As we approach the mid-point of November 2020, Supply Chain Matters provides a brief update on two global trade developments, that of Brexit and the other of RCEP.

 

Brexit to the Wire

With negotiating windows all but being exhausted, Bloomberg reports that European Union officials that is time for Boris Johnson to make up his mind as to whether the UK Prime Minister wants a trade deal or not.

With this week previously being characterized as being the push to the wire for negotiating teams, reports indicate that little progress has been made in the key areas of disagreement.

A further development this week was the reported resignation of two of Johnson’s closest political aides, Dominic Cummings, the reported mastermind of the Brexit effort, and Lee Cain, Communications Director, who also worked to help deliver the 2016 Brexit referendum vote.  which now add even more uncertainty.

While these talks are scheduled to again resume on Monday of next week, the deadlines for European Parliament approval and the actual time to be able to prepare for either a no agreement exit, or an agreed set of conditions is evaporating rather quickly.

This week, the U.K. government intensified talks with the country’s five biggest business groups that would particularly be impacted by either a no agreement or some form of agreement. According to Bloomberg: “The government has previously expressed concern that many firms have their “heads in the sand” and are ill-prepared for Brexit.”

It would seen that reality is closing in on multiple fronts related to new requirements, customs union procedures, the need for added border checks or likely government systems readiness conditions.  The end of December timing is also unfortunate given the new wave of COVID-19 infection rates across the UK and Europe.

The likely takeaway for UK manufacturers, retailers and logistics services firms is to now assume worst case scenarios and plan accordingly. That may sound familiar given the prior brinkmanship history related to Brexit deadlines, but that is the reality. Even if a last-minute breakthrough in talks occurs in the next two weeks, preparation and contingency planning will be required. As we have state previously, assume the worst and hope for the best.

Global Trade

The Dawn of the RCEP Trade Group

Foreign ministers representing 15 ASEAN countries have agreed to sign The Regional Comprehensive Economic Partnership (RCEP) trade agreement on the final day of the 37th ASEAN Summit meeting to be held on Sunday November 15.

This broad multilateral agreement has been eight years in the making.

The signatories include the 10 nations of ASEAN in addition to Australia, Japan, New Zealand and South Korea. China is also expected to sign on as-well.

Absent from both RCEP and the former Trans Pacific Partnership (TPP), now named as the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), is the presence of the United States.

According to a published report from The Diplomat: “While the strategic impact is unlikely to be felt immediately, the long-term ramifications could be profound.” The context of that statement is in the influence that the U.S. has previously held with Asian nations. According to a published report by the South China Morning Post, there was an urgency by China’s leaders to sign the RCEP deal before the next U.S. Administration took office.

The Trump Administration trade policies often eschewed such broad multilateral trade agreements with a perspective that the U.S. would not gain anything from such frameworks. Yet, China’s growing influence in global trade and political influence have become an increasing concern among some political leaders in the U.S.

Global trade and political influence will likely be an agenda item for the new incoming Biden Administration., and some speculate that Biden may favor the joining of CPTPP.

As always. time will tell in both of these trade developments. Indeed, global trade structures will remain an important big-picture focus for multi-industry supply networks for many years to come.