty has linked these three economic heavyweights. Takashi Terada, professor at Doshisha University in Kyoto, even goes so far as to call RCEP“Free trade agreement between China and Japan”, given the significant gains recorded by these two economies.

“New center of gravity” of world trade

The United Nations Conference on Trade and Development (UNCTAD), which qualifies the RCEP as “New center of gravity” of world trade, estimates that it will increase trade in this block by 2%, or about 42 billion dollars (37 billion euros). These gains come from lower customs tariffs, but above all from the diversion of part of trade with the rest of the world.

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Exports from the European Union and the United States to the region are expected to decline by 2% and 1%, respectively. Those of South Asia will be the most affected, in particular Bangladesh (- 12%), Pakistan (- 4%) and India (- 2%). “The whole world will benefit from this agreement, because it will increase the income available in the region, which will offer better outlets for exporters from other continents”, However, Cyn-Young Park, responsible for regional cooperation at the Asian Development Bank, puts it into perspective.

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In Asia, birth of the largest free trade area in the world