What Happened: On Sunday, fifteen Asia-Pacific countries signed a historic trade agreement, creating the world’s largest free-trade bloc. According to CNBC, The Regional Comprehensive Economic Partnership (RCEP) “marks the first time that East Asian powers China, Japan, and South Korea are in a single trade agreement.”
The participating economies represent over 2 billion people and have a total GDP of more than $26 trillion, which makes RCEP a strong protagonist in the world’s economy.
The Regional Comprehensive Economic Partnership “signals a commitment and level of ambition, in terms of economic integration, and it’s been a long haul over eight years, but I think the outcome is well worth the effort,” said Singapore’s minister for communications and information, S. Iswaran, to CNBC.
Jing Take: This ambitious deal strengthens regional integration and cements China’s position as a leader in the Southeast Asia region. It also penalizes the United States, which participated in the Trans-Pacific Partnership (TPP) under President Barack Obama, but it never came to fruition under President Trump.
The big losers in this agreement are India and the United States. Their voluntary self-exclusion from working with China is self-defeating and costing them market access opportunities. China, of course, stands to gain the most from the RCEP, and its economy will only grow in influence and strength. Yet, “the diplomatic messaging of RCEP may be just as important as the economics — a coup for China,” wrote analysts from Citi Research in a November 15 report.
From a trade perspective, China scored a double win. The elimination of trade barriers empowers Beijing to flood the region with cheap commodities, and Chinese companies win access to new markets, which lowers their reliance on domestic consumption.
The impact of RCEP on the luxury industry is significant because the deal creates a common framework to safeguard intellectual property and intangible assets. It also establishes rules of origin for the entire bloc. “Once implemented, RCEP countries will only require a single certificate of origin,” says the Center for Strategic and International Studies (CSIS). “This will allow companies to easily ship products between RCEP countries without needing to worry about specific rules of origin criteria in each country or for each manufacturing step.” According to CSIS’s estimations, this will motivate multinationals to develop supply chains across the region.
The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.