World — Asian regional trade deal defies increased global protectionism
World Risk Developments November 2019
The IMF estimates US-China trade tensions will cumulatively reduce global GDP by 0.8% by 2020. However, while multi-billion-dollar tariff hikes by two behemoths of the trading system dominate headlines, the threat to the level commercial playing field worldwide predates the US-China dynamic, is pervasive and entrenched. Data from Global Trade Alert suggest that since November 2008, a total of 348 trade distortions each affecting over US$10 billion of trade, have been carried out by 36 governments. The percentage of Australian exports that face discriminatory policy interventions in offshore markets has increased from an estimated 21% in 2009 to 61% a decade later.
But amid the unravelling of global trade cooperation, Australia and 14 other countries agreed to finalise the Regional Comprehensive Economic Partnership (RCEP) this month. Of the 16 original RCEP countries, the 15 that have committed to sign the deal next year include nine of Australia’s top 15 trading partners, which together comprise 58% of Australia’s total two-way trade and 66% of our exports. RCEP will increase opportunities for Australian business to access regional value chains and establish high quality rules for the supply of services within a grouping of economies among the most diverse in the world—the GDP per capita of Australia (US$56,000) is 35 times that of Cambodia (US$1,600). The agreement will support goods trade through Asia via standardised rules of origin and documentation to claim lower tariffs, and services trade including across telecommunications, professional and financial services. Efforts to reduce business transaction costs and strengthen intra-regional trade offers Australian exporters a buffer against the fallout from increasingly protectionist policies worldwide.