Asia-pacific 15 economies signed world's biggest free trade agreement: RCEP without US

 

 

 

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China and 14 other economies signed the world's largest trade deal, the Regional Comprehensive Economic Partnership (RCEP), on Sunday to form a free trade zone in the Asia-Pacific region that will encompass a third of the global economy, in what Chinese officials and experts call a historic win for multilateralism that would help the regional and global economies cope with the COVID-19 pandemic and rising protectionism.

Chinese Premier Li Keqiang said that signing of the RCEP is not only an achievement of landmark significance in East Asian regional cooperation, but is also a victory of multilateralism and free trade.

"Signed after eight years of negotiation, the RCEP lets people see brightness and hope in shadows, proving that multilateralism and free trade remain the main and correct course as well as the right direction for the global economy and mankind," Li said.

Signed at a critical turning point in the global political climate – when the next US administration is set to come into office and the world is grasping for solutions to tackle challenges arising from the coronavirus pandemic, the new regional deal would also help the Asia Pacific region take the global lead in recovering from the COVID-19 pandemic and reduce US hegemony in the region, experts said.

The deal, which encompasses Japan, China, South Korea, Australia and the 10 members of the Association of Southeast Asian Nationals, will create what is believed to be the world's largest free trade zone, covering about one-third of the world's total population and GDP. It will be also Japan's first free trade framework with its vital trading partners China and South Korea.

Notably, two major economies – the US and India – were left out of the trade pact. The US, under President Donald Trump, has been pushing for bilateral deals rather than multilateral ones. India was part of the negotiations, but did not join the final agreement.

The RCEP, which contains 20 chapters covering a wide range of areas from merchandise trade to investment to e-commerce, is “modern, comprehensive and high-level win-win agreement,” China’s Finance Ministry said on Sunday, adding that under the deal, members will aim to reduce tariffs to zero in the coming decade.

Bao Jianyun, professor of the School of International Studies and director of the Center for International Political Economy Studies at Renmin University of China, said that signing of the RCEP showed China, which played a very active role in pushing for the deal, has led the way in liberalizing trade and promoting a global market order of free competition.

"At the same time, China provides the world with a Chinese model and a Chinese solution on the open platform, where it serves the world," Bao told the Global Times, explaining that China as an emerging power has been a major promoter of trade and investment integration of RCEP.

Chen Fengying, a research fellow at the China Institutes of Contemporary International Relations, also stressed that the successful and long-awaited signing of the megapact has rekindled the world's 'hope and confidence" about a model of cooperation.

"Global cooperation has been defeated in recent years because of rising protectionism and China-US trade friction. But the RCEP's signing is a signal that cooperation does work today, which I think is even more important withthe lift it gives to specific countries' GDP growth," Chen told the Global Times.

Liu Kuikui, a Beijing-based consultant of international transport and trade, told the Global Times that the RCEP will establish a common framework of rules of origin for Asia-Pacific countries, reduce investment barriers, and expand trade and investment. The participation of Japan, South Korea, Australia and New Zealand, allies of the US, demonstrates that the four countries are opposed to the trade protectionism and the economic bullying launched by the US.

Signing of RCEP a victory of multilateralism and free trade: Chinese Premier Li Keqiang RCEP will end US hegemony in West Pacific Not joining RCEP a strategic blunder that will lead to India’s isolation in globalization 

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Budget 2021 – Great expectations

  LAST Friday, the Finance Minister tabled what is now known as Malaysia’s largest-ever budget. The excellently-crafted and well-wri

Why American presidents matter

 

Strong leaders club: Lee Kuan Yew was an admirer of Reagan and Nixon.— AP Photo/File 

 

 The zeitgeist of the world is infused by the character of the US leader. Biden will bring back the civility and generosity that the American spirit is associated with.

THE first American president to enter my personal consciousness was John F. Kennedy. It wasn’t his stirring rhetoric that reached me as a child in Singapore. It was the news of his assassination. The sense of loss was globally palpable. History has been kind to him.

He was succeeded by Lyndon Baines Johnson. As a child, I was puzzled. How could someone so ugly succeed someone who was so attractive? Indeed, he was boorish. Legend has it that he would summon his staff to meetings while sitting on his toilet seat, doing his business.

