After eight years of tedious negotiations, fifteen countries in the Asia-Pacific region inked the world’s largest free trade agreement (FTA), named the Regional Comprehensive Economic Partnership or RCEP, in the recently concluded 37th ASEAN summit, in virtual mode. While it is unclear when the pact will be ratified finally, it could possibly enter into force in 2021.
Holding nearly 30 per cent of the world’s population, i.e., 2.1 billion people and over a fourth of its GDP, the pact will significantly lower trade and related tariffs in many areas, particularly the industrial and commercial clusters, across the fifteen participating states, namely the ten ASEAN states (Vietnam, Laos, Cambodia, Thailand, Myanmar, Malaysia, Singapore, Indonesia, Brunei, and the Philippines), plus China, Japan, South Korea, Australia and New Zealand.
What does RCEP entail?
One of the notable facts on the RCEP is that it is signed by emerging economic powers in one of the most dynamic regions in the world – the Asia-Pacific, enabling them to facilitate each other’s economic rise. However, something to be watched for is the expected widening of Chinese influence and superior manufacturing prowess across the region for trade, in the striking absence of the United States.
What the agreement envisages is a facilitating environment for free trade devoid of all protectionist barriers, reducing time and costs for businesses to export or import products anywhere in the 15-nation bloc without meeting separate requirements for each participating state. However, RCEP doesn’t address ecological questions or labour rights, while it touches patent rights.
India’s striking absence
Even though the original 2012-proposed pact included India as well, New Delhi decided not to join the agreement in November, last year, owing to domestic concerns over prospective international competition with regard to manufactured goods from China and dairy products from Australia and New Zealand. The Indian government also had to factor-in pressures from producers, farmers, and traders at home in its final decision-making.
But, India has a functioning free trade agreement with the ten-nation ASEAN separately. If signed, the RCEP would’ve forced New Delhi to cut duties and tariffs on about 90 percent of the goods that are currently imported to India over the next 15 years, an outcome that could potentially hurt its domestic producers and farmers. However, the Indian government has made it clear that with favourable offers, it might consider joining the pact in the future.
RCEP effectively sets new trade rules for the region, effectively influencing trade legislations and decision-making in each of the participating individual countries. But, it is also true that each RCEP partner is marked by a stage of socio-economic development which is different from other partners.
As the pact encourages competition which is a key feature of free trade deals, the goods from Laos or Cambodia will now have to compete with the ones from Japan or Australia. Thus, RCEP could also be a test of domestic production and trade competencies of each partner state. Perceivably, Beijing has a favourable upper-hand in this regard.
Well, most of the RCEP partners have functioning bilateral trade agreements amongst each other. But, when it comes to a trade deal encompassing almost the whole region, with the possible exemption of North Korea and Small Island States in the Pacific Ocean, RCEP has a bigger role to play in the coming years.
Another existing region-wide FTA
Another region-wide existing trade deal, including a handful of states across the Pacific as well, is the ‘TPP-11’, the successor pact of the Trans-Pacific Partnership (TPP)that continued after US withdrawal from it, the then world’s largest FTA named the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) with Japan, Malaysia, Singapore, Vietnam, Brunei, Australia, New Zealand, Canada, Chile, Mexico, and Peru as participating states. This pact is effective since 2018.
Why the US should involve more proactively in the region?
The US administration under Donald Trump has severely damaged American interests in the Asia-Pacific by pulling out of TPP which was intended as an economic counterweight to rising China. With, China-dominated RCEP on its way to be effective next year, US’ image is poised to decline further. But, a Biden presidency keeps hope high when it comes to dealing with Beijing economically in a region which it considers its own backyard.
If a change of leadership in Washington fails to translate into proactively renegotiating and intensifying its ties with allies and partners in the Asia-Pacific, it would be equivalent to passively paving the way for Beijing’s enhanced influence in the region, economic first, and followed later by potential military footprints and debt-trap diplomacy, the signs of which are already visible in the region and beyond.
Brighter Future Waits Ahead
Our footprints on the sands of time are about to be washed up by the next wave. We need to set out new paths, urgently, after all, the real power of wisdom not hidden in knowing it all; but in not knowing enough. Because whatever we may think of our mastery of our own crafts is in reality achieving ‘mastery’ as an acknowledgment of arriving at a point of not knowing enough therefore continuous hunger and craving to search for bigger answers. Otherwise, just a few experts would have been enough for the world. Observe how after two millennia passed, we still have not figured out achieving grassroots prosperity, diversity, tolerance and equalities.
