Mr. Wuttke, please share your views on what signing the RCEP agreement means for the global community.
Signing the Regional Comprehensive Economic Partnership (RCEP) agreement, and also the Comprehensive Agreement on Investment (CAI) between the EU and China, shows China’s willingness to engage with other countries and produce results, albeit ones that are limited to just small steps in the right direction. This is a welcome development from the standpoint of European business. RCEP essentially levels out the trade agreements that many of the member states already held bilaterally with one another, meaning that rather than having to navigate a variety of relationships, companies will be able to go about their business in a smoother, more predictable manner. The decrease in tariffs that will be phased in over the coming decades is also positive. However, RCEP is not quite the deal it was made out to be by certain voices. It will smooth out trade flows, but does nothing to address the structural differences in this systemically diverse part of the world.
In your opinion, how will RCEP affect the global economy and especially the EU economy, relations between the EU and China?
Obviously, the CAI will have a greater impact on EU-China relations and the EU economy than RCEP. Nevertheless, less friction in Asia’s business environment following the implementation of RCEP is still beneficial for European companies as many already have operations spread across the region. The agreement is expected to have a positive effect on trade flows and streamlining the customs systems of different countries. That’s good news for European companies that see more and more low-cost suppliers moving operations out of China, necessitating that our members now import more inputs from nearby markets. In that sense, it is essential that European companies review their supply chain to ensure that there will not be any unexpected surprises in the future. It’s also a positive development for European players that are considering using China as a regional production centre for the rest of east and southeast Asia.
What do you think are the prospects and economic benefits for the new RCEP member countries?
Over time the lowering of tariffs and removal of trade barriers is expected to increase trade flows. However, as the RCEP agreement has been customised and altered for every country that signed, there are so many exceptions for each country that it is unclear how big the actual economic benefits will be. The strengthened rules of origin definition will also be helpful to many companies.
Whether it is strategically worth joining or not will obviously vary from country to country. That being said, this is not an agreement that deals with the structural differences between the many different economic systems found in the current membership. Some countries may not be willing to join RCEP unless it deals with more fundamental challenges, such as addressing subsidies, market access regimes and level playing field issues.
In your opinion, how quickly will the RCEP member countries be able to achieve the goals set for the union: reducing tariffs, facilitating the transportation of goods, reducing barriers to trade in services? What steps are already being taken to address these challenges? And what effect will it have on the economy of member countries and the world economy in general?
In these difficult pandemic-filled times it is hard to predict the speed of implementation as governments will have many priorities. Nevertheless, we saw last month that China is stepping up efforts to implement RCEP within the next six months. Managing expectations will be key to moving forward. The effects on the global economy remain unknown, but if barriers to trade are lowered, it will likely drive at least some new efficiency gains.
How do you think trade relations between the EU and China will develop, and what measures are to be taken to produce a productive dialogue?
Trade relations remain strong, but unbalanced. For every euro worth of exports from the EU to China, two euro worth of Chinese imports enter Europe. In general, that deficit is not an issue – Europeans are not losing anything, they are getting products in exchange for outward capital flows – but in some areas, this imbalance is driven by structural issues like China’s intense subsidies for various goods, as well as market access barriers for certain products. China doesn’t have to wait for a trade agreement with the EU to address these issues, as they are well within the unilateral control of local policymakers.
Investment relations are set to improve somewhat, but far more needs to be done. Thirty per cent of global growth in the next ten years will come from China. European businesses want to be a part of this and the conclusion of the CAI negotiations are a welcome step in achieving greater access to the China market, and a more level playing field within. Again, most of these issues could be solved unilaterally by China’s leaders, but it may require the EU to push even harder to go beyond the small, but positive, step that the CAI represents.Related Topics