Still, history will be kind to him. His bold and massive civil rights legislation changed the course of US history. Which may explain why he has the most voluminous and still unfinished biography of any recent American president, in the four volumes by Robert Caro.

History has been unkind to Richard Nixon, his successor. Watergate killed him. The liberal media has not forgiven him. Yet there’s no doubt that he changed the course of human history. Without Nixon, Henry Kissinger could not have gone to China.

Lee Kuan Yew named Nixon as the greatest American president he had met, saying: “But for the misfortune of Watergate, I would say Richard Nixon. He had a realistic view of the world. He was a great analyst, realistic, but also a tactician to get things done.”

When Nixon stepped down, Lee lost a true friend in the White House, a major asset for the leader of a small country.

This partially explained the contempt Lee had for Jimmy Carter, whom he considered naive. In Tom Plate’s book, Giants Of Asia: Conversations With Lee Kuan Yew, Lee named Carter the worst president, saying of him: “Your job as a leader is to inspire and to galvanise, not to share your distraught thoughts. You make your people dispirited.”

Fortunately, Carter was succeeded by the two-term Ronald Reagan, another admirer of Lee. I was present when they met in the White House. Still, as a Singapore diplomat in Washington and New York during Reagan’s era, I experienced the condescension the liberal media displayed towards him. However, history has been very kind to Reagan, especially because of his spectacular victory over the Soviet Union.

Reagan was succeeded by another great friend and admirer of Lee, George H. W. Bush. I was present in a small room in St Petersburg, Russia, in the late 1990s, when Bush confirmed that the No 1 leader he admired in the world was Lee.

I reported this to him. Sadly, Bush became a one-term president, and his departure was another huge blow to Lee.

The point of these stories is a simple one. The selection of an American president has huge consequences for the world, including Singapore.

What Biden offers

Indeed, given the overwhelming power of America, especially in the media and communication dimensions, the zeitgeist of the world is infused by the character and personality of the American president.

Donald Trump’s narcissistic and self-absorbed personality has deprived the world of a major source of inspiration, especially after Barack Obama.

So what does the election of Joe Biden bring to the world? Will good times return? The short answer is yes and no.

Biden is a truly decent human being. He will bring back the civility and generosity that the American spirit is associated with.

However, Biden also knows that he is taking over a deeply divided country, as demonstrated by the huge numbers who voted for Trump even though he was defeated. His priority is to heal his country, not create a better world.

Nonetheless, Biden has at least three opportunities he can capitalise on to retain his positive glow.

First, he can bring back some boredom to the White House. Both America and the world have become exhausted by Trump’s tweets and in-your-face presence. Some calm and reticence by the Biden administration will help to return the world to a certain degree of normalcy.

Biden knows that he cannot do this alone. Fortunately, he has assembled a formidable transitional team of real American heavyweights. They share Biden’s distress over the divisions in the country. Repairing the wounds in American society and bringing back a happy America will be the main priority.

The second opportunity is geopolitical. Biden cannot reverse the US-China geopolitical contest, for reasons I have documented in my book, Has China Won? He would be persecuted if he is seen to be soft on China. Yet, even if he cannot reverse course on China, he can press the pause button on the contest.

Americans believe in common sense. Simple common sense would say that Americans should first deal with the pressing challenges of Covid-19 and economic slowdown, not to mention global warming.

All these problems would be better handled with some degree of cooperation with China. Just as Winston Churchill partnered an adversary, Joseph Stalin, to defeat Adolf Hitler, Biden can partner a competitor, China, to defeat Covid19. Both Nixon and Lee would have approved such a Machiavellian manoeuvre against a common foe.

The third opportunity lies in stopping America’s drift towards a plutocracy. One key reason why Trump was elected in 2016 was because of the “sea of despair” among the white working classes. This is because America is the only major developed economy where the average income of the bottom 50% has gone down. The anguish of these white working classes must be dealt with. Some redistribution must take place.

Reagan delegitimised taxes. Biden must re-legitimise them. And, if America’s many plutocrats are wise, they would support him.

In short, Biden can apply some gentle soothing balm on the many wounds generated by the Trump presidency. His greatest asset is his decency. Plain decency will bring a lot of healing to America. Trump may have been cruel to call him “Sleepy Joe”. Yet a “Sleepy Joe” and calm American presidency may be good for America and the world. 

