by Peter Koenig for The Saker Blog
China has achieved the almost impossible – a free trade agreement with 14 countries – the ten ASEAN, plus Japan, South Korea, Australia and New Zealand, altogether 15 countries, including China. The so-called Regional Comprehensive Economic Partnership, or RCEP, was in negotiations during eight years – and achieved to pull together a group of countries for free trade, i.e. some 2.2 billion people, commanding some 30% of the world’s GDP. This is a never before reached agreement in size, value and tenor. The RCEP was signed during the 37th ASEAN Summit on 11 November in Vietnam.
On top of being the largest such trade agreement in human history, it also associates with and binds to the Belt and Road Initiative (BRI), or One Belt, One Road (OBOR), or also called the New Silk Road, which in itself comprises already more than 130 countries and more than 30 international organizations. In addition, China and Russia have a longstanding strategic partnership, containing bilateral agreements that also enter into this new trade fold – plus the countries of the Central Asia Economic Union (CAEU), consisting mostly of former Soviet Republics, are also integrated into this eastern trade block.
The conglomerate of agreements and sub-agreements between Asian-Pacific countries that will cooperate with RCEP, is bound together by for the west a little-understood Asian Pact, called the Shanghai Cooperation Organization (SCO), founded on 15 June 2001 in Shanghai as an intergovernmental organization composed of China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. The SCO’s purpose is to ensure security and maintain stability across the vast Eurasian region, join forces to counteract emerging challenges and threats, and enhance trade, as well as cultural and humanitarian cooperation.
Much of the funding for RCEP and BRI projects will be in the form of low-cost loans from China’s Asian Infrastructure and Investment Bank (AIIB) and other Chinese and participating countries’ national funding sources. In the hard times emerging from the covid crisis, many countries may need grant assistance to be able to recover as quickly as possible their huge socioeconomic losses created by the pandemic. In this sense, it is likely that the new Silk Road may enhance a special “Health Road” across the Asian Continent.
See map (Wikipedia).
The real beauty of this RCEP agreement is that it pursues a steady course forward, despite all the adversities imposed by the west, foremost the US of A. In fact, the RCEP may, as “byproduct”, integrate the huge Continent of Eurasia that spans all the way from western Europe to what is called Asia and covering the Middle East as well as North Africa, of some 55 million square kilometers (km2).
The crux of the RCEP agreement’s trade deals is that they will be carried out in local currencies and in yuan – no US dollars. The RCEP is a massive instrument for dedollarizing, primarily the Asia-Pacific Region, and gradually the rest of the world.
Much of the BRI infrastructure investments, or New Silk Road, may be funded by other currencies than the US dollar. China’s new digital Renminbi (RMB) or yuan soon being rolled out internationally as legal tender for international payments and transfers, will drastically reduce the use of the dollar. The new digital RMB will become attractive for many countries which are fed up with being subjected to US sanctions, because using the US-dollar, they automatically become vulnerable to being punished with dollar blockages, confiscations of resources, whenever their international “behavior” doesn’t conform with the mandates of Washington’s.
Even country reserves can be stolen, a crime perpetrated by Washington with impunity and with the help of the UK, in full sight of the world, stealing 1.2 billion dollars’ worth of Venezuelan gold deposited with the Bank of England. Only a cumbersome lengthy legal process in UK courts initiated by Venezuela could eventually free the funds to be returned to the jurisdiction of Caracas. This is a warning for many countries, who want to jump the fiat-dollar-ship and join an honest trading and reserve currency, offered by China’s solid and stable economy-backed RMB / yuan.
The dollar is already today in decline. When some 20-25 years ago about 90% of all worldwide held reserve-assets were denominated in US dollars, this proportion has shrunk by today to below 60% – and keeps declining. The emerging international RMB / yuan, together with a RCEP- and BRI-strengthened Chinese economy, may further contribute to a dedollarization, as well as dehegemonization of the United States in the world. Simultaneously and progressively the international digital RMB / yuan may also be replacing the US-dollar / euro reserves in countries’ coffers around the globe.
The US-dollar may eventually return to be just a local US-currency, as it should be. Under China’s philosophy, the unilateral word will transform into a multi-polar world. The RCEP and New Silk Road combination are rapidly pursuing this noble objective, a goal that will bring much more equilibrium into the world.
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For the west adapting to this new reality may not be easy. Cooperation instead of competition has never been a western concept or philosophy. For hundreds if not thousands of years the western dominance has left a sad legacy of exploitation of the poor by the rich colonial masters and of bloody wars.
Cooperation instead of competition and warrying for power, is a concept not easily adhered to by the west. It is clearly visible by US-instigated trade wars, and possibly a currency war between the US and China may already be in the making. The FED has vaguely expressed its plans to also launch a digital, possibly cryptic, blockchain-based currency to counter the new RMB / yuan – not yet even launched internationally. Details of the FED’s plans are at the time of this writing not clear.
