While we Europeans were busy with our (mis)management of the pandemic second wave, while Americans were busy with their strangest presidential transition ever, a new world order was born on November 15, 2020 in the Asia Pacific and under the patronage of China.
On that date, 15 countries, including China, ten ASEAN nations and four regional trade partners -Australia, Japan, New Zealand and South Korea- sealed the biggest free trade agreement ever closed in history.
It covers almost one-third of the world’s population and about one-third of its gross domestic product.
The RCEP will lower tariffs on 90% of traded goods among those countries and allow free movement of goods. It will also open two-thirds of the service sectors to each other. The RCEP agreement will de facto bury the never well-working CPTPP agreement (Trans-Pacific Partnership), promoted in 2017 by the USA and later abandoned by the Trump administration (see the table to check who are the partner countries).
Want to see why it matters? Look at these charts.
The RCEP involves almost one-third of the world population…
… and one third of the world´s domestic product.
It puts together countries with a healthy public debt balance, and can therefor afford to invest more in their future.
Why it matters, in three key points.
- Not the USA, nor Europe: for the first time in history, the center of a major world trade agreement is China.
- Such agreements take years to prepare, and require lots of commitment: China showed to be a much more reliable partner than the USA in that Asian-pacific space.
- It is not only about goods, but about services: two-thirds of the service sector is to be opened up to each other and then immediately completely. This increases competition and creates room for national service providers to expand. Ambitious as the Eurozone used to be.
What we need to acknowledge, as Europeans.
With this agreement, Asia is becoming the dominant player of the beginning 21st century. We Europeans are now the spectators of a history of rise there and decline here. Still busy with our bellibottons, we are now in front of a challenge that is, first and foremost, motivational and cultural.
Do we just want to keep what we have and live with the decline, or are we still able to compete to win?
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