 By KISHORE MAHBUBANI Kishore Mahbubani is a distinguished fellow at the Asia Research Institute, National University of Singapore, and the author of ‘Has The West Lost It?’ and ‘Has China Won?’-ANN

 

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China extends congratulations to Biden, Harris

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The Chinese Foreign Ministry on Friday extended the country's congratulations to Joe Biden and Kamala Harris, and said China respects the choice of the Americans.

Wang Wenbin, spokesperson of the Chinese Foreign Ministry, said that we have been watching the domestic and international reaction to the US presidential election, and we respect the choices of the Americans.

"We extend congratulations to Mr. Biden and Ms. Harris, and we also understand that the US election result will be decided in accordance with US laws and procedures," Wang said at Friday's media briefing.

Wang's remarks came after several world leaders and representatives of international organizations have congratulated Biden, who was declared the winner of the recent election.

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Yet there is little possibility that the Biden administration will accidentally ignite a conflict in the South China Sea. However, the chances that Trump will do so in the final days of presidency are rising sharply as he needs to leave a wealthy legacy for the military industries before he officially leaves office. But for Biden, dealing with the messy relations with other countries will be his priority after dealing with the COVID-19 virus and troubled US economy.

 

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America is in the middle of its third nationwide surge in Covid-19 cases — what some are calling a “third wave” — with reported cases hitting a record high of more than 100,000 in one day.

With that, the much-feared fall and winter surge of coronavirus cases that experts warned of for months is here. Despite the US already suffering at least 235,000 Covid-19 deaths — the highest death toll in the world — it looks like things are getting worse.

As of November 8, the seven-day average of daily new coronavirus cases was more than 111,000, a record high. That’s up from a recent low in the seven-day average of fewer than 35,000 cases on September 12. The increase doesn’t appear to be driven by a single state or region — although the Dakotas, Iowa, and Wisconsin appear to be in particularly bad shape — but rather spikes across much of the country at once, with more cases reported in the Northeast, Midwest, South, and West.

The spike is partly due to more testing exposing more cases. But that can’t be the full explanation, because hospitalizations and the overall rate of positive tests are trending up. Over the most recent week of data, the seven-day average for daily tests increased by only 9 percent while daily new coronavirus cases increased by 34 percent.

Unlike the summer’s surge of coronavirus, the US isn’t alone in its latest wave — cases have risen in much of Europe, too. Still, that doesn’t mean this was inevitable: With aggressive measures, developed nations like Canada, Germany, and especially Australia, Japan, New Zealand, and South Korea have kept their Covid-19 caseloads much lower than America’s or Europe’s as a whole. And many European countries, unlike the US, have started to tame their outbreaks with new measures, from lockdowns to mask mandates.

Experts have long warned that a surge was coming in the US in the colder seasons. Even though the country never fully suppressed its summer surge in Covid-19 cases, most states have moved to reopen more businesses, including risky indoor spaces like restaurants and bars, as well as schools, with colleges and universities proving particularly problematic so far.

President Donald Trump, for his part, has encouraged the rapid reopenings — even after his own illness. As he left the hospital, Trump tweeted, “Don’t be afraid of Covid. Don’t let it dominate your life.” He’s kept pushing a false sense of normalcy in the weeks since, even going as far as mocking masks and claiming, falsely, that they’re ineffective. (In reality, the evidence for masks keeps getting stronger.)

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Budget 2021 – Great expectations

 

LAST Friday, the Finance Minister tabled what is now known as Malaysia’s largest-ever budget.

The excellently-crafted and well-written budget was presented in a couple of hours and after it was presented, the social media, mainstream media, economists, consulting firms and investment banking strategists gave their views on the measures, especially those related to taxes, incentives or grants.

Now that Budget 2021 has been tabled, lawmakers will debate on the merits and vote on it. Having covered budgets for more than two decades, the devil is in the details and this year is not an exception.

Let’s look at the gross domestic product (GDP) estimate first. The government expects GDP growth for 2020 to contract by 4.5% and for next year, it is estimated to grow by between 6.5% and 7.5% in real terms. For the economy to close the year with the projected contraction, the second half of 2020 has a very small room to contract by only 0.7% as the economy shrank 8.3% in the first half.