Having to adapt to the new RCEP, conforming to an agreement among equals, will not come easy for the west. The west will not let go and may use to the utmost possible, its creation and western biased World Trade Organization (WTO), to sabotage as much as possible the RCEP’s trade deals and BRI-infrastructure, as well as cross-border industrial development advances.
The west, led by the US – and always backed by the Pentagon and NATO, may not shy from threatening countries participating in China’s projects, but to no avail. Under Tao philosophy, China will move forward with her partners, like steadily flowing water, constantly creating, avoiding obstacles, in pursuit of her noble goal – a world in Peace with a bright common future.
Peter Koenig is an economist and geopolitical analyst. He is also a water resources and environmental specialist. He worked for over 30 years with the World Bank and the World Health Organization around the world in the fields of environment and water. He lectures at universities in the US, Europe and South America. He writes regularly for online journals such as Global Research; ICH; New Eastern Outlook (NEO) and more. He is the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed – fiction based on facts and on 30 years of World Bank experience around the globe.
Peter is also co-author of Cynthia McKinney’s book “When China Sneezes: From the Coronavirus Lockdown to the Global Politico-Economic Crisis” (Clarity Press – November 1, 2020)
Peter Koenig is a Research Associate of the Centre for Research on Globalization.
In Australia, Victoria, and particularly Melbourne the capital, entered the most severe lock-down in the world (read curfew) not long ago.
Curiously this was announced a week or so after Pompeo admonished Victoria for daring to join the OBOR project.
Coincidence? Not likely.
Here in Australia, we have a double whammy – we are now not only a British colony but an American one as well.
Australians need to look to our indigenous people for the true meaning of struggling for sovereignty to have any hope of regaining ours. This is the sentiment expressed by an elder, now passed, and recorded by John Pilger in his book “New rulers of the world.”
Never get in the way of an idea whose time has come!
Trade based empires are one of the most resilient of the 5 basic types and China is laying the groundwork for a Trade, Cultural, Scientific empire. The Tang and Song dynasties were based on a similar mindset.
“Cooperation instead of competition has never been a western concept or philosophy. For hundreds if not thousands of years the western dominance has left a sad legacy of exploitation of the poor by the rich colonial masters and of bloody wars”.
Yes this is the crux of the matter in term of differentiating the attitudes of East and West.
But how did East and West come to such radical different approaches ?
It all goes back to the historical transition from “non-power tribal-societies” to “power-societies”.
The East transitioned in “continuity” from tribal-societies and their worldview “animism” to “power societies” and “animism+” while in the TriContinental-Area (Middle-East) the transition operated along the lines of “rupture” from tribal-societies and their worldview “animism” to “power societies” and “religions”. Western Europe and its later territorial extensions then later inherited the “Middle-Eastern” model…
This transition ended up consecrating the institutional stabilization of power-societies which initiated the epochal realm of civilizational axioms :
— “continuity” in the East versus “rupture” in the West
— “animism+” in the East versus “religion” in the West
— “polarities” in the East versus “dualities” in the West
— “continuity through transformation” in the East versus “rupture through creative destruction” in the West
— and the list goes on and on.
What is intriguing is that these axioms of civilization today operate on the subconscious level and as such their existence has literally been forgotten by the individuals. But the impact of these axioms on our daily behaviors is nevertheless very real as the quote here above attests…
If interested to read further about this approach check “A growing disconnect between East and West”, “What is going on ?” all are available in the same place as “First societal blow in Late-Modernity”.
The Big loser, Modi’s India.
The same regime that discredited the su 57 program.
Prediction- India will join RCEP within the next five years. It will soon discover just how empty are the Empire’s promises and that the Empire always takes more than it gives.
They should have learned this from their experience of the East India Company but then India considers itself to be its successor and not its victim.
Good observation from Peter Koenig that I hadn’t quite registered, namely that this accomplishment of many uses also serves as a test area for renminbi/yuan as the settlement currency of last resort (if I’m using that term correctly).
China loves its test areas for any policy before it implements across the board.
I would love to know the dollar amount of trade that will be transferred from dollar denomination into yuan – I guess time will tell. But 30% of the world’s GDP will insulate itself from dependence on the US Dollar – this presumably will not happen overnight: there must still be loans and agreements in USD that will take time to exhaust. But it’s a hedge against brinkmanship, a wonderful piece of architecture and infrastructure that creates a replacement, and a counter to the bullying of the USD.
Many thanks, Peter Koenig and the Saker crew.
Now that the RCEP has finally been signed, these countries can create the new economic center of the 21st century. Yes – the “currency” underpinning all of these deals and development will not be the USD but whatever is used must be accepted by all the members and be able to challenge the USD as a reserve. This is the most interesting part – and the most threatening to the West – so it must be followed closely..
“The crux of the RCEP agreement’s trade deals is that they will be carried out in local currencies and in yuan – no US dollars. The RCEP is a massive instrument for dedollarizing, primarily the Asia-Pacific Region, and gradually the rest of the world.”…
Will the Chinese and others continue buying US Treasury bonds so as to finance the internal and external US debt. Should they resist the US is finished as an Empire, Biden, Trump, Harris not withstanding. Should they stop buying the US bonds then the only option is a war in which the sale or use of weapons will try and rescue the economy. This is a faint hope in the long run where the US education system produces one engineer to 10 social scientists. Of course the social scientists will want the war. It is a no win and is as plain as a shaven plank.
