World’s largest trade deal (RCEP) signed in Vietnam as Sri Lanka controls imports
ECONOMYNEXT – Economic ministers from ten Association of South East Asian Nations and five other partners inked a Regional Comprehensive Economic Partnership (RCEP) Agreement in Vietnam, touted as the world largest trade deal.
The partners include China, the world most populous nation, Japan, Korea, Australia and New Zealand and covers 47.5 percent of the world population (3.6 billion people) and 28 percent of global trade and a combined gross domestic product of 32 trillion US dollars.
Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand making up the ASEAN already has low tariffs and visa free travel.
Viet Nam said the deal, signed in semi-virtual 37th ASEAN meeting, would allow the countries to bounce back faster from a Coronavirus pandemic.
“In the light of Covid-19, RCEP could enable ASEAN to bounce back more quickly as such a deal allows firms to diversify their supply chains and increase resiliency of the regional economies,” Vietnam’s government said.
“The agreement aims to reduce tariffs and improve supply chains between Asian nations.”
The agreement comes after eight years of negotiations, and after the US pulled out of a Trans Pacific Partnership (TPP), after Donald Trump, a nationalist with Mercantilist beliefs on trade deficits, was elected to office.
He lauded efforts made by relevant sides to address issues in the negotiations, saying he is delighted as after eight years of working hard, the sides have completely concluded the negotiations, enabling the signing of the agreement within the framework of the 37th ASEAN Summits and Related Summits.
“The global and regional economies are facing huge obstacles and challenges caused by not only COVID-19 but also the decreased global trade,” Vietnamese Prime Minister Nguyen Xuan Phuc said.
“Therefore, the conclusion of the negotiations of the RCEP, the largest free trade agreement in the world, will send a strong message of ASEAN’s leading role in supporting the multilateral trade system, helping to create a new trading structure in the region, facilitating trade sustainably, developing the disrupted supply chains and supporting post-pandemic recovery.”
Vietnam’s continued reliance on free trade comes as Sri Lanka which is burdened by Mercantilism and monetary instability, tightened import controls and industries have to get permission to import raw material with blocked supply chains.
The supply chain to the cooking pot has also been hit by a ban on turmeric, which is encouraging smuggling and raising the risks of Coronavirus entering through fishermen, critics say.
Sri Lanka is following a so-called import substitution strategy developed in Latin America in countries with bad central banks built on the philosophy of the founder of Argentina’s sterilizing central bank, Raul Prebisch, which eventually led to currency collapses and sovereign default.
Most East Asian nations, including Singapore, Vietnam, Hong Kong and China went directly against the philosphy actively wooing foreign firms which were derided in Latin America as ‘multi-nationals’ and became industrial power houses.
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Latin America, and Argentina’s central bank in particular is still suffering currency collapses and triggering sovereign default.
“RCEP is primarily beneficial for goods trade because it will progressively reduce tariffs on many products,” Vietnam’s government said.
“In addition, the deal will allow businesses to sell the same goods within the bloc but do away with the need to fill out separate paperwork for each export destination and help Asian producers to sell more of their products to the rest of the region.
“Even for companies that export goods outside the bloc, there’ll be incentives to build their supply chains across RCEP member countries.”