This is a tall order as economic data remains largely weak as seen in several indicators, which include the industrial production index as well as the poor reading in the retail sub-segment.

With almost the entire nation under the conditional movement control order, economic growth, if any, will be challenging.

Meanwhile, in nominal terms, the government expects GDP growth to be -4.7% this year and to rise significantly by almost 9% in 2021, as inflation is expected to return with a reading of 2.5%, mainly due to the low base effect from 2020.

Perhaps when the Bank Negara releases the third quarter GDP data on Friday, we can then assess if the full year GDP assumption still holds water or otherwise.

For 2021, the government expects GDP growth to be driven by domestic demand, in particular growth from private consumption while the external sector may post some drag as imports are forecast to grow even faster than exports.

On the supply side, the government expects the services and manufacturing sectors, which account for 80% of the economy, to grow by 7% each while construction is expected to bounce back with a near 14% leap in 2021 after the forecast drop of 18.7% this year. From here, we can observe that one of the key drivers of the economy next year is public investment, as the government has bumped up development expenditure to the tune of RM69bil for 2021 from the adjusted figure of RM50bil this year (which was previously forecast to be at RM56bil).

The government’s total expenditure is now broken into three main buckets – other than operating expenditure and development expenditure, we now have a new line item called the Covid-19 Fund with an allocation of RM38bil this year and RM17bil next year.

In essence, since the pandemic outbreak, the government has introduced various economic stimulus packages under its Prihatin package series and the Penjana package, which in total amounted to RM305bil, while the actual direct fiscal injection totaled RM55bil.

However, under the Temporary Measures for Government Financing (Coronavirus Disease 2019) Act, the Parliament had only approved a ceiling of RM45bil for the fund and hence the Minister has proposed, taking into consideration the nation’s need up to 2022, an amendment that will be tabled to raise the fund to RM65bil, an increase of RM20bil.

This increase that was mentioned in the budget speech is meant for the RM10bil Kita Prihatin package, additional assistance for people’s well-being, as well as to secure the supply of the much-needed vaccine. The table above summarises the government’s revenue projection for this year and the next.

The expected revenue for the second half of the year and into 2021 will be challenging for the government, given the level it had achieved in the first half. As it is, the second half forecast is 23.3% higher than the first half.

In addition, for 2021, revenue and expenditure are expected to increase by 4.2% and 4.3% respectively, which will likely be tough given the tax breaks that the government is proposing, in particular, company income tax (CITA) and personal direct taxes.

Based on government’s estimate, taxes from the two sources are expected to fall by 6.8% and 7.2% this year but will bounce back strongly in 2021 with a growth of 8.8% and 18.2% respectively.Interestingly, the 2021 forecast for CITA and personal direct taxes at RM64.6bil and RM42.4bil is higher than 2019’s figure by 1.3% and 9.7% respectively.

As for expenditure, as total federal government debt stood at RM874.3bil mark or 60.7% of GDP as at end of September 2020, the government’s Debt Service Charges (DSC) too have deteriorated.

From an estimated level of 15.4% of GDP this year, DSC is expected to drop further to 16.5% in 2021, mainly driven by 11.6% increase in absolute DSC to RM39bil.

Although both the DSC ratio in 2020 and 2021 will be higher than the self-imposed fiscal limit ratio of 15%, it is hoped that by beyond 2021, this ratio will be brought under control when the economy is expected to expand further.

All in, Budget 2021 measures are holistic and inclusive for all levels of society and have been cleverly crafted to address the challenges faced by Malaysians, especially those severely impacted by Covid-19.The government has largely listened to the voices of hope in addressing the pandemic world.

Having said that, the expected government’s revenue and GDP projections are rather optimistic, resulting in a much lower budget deficit figure while the forecast government tax revenues too are on the high side. While the DSC has now surpassed the self-imposed ceiling, the government’s debt to GDP ratio is expected to remain elevated for at least this year and in 2021.It is important for the lawmakers to approve this budget as the government has taken steps in keeping the economy going.

While there are some shortcomings in the terms of budget allocations, it is hoped that this can be ironed out during the parliamentary debate stage and all lawmakers come to an consensus to approve the gigantic budget.

Pankaj C. Kumar is a long-time investment analyst. Views expressed here are his own. 

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