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RCEP and its impact on global trade
GLOBAL TRADE ASEAN TRADE AGREEMENT
IF CORRESPONDENT
On November 15, 2020, 15 countries- including the Association of Southeast Asian Nations (ASEAN) and five regional partners — signed the Regional Comprehensive Economic Partnership (RCEP), arguably the most significant free trade agreement in history. RCEP
Brazil is and the Comprehensive and important Progressive Agreement for to the global Trans-Pacific Partnership oil industry (CPTPP), which concluded in and will be 2018 and is also dominated by responsible for the production of nearly 50 percent of the world’s offshore oil by 2040 East Asian members, are the only major multilateral free trade agreements signed in the Trump era. So what is RCEP? To give a brief introduction, RCEP is a proposed agreement between the member states of the Association of Southeast Asian Nations (ASEAN) and its free trade agreement (FTA) partners. The pact covers trade in goods and services, intellectual property, etc. RCEP was introduced during the 19th Asean meet held in November 2011, and the negotiations for the same began during the 21st ASEAN Summit in Cambodia in November 2012. RCEP is considered extremely important because all the 16 countries negotiating the RCEP together account for a third of the world's gross domestic product (GDP) and almost half the world's population, with the combined GDPs of China and India alone making up more than half of that. RCEP's share of the world economy could account for half of the estimated $0.5 quadrillion global (GDP, PPP) by 2050. RCEP aims to create an integrated market in the participating countries, thereby making it easier for products and services of each of these countries to be available across this region. The negotiations will focus on trade in goods and services, investment, intellectual property, dispute settlement, e-commerce, small and medium enterprises, and economic cooperation.
RCEP is expected to connect around 30 percent of the world population and its output. And, if this gets the proper political context, RCEP is expected to generate significant gains. According to media reports, RCEP could add $209 billion annually to world incomes and $500 billion to world trade by 2030. Experts also estimate that RCEP and CPTPP together will offset global losses from the U.S.-China trade war, although not for China and the United States. Additionally, the new agreements will make the economies of North and Southeast Asia more efficient, linking their strengths in technology, manufacturing, agriculture, and natural resources.
Countries benefiting from the RCEP agreement As mentioned before, the effects of RCEP is quite impressive even though its agreement is not as
rigorous as CPTTP. RCEP primarily incentivises supply chains across the concerned regions and caters to necessary political sensitivity. Its intellectual property rules add little to what many members have in place. The agreement says nothing about labour, the environment, or state-owned enterprises, all of the critical chapters covered in the CPTTP agreement. But, it has also been observed that ASEAN-centred trade agreements improve over time.
Talking about the agreement's benefits, the Southeast Asia region will generate $19 billion annually by 2030. Still, it will be less than Northeast Asia because it already has free trade agreements with RCEP partners. RCEP is also expected to improve access to Chinese Belt and Road Initiative (BRI) funds, enhancing gains from market access by strengthening transport, energy, and communications links. RCEP's favourable rules of origin will also attract foreign investment.
The geopolitical significance of RCEP Everyone concerned with the subject knows and recognises the value of a significant, East Asian trade agreement. Even though the agreement is incorrectly labelled as 'China-led', it triumphs for the ASEAN middle-power diplomacy. Still, neither China nor Japan, both of which are the region's largest economy, were politically accepted as the primary architects for the project. This issue was resolved way back in 2012 by an ASEAN-brokered deal that included India, Australia, and New Zealand members and put ASEAN in charge of negotiating the agreement. Without such "ASEAN centrality," RCEP might never have been launched. Additionally, RCEP
World’s biggest trade blocs
United States - Mexico-Canada agreement
$24.37 trillion
European Economic area
$18.85 trillion
RCEP
$25.84 trillion
Source: Statista
GLOBAL TRADE ASEAN TRADE AGREEMENT
will also help China strengthen its relations with its neighbours, previously described as unusually slow, consensual, and flexible.
With accelerating trade relations between China and its neighbours, RCEP will also accelerate Northeast Asian economic integration. Regarding this, Japan's ministry of foreign affairs noted that negotiations on the trilateral China-South KoreaJapan free trade agreement, which has been sitting idle for a long time, are expected to become active as soon as they can conclude the negotiation RCEP. Xi Jinping, in a high profile speech, in November 2020, promised to speed up negotiations on a China-EU investment treaty and a ChinaJapan-ROK [South Korea] free trade agreement.
