RCEP FREE TRADE AGREEMENT

The recently concluded RCEP free trade agreement needs close scrutiny. The countries that have signed it Australia, Brunei, Cambodia, China, Indonesia, Laos, Malaysia, Myanmar, New Zealand, Philippines, Singapore, South Korea, Thailand, and Vietnam except China will need to do a comprehensive review of this agreement.

The purpose of any trade or economic policy of any country is for the betterment of its people and more importantly to maintain its sovereignty. Tariff or no tariff any country with adverse balance of trade will accumulate foreign currency liability. RCEP member countries should give a serious thought to this issue.

RCEP member countries should give a serious thought to manufacturing eco system and agriculture eco system.

For example, let us assume Laos imports all its cars. This act will create minimum jobs in dealer outlets, and in servicing. The consumer money spent in LAOS will leak out of the country to the exporting countries of cars. If LAOS imports cars whose value is more than its exports it will incur foreign currency liability. The only way it can square the liability is to borrow money or find ways to export more.

LAOS misses the benefits of a manufacturing eco system. Let us take car manufacturing as an example. If cars are locally manufactured in LAOS it will give rise to demand for factory buildings, warehousing, logistics, engineers, capital equipment, auto component units, paint, glass etc. It is a no brainer that manufacturing eco system will create more jobs.

Let us take agriculture eco system. Agriculture is very important for economic security. An agriculture eco system will support farmers, agriculture graduates, warehousing, logistics etc. Any adverse trade in agriculture will ruin the farmers and impair economic security of the country. Every country should remember that NATURE has given each country local produce suitable for local population. There is a concerted effort by vested interests to dominate agriculture/ food production. No country should allow this to happen to protect its sovereignty.

As written in my previous posts Global Trade must happen without incurring foreign currency liability for any country. Each country will pay for its imports with local currency to the exporting countries. This will force exporting countries to source products from importing countries to balance the trade. 

From 2004 to 2014 India under an economist Prime Minister incurred adverse balance of trade with China. Supermarkets were flooded with Chinese goods which could be easily manufactured locally. The Government of the day failed to notice that job opportunities will not be available for Indians if ACs, TVs, auto components, Refrigerators, Microwave owens, Mobiles, PCs, Laptops   etc. are imported into India, branded, and then sold. India did the right thing by not signing RCEP agreement.