FAR EAST REGIONAL FREE TRADE AGREEMENT

Hüseyin Cahit SOYSAL
Board of Directors

 Fifteen countries in the Asia-Pacific region signed the world's most significant Free Trade Agreement (FTA) on November 15, 2020. On this date, the "Regional Comprehensive Economic Partnership," that is, "RCEP," was signed by Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. China, Japan, South Korea, Australia, and New Zealand have also become "dialogue partners" of the Union.

India, another powerful country in the region, also planned to join the RCEP Agreement. However, it decided to withdraw from the negotiations because it was concerned about Chinese products entering its country at cheap prices. All RCEP countries agree that India can join the Union later if it wishes to.

According to World Trade Organization data, 2.2 billion people live in RCEP countries, which have a total Gross Domestic Product (GDP) of 25.8 trillion dollars. In other words, these countries produce approximately 30 percent of the global product and are rapidly progressing towards becoming a commercial union with the widest coverage in the world.

The agreement covers areas related to trade, services and investments, as well as areas such as e-commerce, telecommunications, intellectual property rights and copyrights. The RCEP Agreement aims to gradually reduce and eliminate customs duties between 15 Asia-Pacific countries, facilitate trade with common trade rules, remove non-tariff barriers and accelerate logistics operations. Other taxes and restrictions are expected to be eliminated within the next 20 years. In summary, efforts are being made to create a structure in which supply chains are deepened and market economy rules and competitiveness rules are redefined, potentially leading to significant economic growth and prosperity.

In these aspects, an open, inclusive, rule-based international trading system is being established with RCEP. Since the contract is open-ended, the aim is to create a structure that will meet not only today's needs but also the needs of the future. It can be said that a new "Far East EU" is being built, and all countries in the Asia-Pacific region are invited to be part of this inclusive and progressive Union.

The agreement is expected to be ratified and enter into force in the signatory countries in the near future. Thus, China, Japan, and South Korea will be parties to a free trade agreement at the same time for the first time, marking a significant milestone in the economic history of the Asia-Pacific region.

With the agreement coming into force, Thailand will provide a significant advantage in the construction sector, Singapore and Malaysia in the processed food sector, Laos in the manufacturing sector, and Vietnam Telecom in the textile and shoe sector.

It is already clear that China, Japan, and South Korea will be among the countries that will benefit most from this integration. The People's Republic of China which has been subject to constant complaints before the World Trade Organization for reasons such as state aid in production, SOE production, and the obligation to create a "joint venture" with a domestic company in direct foreign investments, will be able to quickly develop its trade in the Far East thanks to RCEP, which does not contain any restrictions on these issues.

The most important article of the agreement is that "in case the input production takes place in the RCEP countries and the last essential labor or a significant stage of manufacturing and the last essential labor or action deemed economically necessary takes place in one of these countries," the said product will be allowed to move freely in the RCEP countries without being subject to customs duties. Ensuring. This rule will significantly benefit the People's Republic of China. For example, China, which procures a small mobile phone component from one of these countries, can import the goods it produces as final products quickly into the RCEP region, free of import taxes.

In this regard, the People's Republic of China is expected to strengthen its position and influence in the region with the fastest economic growth in the world. This position will clearly disadvantage US and European companies outside of RCEP.

Another advantage RCEP will provide is that it creates an environment for member countries to send their products more quickly to the USA and European countries with the same logistics operations. Depending on export deadlines, another country's product may be placed on one ship, and another country's package may be placed on another country's container.

Turkey, which has turned its face to Europe for a century but has not been able to achieve integration beyond the "customs union" with the European Union, seems stuck in a position of "can't beat between two mosques" after the newly formed RCEP.

Turkey, which has already signed a Free Trade Agreement with South Korea and Singapore, which are among the countries in the region, has yet to be able to conclude the negotiations with Japan, Indonesia, and Thailand, with which it set out to sign an FTA. Although there are attempts to sign an FTA with Vietnam, this issue has yet to reach the level of negotiations between diplomatic missions. However, signing an FTA between the RCEP countries and us will pave the way for Turkey to grab a share of the "Far East Pie."

Even if Turkey does not secure additional FTAs, the country can still benefit from its strategic location. If products are manufactured in the Far East and consumed in Europe, Turkey can position itself as a crucial logistics base. However, to maintain this advantage, Turkey must act now to enhance the TRACECA corridor, a key route that passes through the country.

At this stage, we can only hope that the Far East Free Trade Agreement, while potentially disruptive to the European Union and the USA, will not harm Turkey. On the contrary, it could present an opportunity for Turkey to enhance its trade and logistics operations. This hopeful outlook is essential for maintaining a positive perspective on Turkey's future in the changing global economic landscape.