Finally, RCEP and the CPTPP are decisive counterexamples to the global decline in rules-based trade. If it is observed that RCEP is spurring mutually beneficial growth, its members, including China, are expected to gain influence worldwide.
Objectives and scope of the RCEP agreement The primary goal of the RCEP agreement is to establish a modern, comprehensive, high-quality and mutually beneficial economic partnership that will facilitate the expansion of regional trade and investment while contributing to global economic growth and development. The RCEP agreement is declared to work together and support an open, inclusive and rulesbased multilateral trading system within the World Trade Agreement (WTO) framework. Hence, the objectives of RCEP are in line with the WTO rules.
Additionally, the RCEP agreement aims to complement the WTO and extend it to areas not covered or beyond its provisions. RCEP constitutes for sure a significant improvement and deepening of integration in the region compared to the prior system of ASEAN Plus One FTAs. The RCEP agreement also plans to strengthen states' position within the global value chains and build more robust and deeper regional value chains. The agreement will also boost competitiveness between parties involved to drive overall productivity, the key to long-term competitiveness and economic growth.
The agreement comprises 20 chapters. The base chapters talk about concentrating on trade in goods, including rules of origin, customs procedures and trade facilitation, sanitary and phytosanitary measures, standards, technical regulations, and conformity assessment procedures, as well as trade remedies. The agreement also covers trade-in services, including specific financial services, telecommunication services, and temporary movement of natural persons (related to trade in services). The agreement also mentions provisions on investment, IPRs, electronic commerce, competition, SMEs, economic and technical cooperation, government procurement, and legal and institutional areas, including dispute settlement.
It is also noteworthy that the RCEP trade agreement features a diverse group of countries at different levels of development, different levels of sophistication of firms, and varying sizes. Each signatory
is significantly other in terms of economic need. RCEP agreement is said to be mutually beneficial to countries at a different level of development, thereby providing a much-needed level of flexibility and special provisions and treatment for Cambodia, Laos, Myanmar, and Vietnam and adding additional flexibility for the least developed states. Many experts worry it may create potential tension among the group itself for all these reasons.
Political extension of the RCEP agreement The RCEP agreement was completed in 2021 and currently is open for accession by other states 18 months after its entry into force. As an original negotiating state, India could become an additional member thanks to its fast-track accession possibility, and this could introduce the original plan of ASEAN Plus Six.
ASEAN GDP per capita Singapore
$1,075 bn
Brunei
$484 bn
Malaysia
$365 bn
Thailand
$350 bn
Indonesia
$332 bn
The Philippines
$241 bn
Vietnam
$71 bn
Source: Good News Southeast Asia
Currently, India has decided to optout of RCEP due to concerns over the potential of excessive imports, particularly from China within the scheme of the current agreement that could endanger domestic industry and agricultural sectors. Therefore, the Indian government's entry would require extra safeguard measures and renegotiation of the terms by all parties involved. RCEP countries account for $25.8 trillion of global GDP with 30 percent of the world's population.
The road ahead Once the agreement comes into effect, RCEP will become the world’s largest regional trade agreement in terms of GDP and population. Given its expected impact on the world economy, the agreement extends beyond the typical FTA in trade in goods, including those in these in services and investments. Talking from a geopolitical perspective, RCEP constitutes the first case in which China enters a multilateral regional trade agreement. Due to its size, RCEP has the potential to create significant qualitative and quantitative effects regionally and globally both in the short and the long run. It is also expected to strengthen the economic position of the region as the main focus of economic activity spurring growth and playing a crucial role against the fight of the Covid-19 pandemic. This trade agreement also increases the likelihood of establishing the world’s largest regional value chain with the growing role of intraregional economic activity.