Only if our new wisdom understood will we advance or else stay lost at the beaches. Our new world of today needs new words, new vocabulary, and new narratives to allow correctly knitting the tapestries of our miseries and equally weaving strong and fit enough sails for the coming stormy winds of tomorrow. Muffled in the old-fashioned terms of the past, the double-sided, agenda-centric language used today, already lost its authenticity. Today’s language mummified in bandages of political correctness, already tombed intellectualism and spoken words into deprivations, while whatever enunciated as rehearsed acts via teleprompters is still undecipherable by the global populace. Realities now demand change to honest words to assemble new narratives, to calm restless citizenry to deliver its truthful meaning in bold progressions.
Loudly enunciated are our acceptances of our victory and defeats or we stay silent to our deceptions. There is a brighter future ahead, indeed, but firstly, if we only accept for a moment that our previous attempts on grassroots prosperity creation were failures of sorts, suddenly pandemic recovery appears meaningful. If we also accept our previous trajectory of economic development spanning the last decade was somewhat hit or miss on targets, suddenly, new horizons appear. If we accept also that all our power-skills and rich-knowledge almost maxed out, suddenly brighter futures start to appear. Because, only when we discover a window, find some empty spaces tumble into voids, and chasms new things start to pour in, new ideas flourish, the processes start as enlightenment for new discoveries to commence. No matter where we stand on this earth, a new world has once again brought us on crossroads to face new transformation for brand new adventures
Our limitations on our performance are true measurements to qualify us to enter the cockpits. Historians will recognize this pandemic recovery as a very special moment; declare this era as a small blip in the course of human endeavor and a glitch that ‘possibly’ corrected the role of government administration to allow far more talented and upskilled citizenry at helm to advance. One: The corporate leaderships of technology companies acquired extraordinary smarts many times more powerful over what their own top national political leadership team displays and thus unable to tackle any technology sides of the economy. Two: Digitized and technologically advanced vertical sectors across 200 nations and 10,000 cities shut out national political leaderships and local institutional administrators as obsolete and unprepared to deal with the required speed of response and execution and therefore losing future control of the national economic drivers of national economy in global jurisdictions. Frequent flyers know a lot about flying city to city but definitely are not certified and qualified pilots to fly jumbos around the world. The power play of the digital economy once enters the ocean of platform economies of the world will become extremely specialized, therefore, unless prepared, nation-by-nation, top political leadership and government agencies will lose grip on all such technology advancement games and become simply spectators. Study crypto-currency deployments, Space travel and satellite transportation, AI and trading games, Jack Ma and China over ruling financial sectors as a start.
Our mobilization of hidden resources and talents are proof of what we just learned coming out of fog. For the first time in 100 years, globally speaking, a new world emerges; The pandemic has already prepared the humankind to rediscover “the meaning of life” the purpose of “co-existence” while to the poor of the world “re-learn to survive” and to the rich “re learn to create common good”. Is pandemic germinating our entrepreneurial intellectualism? Is this the kind of transformation humankind has been waiting for over a century? Why is futurism calling for futuristic literacy?
Our billion hungry every night despite two millennia past, we must show our resolve or our negligence will destroy us. The poor of the world; in neglect, misery and almost buried alive, Millionaires anxiously digging their own graves, now exhausted, Billionaires digging deeper to find their own legacy if any and Trillionaires buying up heavens in the clouds to block other voices. The Towers of Babylon going half empty, displaying signs of ‘vacancy’ fires of hell at the base only provide gentle warmth to the upper celestial floors of luxury living. Where sweetness is missing in the bitter medicine of our times ignored but candies alone will never cure; the message in the bottle found on the bloody beaches tossed but the noise of fakery drowns us all. Imagine, if we compressed the last two millennia in two minutes. We just evaporated at the last second. Universe did not even notice.
Wondering, what was the possible message in that bottle, if any?
Kickstarting the U.S. Economy: A Rebound or Further Inequity?
The global economy has seen its fair share of peculiarity in recent years; much attributed to the developing economies rather than the stable sovereigns of the world. However, the wave of the pandemic has toppled the conventional trend unlike ever before. Whilst the developing economies gain traction, the European economies are crumbling under the whelming pressure of the pandemic.
The US economy, however, is on its track to rebound at nothing but an accelerated pace that is optimistic as it is sinister. Forecasters have been predicting an economic boom post the pandemic for months yet the claims were rebuffed as overly quixotic. The economic boom is on cards that could contract the surging unemployment rates and could even push the economy towards a prolonged growth trajectory.