USA: To rule the world we need to see how Macbeth tried to rule Scotland according to a little known writer called Shakespeare. First you need to listen to the witches (CIA, MI6 and Mossad) then you need to murder, steal, rape and destroy until the witches appear again. http://www.cowdisley.com/videos/Macbeth.mp4 or https://www.youtube.com/watch?v=Oo1ynIFzTTY
Regime Change USA : Milley has sufficient medals to prevent his survival should he fall into a swimming pool. He is not alone in that regard as most high ranking US military officers would also suffer a similar fate https://youtu.be/KEk1m6nwwog or http://www.cowdisley.com/videos/regimechange2.mp4
New Zealand and Australia are the two black eyes of this trade group. total misfit.
On the contrary, ANZ represent the much undervalued Primary Producers (minerals and agriculture) on which the whole sophisticated Industrial edifice depends. You can’t eat silicon chips.
ANZ will be sanctioned if they do not obey their US/UK masters. Canada experienced heavy tariffs/sanctions on steel, aluminum and lumber because the US is not competitive. ANZ is a flea on on elephant. Good luck, you are going to need it.
“ANZ will be sanctioned if they do not obey their US/UK masters.”
Exactly.
We’ve already seen just this year how the idiot Australian foreign minister torpedoed Australia’s trading relationship with China (by stabbing China in the back over Corona Chan) in total disregard for Australia’s national interests, and in complete opposition to truth and ethical conduct – but in absolute conformity with American interests.
And now, with literally 10’s of billions of lost trade with China (and growing), the pusillanimous Australian government refuses to back down or admit any fault, and instead doubles down, claiming to be adhering to Australia’s democratic “principles”.
What “principles” could Prime Minister Morrison possibly be espousing, apart from fidelity to his American masters?
New Zealand is better placed to turn maverick and fully align with China – they’ve always had a more independent spirit.
As an Australian I am absolutely stoked about this agreement.
The not agreement capables will have their maneuvering space – in trade – shrinked up to the toes, as soon as the RCEP takes off. Everybody evaltuating the fall of green painted sheets will be slow as hell.
That is incompatible with the most apparent face of capital: the panic trend as soon as losses loom in the horizon.
The gibbering globetrotting genocidal Gujarati gangster government of Narendrabhai Damodardasbhai Modi in India didn’t join in the RCEP and its tame media are working hard to ignore the fact that the RCEP even exists. For months the Modi media have been pretending that China is “isolated”, and acknowledging the truth would be detrimental to the prestige of der Führer, so it won’t.
I’m a simple person who needs some help in understanding this concept of free trade in regards to the ” the belt and road project “. How is it beneficial to have ” free trade ” with an industrial, manufacturing behemoth like China ? Wont the other nations just get flooded with Chinese goods and have their relatively smaller industries and manufacturing bases destroyed ? Additionally , even if the other nations in the free trade agreement, have natural resources to export to China arent they going to be competing with themselves to do so, resulting in China just purchasing the resources for the cheapest price ? Didn’t free trade with China destroy the US industrial base ? How will this be any different ?
You should ask the other countries, what they are getting out of the agreement. China is far more than a large country turning out cheap tin wares and it is has massive and increasingly wealthy domestic market to satisfy and to which RCEP members will gain better access.
Answering your last question, American industrial base has been destroyed by many factors, of which, of which a free trade agreement has never been:
1. Movement of their industries, by their own initiative, abroad. That was caused by the general capitalist trend to diminishing returns, and existence of cheap labour force in other countries;
2. Growing inequality, that diminished internal market, and purchasing power of the population, which as forecast by Marx, leads to successive crisis;
3. Lack of investment in infrastructure;
4. Lack of real R & D, with a distorted flux of capital into bellicist industry;
5. Market economy facing a huge economic challenge by China, with a long term planned economy, with clear goals and means to achieve those goals, leading to lack of competitivity.
China aims to buy a lot…. sustainable trade has always been a two way street. Done have been conditioned in the West that China just want to sell sell sell and is super stingy in what it buys.
If that’s true, then China is into slaving away for others for pennies on the dollar. You think they are that stupid?
Trade is not about colonialism. It is about win win exchanges.
ASEAN and others want to trade with China… So does China want with others….
Simple, Two-Part Explanation For Anon (November 20, 2020 · at 10:13 am EST/EDT), who asked, “I’m a simple person who needs some help in understanding this concept of free trade in regards to the ‘the belt and road project’.”
Before RCEP, all the 15 nations traded with each other. After RCEP, they go on trading. But they fill out fewer customs forms, enjoy faster customs clearance of goods sold, pay lower tariffs, earn higher profits. That is win-win.
The Belt And Road is like that, only bigger, covers more nations. Another win-win.