Experts have also mentioned that the cultural, social, economic, and political heterogeneity of the block might pose a challenge to its functioning, and the progress of the deal will likely depend on the balance of costs and benefits for all participating states. Realizing the potential benefits of this megaregional FTA will crucially depend on addressing the major challenges in particular divergent political and economic interests of this diverse group. It is also important to look at RCEP from a broader perspective. Over several decades, the global trade will likely develop into a system of several large RIA’s or mega-regional trade agreements with a significant role in the global trading systems.
editor@ifinancemag.com
Business Dossier - Max Capital Management Holding Ltd
Bringing MCM has educated more than 5,000 GIC members worldwide with an experienced innovation to and dedicated global team with the aim of managing a knowledge-sharing platform management
Max Capital Management Holding Ltd, also known as MCM is a Global Investment Holding and Project Management Consultant (PMC) that specialises in project management’s conception to implementation, Customer Relationship Management (CRM) and event management.
In 2016, MCM launched the Global Investment Community (GIC) and educated more than 5,000 GIC members worldwide with an experienced and dedicated global team with the aim of managing a knowledgesharing platform and finding more opportunities around the world. This educational knowledge ranges from due diligence to identification, analysis, evaluation and more in the property and business investment life cycle. Through MCM’s exclusive and trusted global network, it can be implemented with proven investment experience, PILC / BILC strategies, and a willingness to share knowledge with respected MCM GIC members.
MCM has also successfully managed more than 30 projects with a combined total value of Projects Under Management (PUM) of over $10 Billion in more than 10 countries. MCM also successfully managed various types of projects, ranging from property development, e-commerce and e-learning platforms, hospitality, healthcare, and many other sectors. MCM expanded its expertise with a rapid level of development, thereby making its presence known in two countries annually. This shows how strong the business network of MCM is.
MCM strengthens its performance through Property Investment Life Cycle (PILC) and Business Investment Life Cycle (BILC). These two strategies have several stages to facilitate dealings in properties and businesses. Both of these strategies are also educational and informative and are indeed very helpful to GIC members.
MCM adheres to the core value of People before Profit: Trust and integrity to achieve encouraging results in this arena. MCM also appeared in multiple media and press released all over the world, and boasts more than 500 coverages.
MCM attributes its success to its founder, Adj. Prof. Maxshangkar, who has an MBA in International Business (distinction) from the University of East London, United Kingdom. He began MCM by selling healthcare products and water purification systems. Then, he jumped from one field to another until he found the door of opportunity through the property.
His main motivation began to soar after he had to deal with the 2008 Global Financial Crisis until he founded the Property Investment Life Cycle (PILC) strategy to solve the problems faced by the people. In turn, this led him to found the establishment of the Max Capital Management (MCM) group.
Maxshangkar is often invited as a speaker in many private investment seminars. He never stopped sharing the main value that he has always held which is People before Profit because he believes that that value will make him more ambitious and continue to achieve success together with his loyal members.
High ambitions interspersed with high values and knowledge have made MCM one of the companies that have successfully secured many projects on a global scale in more than 10 countries such as Malaysia, Singapore, Indonesia, Vietnam, China, Hong Kong, Germany, US, UK, New Zealand, Australia, India and others.
MCM will further expand its influence by becoming project management consulting, strategic planning and marketing/branding strategies for local and internationally renowned property developers and business owners. With a large number of projects that have been successfully managed and handovers, the experience possessed by MCM indirectly increases customer trust towards a better base.
As mentioned above, MCM also always has a strategic partner who acts as a Project Management Consultant (PMC) in several projects specializing in project management’s conception to implementation. The collaboration usually amplifies the user experience with an increased potential to reach for a greater customer base especially in the property development industry. But now MCM also extends through other industries as well which are FinTech, eCommerce, Healthcare and EduTech industry.
There are 4 countries that attract MCM with the potential and opportunities that can be offered. The country is Hong Kong which is the 3rd largest financial hub, Malaysia which is strategically located in the heart of the South-East Asia region, Indonesia which has the 4th largest population and New Zealand with the World's Freest Economy status. These four countries have great potential for MCM to further expand business and investment.
Along with Malaysia, MCM has witnessed success in several other countries like the United Kingdom, United States, New Zealand, Australia, Russia, Japan, China and Malaysia.
The economic downturn caused by the pandemic is likely to increase crime in many countries. Therefore, one of the MCM’s managed projects, Code7 took the initiative by developing a security technology that, to some extent, can ensure public safety through a mobile app known as CODE7 Protection. CODE 7 was founded in 2018 as a platform that allows all security companies to embark on this inter-ecosystem as ONE with the MISSION of enhancing and upgrading security standards to the next level, with everyone's safety as their PRIORITY. CODE7 provides several security services to the public through the CODE7 Protection app, including on-demand requests for "scheduled patrol" and "home protection," as well as an extensive coverage area throughout Malaysia. They also provide security assistance, CCTV alert, loitering, attempted break-in, and stranger approach. CODE7 has formed a strategic partnership with MCM as part of its plan to broaden its customer base and strengthen its marketing efforts.