The economic recovery is evident from the jump in retail sales all over the US: levels anticipated to bloom further amidst speculations of a hefty aid package advocated by president Biden. Moreover, the FED has predicted a growth of 4.5% in the US output; the highest predicted level of GDP growth in over two decades. The optimism is matched by the leading economists, likes of Goldman Sachs putting a word in their perspective: ‘We [US] are very likely to get a very high growth rate’.
The budding confidence in the economy is majorly linked to the rollout of vaccines. Albeit slow-paced, the vaccination drives are striving hard to meet targets set by the authorities. Coupled with the shift in the government, the national focus is primarily etched in the campaigns to ensure timely inoculation before the virus strikes again.
However, the inoculation would grip over the country for most of the year 2021, keeping the natural order of the country at bay. The economy, thus, is bolstered by Federal aid packages; pouring trillions of dollars in rental packages and unemployment benefits. The resulting is a pile of surplus disposable income which awaits an opportunity to be expended. Given the mounding pressure of recession and health crisis cumulated over the yesteryear, the income would be sufficient enough to suffice under the newfound rental and mortgage reliefs purported by the federal government. Combined with free public transportation, the added monetary value could be utilized as soon as the country bounces back from lockdowns.
The surplus income could further expand if congress approves the magnanimous aid package proposed by the democrats under the plan of president Joe Biden. As vaccinations continue to immunize the population and income blooms within common households, approaching summers could prove to be a haven for the US economy to shine bright. Peak demand for hotels and transport is expected in the second and third quarter of 2021; unemployment is predicted to level down to 4.1% due to surging demand for labour in the HoReCa sector whilst simultaneously kickstarting the dormant business of airlines and smattering of other means of transit.
Even the most experienced economists, however, have pitched reservations to the envisioned rebound of the US economy. The prime facet impeding that prospect is the intermittent campaign of vaccination. The inoculation has been slower than expected and the adverse effects of the jabs have instilled a fear that threatens to further stall the efforts to vaccinate the population. With the ensue of new virus variants in California and irregular vaccination drives, the expected recovery could defer to late 2021 and even 2022. This could make the US vulnerable to the 3rd wave of Covid as per the pattern of cases observed last year.
The political standoff is another factor that could push economic prosperity into despair. The simmering tensions post the impeachment trial of Donald Trump have surfaced over the last two months. The demarcation in the senate is as clear as it has ever been over decades and even the split in the republicans has brewed post the acquittal of Trump. Both parties locking horns this early casts a confusion that stood out in the recent energy crisis in Texas; the federal and state governments bumping heads whilst the state drowned in stark darkness and bitter cold. This disparity paints a bleak picture for the United States given Mr. Trump could stir more instability with the prospect of running the election again in 2024.
The escalating oil prices also indicate a tough road for nearly the entirety of the manufacturing sector of the economy along with any lucrative opportunity to the airline industry in the forthcoming months. As the world still reels from the pandemic, the crush in the oil supply from the US has rendered the valuation at high levels; a contrast to the plummeting prices just last year. The Brent index has surged more than 28% since December 2020, pushing the prices up to as high as $66 per barrel. With the forecasts expecting Brent to further climb up the trajectory and the subsequent production crunch from Russia and OPEC members, oil prices could rise up and beyond $70 per barrel. This price surge, as a result, could convert the booming economy into hyperinflation since the US would continue to rely on imported petroleum until it regains the economic traction to be self-sufficient again. Thus, the pilling income could transition into sky-high prices post the pandemic.
Mirroring the recession of 2001, while the economy started to expand within a year, the unemployment rates remained high for the better part of the decade. Drawing parallels from that period, while the growth is projected to touch the 5.8% mark later in the fiscal year of 2021, a congruent projection could not be made on the front of economic recovery. Although high inflation has never been an issue for the US in the past, unlike the developing nations, sluggish recovery in employment, brimming tensions in the political arena, and irregular inoculation rates could widen the gap of wealth in the country. Inequity, thus, is inevitable as an opportunity cost of growth at the expense of an inflating economy. The affluent strata of the society would reap the benefits much more rapidly than the working class. Whether it would be of long-term virtue or despair: time is the deciding factor for the common citizens of America.
EEU: An Irrelevant Anachronism or a Growing Digital Enterprise Dynamo?
