The largest free trade region in the world

Under the leadership of Beijing, 15 countries concluded last Monday the negotiations to create the largest free trade zone in the world. The so-called Regional Integral Economic Association is made up of China, Japan, South Korea, Australia, New Zealand, Indonesia, Thailand, Singapore, Malaysia, the Philippines, Vietnam, Myanmar, Cambodia, Laos and Brunei. These countries represent 47% of the population and 32.2% of world GDP.

Thus, with this negotiation and with the strategy called New Silk Road, China not only expands its influence worldwide, but also positions itself as a decisive player in multilateralism and free trade. Thus, Beijing is filling power gaps left by the United States when it decided to turn its economic policies and its foreign policy of international free trade systems and international regimes to protect Human Rights to protectionist and isolationist policies. For this reason, the international concert needs a player large and stable enough to protect trade regimes from protectionism. China is taking the lead in opening markets and not closing the international free trade system.

As in most economic agreements in which China participates, issues related to the protection of Human Rights, such as labor and environmental rights, are left out of the treaty, and full attention is given to the reduction of tariffs. This is precisely the characteristic that makes many countries that do not commit to the protection of Human Rights seek commercial alliances with China and not with Europeans or North America. China does not condition its treaties to the observance of Human Rights.

Without a doubt, this new commercial alliance will generate noise to Mexico. It is very likely that when this AEIR enters into force, supply chains in Southeast Asia will expand and lower production costs. In addition, today, the economies that form this alliance are more stable than Mexico, who has a high probability of falling into recession and where the current administration has undermined economic certainty by making erratic decisions.

Thus, Mexico’s comparative advantage over Asian economies is its proximity to the United States. Therefore, beyond the ratification of the T-MEC, Mexico must continue to improve export channels to the US market, reducing travel times and waiting times in customs ports. That Mexico is more efficient in exporting to the US. UU. It can make all the difference between continuing to attract investment or that capitals move to Southeast Asia.

Ricardo Solano Olivera, MSc.


Column originally published at https://laopinion.de/2019/11/05/la-mayor-zona-de-libre-comercio-en-el-mundo/

Photo by Sam Albury on Unsplash

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