Global Brand Partners Pte Ltd (GBP) was founded by an apparel veteran with a strong market network that designs, develops, and markets innovative performance and styledriven men's, women's, and children's apparel, footwear, and accessories for global distribution. GBP, one of the world's largest fitness and health brands, has launched a performance footwear and apparel collection under the brand BeachBody which is an International Sports Apparel Brand that competes with NIKE, ADIDAS, and PUMA. Following an outstanding performance, MCM entered into a joint partnership with GBP as an angel investor. Currently, the market has begun to penetrate renowned wholesale distributors in the United States, United Kingdom, Germany, Japan, and the Middle East.
MCM also partnered with Plantonic Singapore Pte Ltd, which produces the world's first four-inone revolutionary products that are not harmful and are beneficial to the environment, humans and animals as a whole, which employs an effective formula inspired by ayurvedic and traditional medicines. It is made with all-natural and plant-based ingredients like shilajit, a mineralrich resin, seaweed, ginseng root, and furthermore. This tonic acts as a fertiliser, revitalier which allows plants to thrive while protecting them from diseases and fungal infections. As part of their global expansion plan, Plantonic appoints MCM as their global Project Management Consultant (PMC) into the global market, including Malaysia.
ECONOMY FEATURE ECONOMIC RECOVERY EUROPEAN ECONOMY COVID-19 ECONOMY IMPACT
FEATURE
COVID-19 ECONOMY IMPACT
IMF predicted that the Eurozone public deficit reached a new high of 10.1% of GDP in 2020
Impact of Covid-19 on the European Union Economy
IF CORRESPONDENT
The pandemic has bludgeoned the global economy heavily, especially the European Union (EU). While most nations struggle to get back on their feet, the EU’s road to economic recovery has been commendable. The sheer intensity of the Covid-19 pandemic has a significant response in Europe and the Eurozone’s fiscal policy, both at national and international levels. Eurozone member states use fiscal measures to respond quickly and forcefully. Their responses aimed to minimise the danger of corporate failures and increased redundancies, paving the way for a rapid recovery from the crisis.
Government involvement has taken the form of various tools, including widespread usage of short-term labour programs, deferment of social security contributions for businesses, and stateguaranteed loans, among others. The fiscal budgets of member states
ECONOMY FEATURE ECONOMIC RECOVERY EUROPEAN ECONOMY COVID-19 ECONOMY IMPACT
deteriorated significantly in 2020 because of these initiatives.
According to the International Monetary Fund (IMF) predictions, the Eurozone public deficit reached a new high of 10.1 percent of gross domestic product (GDP) in 2020, with debt exceeding 100 percent of GDP (at 101.1 percent) for the first time. The European Central Bank’s (ECB) significant involvement in keeping the interest rates low reduced the dangers of these statistics.
Europe has managed to break some of its taboos throughout this crisis. Although far from ideal, the European Recovery Plan accord is a significant step forward. EU-wide borrowing funds the proposal, which mixes £360 billion in loans to member states with £390 billion in grants, something that was inconceivable. The Eurozone’s battle against the crisis is now no longer the duty of the ECB only; the union-wide fiscal policy is tackling it.
Implementing this recovery plan and targeting assistance to the most vulnerable nations could boost confidence and increase monetary policy efficacy. The rehabilitation strategy clearly defines priorities.
Member states' recovery plans must enhance growth potential and employment while contributing to green and digital transformations to qualify for loans and grants from the European program. The plan’s proper execution will be difficult in the face of several points of contention, such as the European Union’s (EU) need to boost its own tax revenues to return the subsidies it has received.
