04/07/2021 at 8:44 AM #436030
Commentary: Don’t be too quick to dismiss the economic benefits of RCEP for Southeast Asia
What is the economic impact of slotxo download a huge new regional trade agreement for participating countries?
ASEAN member states are currently re-examining this question after a new report out of the UN Commission on Trade and Development (UNCTAD) suggested that the Regional Comprehensive Economic Partnership (RCEP) could be harmful to many in the region.
The report, released two weeks ago, posited that under the RCEP, ASEAN countries will see a decline in their balance of trade as they are likely to import more goods than export to other RCEP member countries, especially China, which, as a more efficient exporter, may benefit from trade diversion.
The conclusions of this report are highly likely to be wrong. ASEAN will find new economic stimulus coming from being part of the world’s largest free trade agreement with 15 members across Asia.
GOOD ESTIMATES ARE HARD TO ACHIEVE
Often, poor modelling results in poor judgements about the impact of trade agreements. But getting good estimates of the impact of any trade deal is much harder than might be appreciated.
Typically, the easiest element of a free trade agreement (FTA) to see and measure is reductions in tariff rates. All FTAs work to lower tariff rates at the border as a way of helping provide benefits to participating members and lowering costs. A reduction in tariffs should stimulate greater trade flows.
Not every good that might appear to be eligible for tariff cuts will actually qualify for these benefits. Products have to be manufactured in ways that fit the criteria for each trade agreement and include sufficient content from within member states.
TARIFF REDUCTIONS MAY BE OVERWEIGHTED
Determining the impact of the RCEP or any FTA also depends on existing conditions in other ways.
Asian governments, including ASEAN members, have been enthusiastic participants in FTAs.
RCEP itself was built on the basis of five existing ASEAN+1 trade agreements that have been combined and refashioned into one. The net result is that there are literally hundreds of different types of trade arrangements that cross the region from bilateral commitments to large regional deals.
RCEP benefits – even for assessing just tariff cuts – therefore depend on comparing RCEP to other existing trade deals.
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