Two weeks ago, fifteen countries in the Asia-Pacific region—including China and Australia—signed the world’s newest and largest trade pact ever.
The Regional Comprehensive Economic Partnership (RCEP) Agreement is set to gradually reduce and, in some cases, eliminate, trade tariffs on goods, including commodities.
The recent political and geopolitical developments in the USA and Asia could now undermine American energy exports to the biggest regional importer of crude oil, natural gas, and coal in China.
So, these fifteen countries across Asia signed the world’s largest-ever trade pact, which may ultimately wind up crushing US controlled gas exports to China. The trade pact, nearly a decade in the making, is not without controversy—it is viewed as part of additional strengthening of China’s position in the global supply chains.
The combined gross domestic product of the countries part of the agreement is estimated at around US$26.2 trillion, or about 30% of global GDP.
The biggest trade agreement globally includes the ten members of the ASEAN bloc plus Australia, China, Japan, South Korea, and New Zealand.
In terms of commodities trade, the pact includes the world’s top crude oil importer China; the biggest importers of liquefied natural gas (LNG)—Japan, China, and South Korea.
But also one of the world’s top LNG exporters Australia and other LNG exporters such as Malaysia and Indonesia; and top coal exporters Australia and Indonesia.
Notably, the world’s third-biggest crude oil importer, India, is not part of the agreement after talks failed in recent years, although the signatories to the pact said that they were open to India joining at some point in the future.
The world’s newest trade pact could bolster commodity trade among its members, thanks to reduced or eliminated tariffs on oil, gas, and coal among those members.
Analysts believe that membership in the trade bloc could help to defuse the current strained relations between Australia and China, a major exporter and a top importer of fossil fuels in the region, respectively.
According to the American Petroleum Institute (API), a federal leasing ban could lead to annual US natural gas exports declining by 800 billion cubic feet by 2030, while US crude oil imports from foreign sources could increase by 2 million barrels per day (bpd) by 2030.
Yet, in the shorter-term, US LNG producers and exporters look upbeat about the prospects of increased trade with China.
US exports of LNG to China are set to grow in the coming years, thanks to the first commercial US-Chinese agreement for term supplies since the trade war that started in 2018 decimated American LNG exports to China.
RT. com / ABC Flash Point Trade News 2020.