All European countries appear to recognize the degradation of public finances. Government involvement was necessary to absorb part of the shock of Covid-19, and the EU will address the question of decreasing
EU GDP from 2018 to 2025 (in billion dollars)
2019 $15,682 2020 $15,263 2021 $17,078 2022 $18,353 2023 $19, 340 2024 $20, 270 2025 $21,215
government deficits and indebtedness later. Member states have tightened their fiscal policies too soon in the past, notably in the aftermath of the sovereign debt crisis, hampering economic development. As a result, the European authorities’ measures to the current turmoil represent a clear positive shift in this regard.
Fiscal constraints have been eased, particularly those limiting government deficits to 3 percent of GDP and public debt to 60 percent of GDP. This enhanced adaptability has aided in combating the pandemic’s economic collapse.
The European Council, comprising the heads of state and government of the EU’s 27 countries, later agreed to further measures. Financial aid has been offered as loans from the EU to member states, primarily to help cover the rising use of short-term employment schemes.
Impact on the UK
The scale of the epidemic’s economic downturn is unmatched in contemporary history. Some estimates suggest a 9.8 percent fall in UK’s 2020 GDP, the biggest reduction since records began in 1948 and the largest in over 300 years.
During the first shutdown, the UK's GDP was 25 percent lower in April
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COVID-19 ECONOMY IMPACT
2020 than just two months before in February. Economic activity increased in the spring and summer of 2020, indicating the economy’s opening. This opening was followed by increased Covid-19 cases and more lockdowns in the autumn and winter, resulting in a drop in economic activity.
After a rapid recovery when the economy reopened, economic growth slowed in the summer of 2021. This slowdown was first attributed to the proliferation of the Delta strain and the resulting huge number of persons forced to self-isolate. The disruption of global supply networks, which has resulted in supply shortages of some items, is a more lasting problem. Many businesses are also having trouble finding qualified employees.
Inflation has increased in 2021, partly due to supply issues, and may continue doing so through 2022. Consumers may consequently become more cautious in their spending, slowing economic development. Another critical topic is how the conclusion of the furlough program in September 2021 would influence the labour market and, as a result, consumer spending.
Even assuming there will be no reappearance of the virus that will significantly impact the economy, there remains a tremendous amount of uncertainty about the economic outlook and how robust and sustainable the recovery will be.
The average projection for GDP growth in 2021 among economists as of September was 6.8 percent. There is a rise in expectations as statistics reveal a good rebound in the spring and early summer.
Impact on Germany
Germany’s GDP contracted by 1.8 percent from January to March in 2021, somewhat more than projected,
ECONOMY FEATURE ECONOMIC RECOVERY EUROPEAN ECONOMY COVID-19 ECONOMY IMPACT
compared to figures from the final quarter of 2020. Private consumption was most affected, with people spending 5.4 percent less on goods and services.
On the positive side, building investment increased by 1.1 percent. Imports of goods and services increased by 3.8 percent at the start of the year, while exports only increased by 1.8 percent. Germany’s GDP dropped by 3.4 percent from the same time in 2020. In the fourth quarter of 2019, the economy shrank by 5 percent compared to the previous year’s fourth quarter, before the Covid-19 outbreak.
Stringent lockdowns due to restrictions aimed at preventing the spread of Covid-19 led to the shuttering of businesses across Germany.
Although Germany did a good job handling the epidemic, the economic impact has been significant. The country’s aggressive public health response has resulted in Europe’s lowest death rates. Containment efforts, on the other hand, resulted in a significant dcline in company activity, particularly in contact-intensive industries.
Economic activity began to resume following the re-opening in late April, but a fresh wave of illnesses in the fall prompted yet another round of lockdowns. In all, the GDP shrank by more than 5 percent in 2020.
Impact on France
Last year, the Covid-19 pandemic reduced overall production by 8.3 percent, plunging the French economy into a severe recession. The statistics were marginally better than the 9 percent decline since France was spared a second Covid-19 shutdown in the latter half of the year. During the last three months of 2020, the French economy declined only by 1.3 percent.
On the other hand, the government predicted that the economy would contract by a considerably worse 11 percent this year. The French economy increased by 1.5 percent in 2019, placing it among Europe’s outstanding performers, although last year’s dip was the country’s worst since World War II.
France saw a significant increase in spending recovery, climbing to 80 percent after plunging by nearly 50 percent during the first lockdown — a recovery of +60 percent. The silver lining was that consumer expenditure rose the greatest of any country between the two shutdown periods. After initially falling to 50 percent of pre-pandemic levels, expenses increased by 80 percent between the first and second lockdowns.