A commonwealth of interests
The search for a stable Eurasia depended on the effectiveness of a durable system for the post Soviet space which could easily descend into an arc of instability if was not properly managed. Moscow had to be careful not to view these ex Soviet countries as its natural hinterland to be taken for granted and to upgrade its relations with each of them to preserve a communality of interests that had eluded it in Ukraine. The world of the command economy centred on Moscow would be made over on an entirely new basis that reflected the fast moving 21st century digital economy. Where common standards and freedom of movement of people and capital was meant to create a climate of openness and facilitate cross border business not to seal off Eurasia from the outside world. The fragile nature of post Soviet identities meant that a sense of commonwealth and common citizenship rooted in an overarching Eurasian identity would be more appealing to a growing entrepreneurial class disillusioned with the results of narrow ethno- nationalism as a ruling idea. The danger was that the more the Eurasian Union grew in stature it would have to navigate roadblocks deliberately placed there by powerful nationalist interests who perceived it as threat to their power base. And by stoking tensions with Russia periodically these former Soviet states could remind the outside world that they were not tame satellites of Moscow or artificial constructs but were free to decide their own destinies.
The path to some kind of durable Eurasian concept was obstructed by the reluctance of many Eurasian states to give up on the idea that eventually find a place in the west. The Eurasian union might be a useful stopgap while they waited to the privileged world of the west where they felt they ultimately belonged. Even though the chances were slim that it would ever happen. The Russian view of the Eurasian Union was that it would be a modernizing force which would have the express aim of bringing the region closer to the world and transforming it into a forward thinking technological giant. It would not be a repeat of the “Soviet experiment” which was a parallel universe closed to outsiders with information tightly controlled. And with the official version vastly at variance with the grim reality. Its core vision this time around was to effectively connect the region to the outside world and be at the forefront of new innovation. It would not depart from international standards and go off on its own tangent or conduct its affairs with guarded secrecy. But happily embrace new ideas and fresh thinking. Russia’s objectives were to circumvent parochial state leaderships and local bureaucracies and create a global brand that would capture the imagination of high net worth investors and provide a real alternative to pro western orthodoxy. With first class transport, logistics and a digital economy that would be the envy of the world, it would be first and foremost technocratic and meritocratic and not so much ideological in nature.
The Russian leadership concentrated on achieving maximum consensus in decision making and adopting policy positions where the weaker states would not be unfairly disadvantaged. While Russia would be providing the bulk of the digital infrastructure and at its own expense it would be considered common property of the Eurasian economic union in many ways. Russia’s contribution was based on a more generous model than its Chinese partner which took the form of loans that could result in forfeiture of assets if loan payments were not met in time.
Thus Russian prime minister Mihail Mishustin recommended at a meeting of the inter Government commission implementing a “digital project” across the whole Eurasian union. This would provide a “specialist information system” in the sphere of “migrant labour” that would better serve the needs of business and the migrant communities. These measures would seek to gradually phase out and replace the patchwork, confusing system of regulations with a common framework. So for example in future the EEU would receive powers that would promote standardization. The Eurasian commission adopted a new technology based system of labelling products that “would apply in future in relation to new categories of labelled products.” The prime ministers of the EEU states approved a document that would “establish a time limit by which member states would be notified of the intention to introduce labelling on their territory.” And would give them a “period of nine months to outlaw unlabelled products.” The new system should eventually be incorporated fully at the national level so that business could “escape unnecessary burdens” caused by “different systems of control.” and gradually filter out bureaucratic anomalies.
The priority was to create a level playing field so that the EEU was not perceived as just an exclusive club for Government connected state companies. But that it would also create conditions for small and medium enterprises to thrive and expand and ease substantially the costs of doing business. As well as reversing the favouritism traditionally shown to large companies by making the ability of SME’s to operate in an environment that was transparent and equitable more concrete. For example the prime ministers of the EEU states agreed to a “unified ecosystem of digital transport corridors”. The total cost of the scheme would be around 10 billion roubles. The cost divided between the union and the member states. It would provide a “service for the access of electronic route maps, international transport charging rates” as well as electronic protocols that would give updated information on interior ministry regulations etc. This unified system was especially useful to SME sector who were often reliant on “outside platforms” which were often “not connected to each other” and ” the absence of coordination added to their logistical costs.”
Similarly the five member states of the EEU have agreed to form a common financial market by 2025. A key role in this is played by financial technology which will be deployed to make financial services “more accessible, cost favourable and safer”. Private and business customers can expect “financial services of higher quality and greater choice to be available”. And with such a hi tech financial monitoring tool at the authorities disposal “credit and financial institutions will have to reveal the origin of their capital”. An important element was the Application Programming interface which gave the programme the capacity to conduct biometric identification and to connect IT systems together so “they can exchange information between themselves.” Also a pilot project was launched which the AFT system together with 13 Russian banks were undertaking. “The aim of it is to improve automated online credit lending for small and medium businesses.” And create a level playing field. This was another example of how the Eurasian Union was preparing the ground for a greater role for the more dynamic and innovative SME sector in anticipation for a shift from a resource based economic model to a more diverse demand and consumption one.
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