With virtual fanfare the much heralded Regional Comprehensive Economic Partnership (RCEP) Regional_Comprehensive_Economic_Partnership was signed this weekend with the ten nation ASEAN group in addition to Australia, China, South Korea, Japan and New Zealand. As with the former 12 nation Trans Pacific Partnership, the United States has withheld its participation. What are these mega trade agreements worth?
The range and scope of these mega agreements might on their surface appear mind boggling but in the light of multilateral trade experience in recent decades what are they worth? Unlike the World Trade Organisation they are essentially no more than platforms for discourse and further negotiation and lack effective structures for enforcement and dispute settlement. If the parties have differences over claims they can resort only to diplomatic process. This can be a hollow experience because what is in reality a breach of the agreement may consist of actions that deliberately avoid a formal breach but yet result in serious disruption and frustration to a party’s trade.
Pathetically it is being claimed that RCEP will open a fresh channel to break the diplomatic logjam over trade between Australia and China. Time will tell but at this stage nothing may be further from the truth as China has turned these evasive practices into an art form. They belie its obligations both within the World Trade Organisation or under individual trade agreements, and now doubtless in due course RCEP. Whatever might be said about such tactics they certainly lack comity. Products currently affected by these bans or barriers include barley, wine, coal, seafoods (notably rock lobsters), and possibly sugar and copper. No one can say for sure as China has not formalised a policy. Recently added to the list was Victorian and Queensland timber, on the ground that some insects were allegedly present in the timber because bushfires hampered fumigation in some areas – an especially egregious imposition. The WTO Trade Facilitation Agreement was specifically designed to overcome unsubstantiated complaints of this nature without recourse to the exporter.
To remind. Under the Australia-China Free Agreement (FTA) China reduced its tariffs to Zero on most of the products now targeted and others. The zero tariff was settled by negotiation in good faith by balancing interests and embodied in the agreement. Barely and and wine retained tariffs but these have been have been raised unilaterally by China to around 80%. Any product may now find itself subjected to such unilateral moves even while en route or in preparation for shipping.
China may have a point in regard to certain anti-dumping claims by Australia now before the WTO – some 60 altogether, mostly concerning subsidised steel products. They in turn have alleged subsidies on Australian red wine and barley. These claims have however been made by way of due process. On the other hand, leaving a $million dollar consignment of Australian rock lobsters to rot on the tarmac at Shanghai airport is not due process. Nor is the case of a consignment of 160,000 tonnes of Australian coking coal on an Indian owned and flagged ship stranded for some 5 months off a northeast Chinese port (Bihai Sea), with a confined and distressed Asian crew aboard, not allowed to depart even though a Japanese company has offered to take the coal and relieve the ship. The Chinese, in refusing to accept the Japanese offer and release the ship , have alluded to the recent Indian/Chinese clash in the Himalayan mountains as being relevant. So much for the Australian coal. This is only one of several ships stranded in similar circumstances.
These are clearly actions where law and due process have been abandoned in circumstances when war has not been declared (which might otherwise justify them) – but where pretence is made that all is normal and above board. The Australian government seems unwilling to treat them for what they are, being in thrall of further retaliations from a country on which the bulk of our exports depend, pathetically asserting that Australian exporters should be diversifying their markets. The fact is that there is and has been a natural complementarity between what we produce and what the Chinese to date have required. The relationship has evolved over time with confidence that formalised agreements exist for what they stand for. The growing trade imbalance has placed us at a disadvantage well beyond the time when that imbalance remains tolerable.
The Australian economy in relation to export earnings may need to be reshaped radically to overcome this vulnerability. With RCEP or whatever, if we cannot have a direct and frank exchange with the Chinese government to reestablish trust and goodwill, and reestablish respect for the spirit of international agreements, particularly the WTO, we will know that the Rubicon in this regard has been crossed.
Andrew Farran in his younger days was a diplomat, Commonwealth civil servant and law academic (Monash). His subsequent business interests included international trade, intellectual property and publishing, and wool growing. He was a regular contributor to Pearls & Irritations from 2017 – 2020.
Writes extensively on international affairs and defence, contributing previously to major newspapers (metropolitan and rural). Formerly director of major professional publishing company. Currently apart from writing he directs a registered charitable foundation with links in both Australia and overseas.
Comments
4 responses to “What’s the point of FTAs (including RCEP, with China?”
Good international relations, which include trade agreements, depend on good will at government-to government level. There are limits to how far legalism can be pushed. The Australian government has demonstrated ill-will towards that of China, so Australian expectations that trade should go smoothly are naive.
Attempting to trade with people while acting to bring down the government under which they operate is equivalent to the 19th century Imperial policy of making war on China in order to be able to sell opium to its people. We are still imperialist jerks.
The formation of an economic pact in Asia Pacific without India the US seems incomplete and may present problems later for the block.
Such decision would not have been reached had it not for two major events, the emergence of the covid-19 pandemic. the wrecking of the TPP by President Trump, and the US containment policy of China (via trade and cold war). Hence the decoupling of Trump from world organisations formed initially by the US is a major factor.
The decision to form RCEP without the US does dent US reputation and global leadership but she remains the world’s No.1 superpower.
The formation of RCEP without the US does signify a new thinking in the Asia Pacific that they can resolve problems and conflicts by themselves without involving the US. Their immediate elephant in the room is not the US but China and they have to find means and ways to accommodate China on her rise and to make economic progress for their own countries.
Australia has an opportunity to unfreeze her poor relations with China if she makes a genuine effort to be part the Asia Pacific and played her tune in harmony and in concert with our northern Asian neighbours; together reaping peace and prosperity for all in the Asia Pacific.
India will re-join when she is ready and the US cannot afford to be outside the tent. The only good thing about US joining later would be that all problems within Asia Pacific nations have already been solved prior to US entry, hence less a spanner in the works.
RCEP will never be like NATO, as it concentrates of peaceful trade and not war!
Lastly, this pact is a rules ordered pact and it will allow China to show her Asian neighbours her good intentions and ability to adhere to rules made by all the members of RCEP not just unilateral authorship of current institutions.
The RCEP could prove to be a peace drive trade block that can promote long lasting peace on earth. When RCEP grows and replaced by a World Trade Pact, then there will lasting peace on earth.
No doubt you are right about RCEP. But, as Churchill said, jaw jaw is better than war war. So this might be like the UN – corrupt, inefficient, run by parties’ self-interest, useful for posturing. The only thing worse than the UN is not having the UN.