Impact on Other EU Nations
The Covid-19 virus outbreak prompted many European nations to shut down large portions of their economy to combat the infection. These restrictions severely harmed the Italian economy. From March 9, 2020, through the end of May 2020, the entire country was under lockdown, with catastrophic results: Italy’s GDP decreased by 5.4 percent
ECONOMY FEATURE ECONOMIC RECOVERY EUROPEAN ECONOMY COVID-19 ECONOMY IMPACT
in the first quarter and 12.4 percent in the second. The major causes of GDP reduction were a drop in domestic demand and investment.
The national industrial output index fell by 17.5 percent in the second quarter, bringing production to an all-time low. However, despite being particularly heavily struck by the pandemic, Italy’s expenditure has improved, and it is now back to 70 percent of pre-pandemic levels — an astonishing 40 percent recovery.
In Spain, spending fell to 50 percent below average during the first lockout and then increased to 75 percent during the second lockdown, indicating a recovery of 50 percent.
Impact on Industries
Most manufacturing-based industries recovered relatively quickly in the third quarter of 2020, as there was gradual relaxation in the restrictions. As a result of various measures, such as recognizing “essential” sectors and creating green lanes to ensure crossborder transportation and supply chain functionality, economic recovery quickened.
However, there are significant disparities in performance not just between sectors but also within them. Large swathes of the digital business, as well as the healthcare industry, have succeeded well. Chemicals, construction, and the food and beverage industry may probably rebound in a V-shaped pattern.
Despite the early shocks, the automobile and textile sectors look to be on the mend since the lockdowns began. Industries that rely on human contact and connection — such as the cultural and creative industries and the aircraft sector (due to reduced mobility and tourism activities) — have taken a significant impact because of the crisis, and they are likely to continue to suffer longer.
According to sectoral and value chain evaluations, the pandemic functioned as a digitalization accelerator. The capacity of firms to adopt digital explains some varied patterns in the Covid-19 impacts. Streaming services, for example, have mostly benefited from the crisis in the creative industries. However, it has increased unemployment, which economies must handle.
Challenges Ahead
Europe confronted the pandemic with courage and inventiveness, and the countries across the region are now experiencing a robust but rocky economic recovery. It currently faces two policy challenges: inflation management and fiscal support reduction. While there is a great deal of uncertainty around inflation, central bankers have a lot of experience dealing with it and can use their powers rapidly and flexibly.
Unwinding the emergency expenditure measures that governments used to boost their economies, on the other hand, is a large and challenging undertaking. If policymakers make a mistake, they risk repeating the sluggish recovery that followed the 2008 global financial crisis.
Every quarter that goes by without attaining full employment adds to the difficulty of re-engaging people in the labor market. Emerging European economies are less concerned about the issue because they used less stimulus and had higher prospective growth rates. They would, however, see a drop in demand for their commodities from their advanced European rivals.
Changes in monetary policy would have little effect on the current drivers of inflation. Instead, fiscal policymakers would need to avoid inducing a wageprice spiral. Fortunately, in many modern European economies, where labor market slack remains large, the probability of such second-round impacts is low.
Policymakers may find themselves in a predicament comparable to the early phases of the global financial crisis more than a decade ago. There is a compelling case to be made for reducing extremely high budget deficits. However, this will need robust revenue growth and, as a result, increased activity, which larger transfers to families in need may aid.
There should be an increase in spending on recruiting incentives and investment tax credits. It will be difficult to get the timing of the fiscal support withdrawal quite right. To avoid undermining the recovery’s momentum, it appears that erring on the side of withdrawing too little fiscal support rather than too much is the wiser course of action, especially in economies with considerable budgetary headroom.
Outlook
In Europe, a more durable recovery is taking hold, aided by incremental improvements in vaccination rates and mobility. Strongly supportive macroeconomic policies and Covid-19 assistance packages have helped prepare the road for recovery by preserving employment ties and safeguarding private sector balance sheets.
However, there remains uncertainty, partly because of the risk of new infection waves and virus variants amid uneven vaccination rates across countries. As a result, it is critical to boosting vaccination rates, particularly in growing European economies, and firmly support international initiatives to improve global vaccine availability.
editor@ifinancemag.com
