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Many have assumed that the TPP absent American participation is no longer worthwhile. From the perspective of the remaining parties in the agreement, this is a flawed assessment. A careful review of the TPP shows that the benefits of the TPP remain—whether or not the United States ever joins the deal. Why? Because the United States is already a relatively open market, most of the other 11 TPP parties already have decent access to the American market whether or not the TPP includes the United States. There is not a great deal of need for new preferential access to the US market, outside of a few sectors. The US therefore is already in alignment with most of the TPP rules—whether or not it signs the agreement—in areas like standards or e-commerce. As a result, for most firms trying to access American markets from TPP member countries, whether the United States in included or not in the deal is not especially critical. Thus, from the point of view of the TPP11, moving ahead with the agreement makes a great deal of sense. Little is actually lost. It will be deeply damaging to American companies and US interests, but this is, frankly, America’s problem.
But from our perspective, one key outcome of her speech is the announcement that the UK will seek to replace its current situation with an FTA and not with some sort of association or associate membership status. Many are likely to cheer this news—not least because it brings some clarity after months of uncertainty over objectives. But, frankly, from the perspective of companies operating in or out of the UK, it should be viewed with some alarm. Why? Because it means the UK will have to negotiate the most amazing FTA that has ever been negotiated with a very green, untested team up against one of the very best, most seasoned team of officials with the deepest bench of staff members on the planet.
So, what happens when President Donald Trump, urged on by his equally enthusiastic advisors, significantly ramps up enforcement efforts against China? Or moves beyond standard measures like anti-dumping lawsuits and does impose tariffs or starts to block trade? These are critically important questions that ought to be asked and answered prior to American actions. The response matters not just to the United States and China or to American and Chinese companies but much more broadly to Asia and, potentially, to the wider world.
Last year ended with a whimper for the World Trade Organization (WTO). The multilateral trade institution had hoped for several big announcements that would show the organization could do more than just fight trade disputes. But as the last day fell in 2016, the countdown on the number of countries that have ratified with Bali Trade Facilitation Agreement (TFA) remained stubbornly stuck. For the agreement to come into force, 108 members have to ratify it. The countdown has now been changed to show that only six more ratifications are needed before TFA comes into force.
At least some of incoming Trump team—to repeat again—believe the US is already engaged in a trade war. They want manufacturing to take place inside the United States and will do whatever they think it takes to make it so. Many of the key players seem to be stuck in the 1980s and are pulling out the playbook from that era when the United States could dictate terms and insist on mechanisms like voluntary export restraints. The retaliation this time around will be different. The coming year is going to be very challenging for firms. Trump is not going to change his mind on trade. He really means business.
Normally, we would not do CNBC interviews or roll out a blog post on the eve of Christmas, New Year’s celebrations and the end of the year “dead time” in the office. But our friends in Washington DC are continuing to make trade and trade policy too interesting to ignore. The latest is the elevation of Peter Navarro to a newly created post of trade “czar” in the White House. Navarro started life as a fairly normal Harvard-trained economist, but has gained a reputation as an economic nationalist and a strident anti-China proponent. The terms may sound too strong. Watch the opening 30 seconds of his video documentary in which he urges viewers to “defend America and protect your family” by not buying Chinese products. The film is called “Death by China: How America Lost Its Manufacturing Base.”