Not quite there yet: The Asian free trade colossus

Good morning dear readers,

First of all I would like to wish you a good start into the new year. Although it has to be said that a year is already considered good if neither a global pandemic nor a war of aggression that violates international law breaks out. So the bar for 2023 is really not that high.

In this first morning briefing of the new year, we celebrate an anniversary, catch up with an old friend and share bad news. Let’s start with the anniversary.

At the beginning of January, a colossus of the world economy celebrates its birthday. A year ago, the world’s largest free trade zone, the Regional Comprehensive Economic Partnership (RCEP), came into force in the Asia-Pacific region.

While the countries involved, such as Singapore, China, Japan, South Korea, Australia and New Zealand, hoped that this would result in economic growth and greater weight in the world, Europe feared being seen as a loser.

But a year after the start, it is clear that not everything is going as planned at the RCEP. The necessary forms are missing in order to be able to use the provisions of the free trade zone. In some customs offices, officials still don’t know how the new regulations actually work, our correspondents from Southeast Asia and Japan report. The confusion also arises from the fact that many of the countries are already part of other bilateral and multilateral agreements.

However, it would be important for China in particular, by far the largest member of the free trade area, to implement the agreement quickly. This is also due to the growing conflict with the USA. As a result, Beijing has to look around for other export markets and tie its partners in Asia more closely to itself. Hong Kong SAR is also currently preparing to join the RCEP. Because even if China is an unpleasant neighbor politically, the economic giant is always economically important for the region.

Not only to keep an eye on the RCEP free trade zone, German companies are currently looking to China with interest. The economy Ulrike Malmendier sees a great danger for the German economy in the rapidly increasing number of corona infections in the Middle Kingdom. “If the Chinese ports and factories are closed because almost all employees are ill, there will be dramatic economic consequences,” she predicted in an interview with the Handelsblatt.

She therefore recommends aChina protection crash course“. However, the economy does not comment on the possible content of this course. It is probably about getting the German economy into a stable side position quickly in the event of a total Chinese failure and waiting for rescue from a well-filled state financial injection.

In any case, Malmendier hopes that the federal government already has “emergency plans” up its sleeve for the “worst case” for the German economy.

The new year has barely begun and the first bereavement has already been reported. It is dying, slowly but surely: the diesel engine. In the first eleven months of last year, 20 percent fewer diesel cars were sold in Western Europe than in the previous year. In Germany, the decline is almost eight percent.

The revelations in the diesel scandal, coupled with the rise of electric cars, are slowly but surely killing off the diesel drive form. Overall, according to the prophecy of Handelsblatt auto guru Stefan Menzel, electric vehicles will continue to displace combustion engines over the next few years.

Anyone who wants to participate in the trend towards electric drives would do well to buy a new car in the old year. Because, here comes the bad news announced at the beginning: This year, the subsidies for electric cars will be capped for the first time. You can read in our FAQ whether the purchase is still worthwhile and if so, for which model.

And now to an old friend: Luiz Inácio Lula da Silva is President of Brazil for the third time. The 77-year-old took his oath of office in Congress in Brasília on Sunday.

He is taking over the leadership of a country that is still euphemistically described by the expression “deeply divided”. Lula’s electoral success against incumbent Jair Bolsonaro two months ago was extremely narrow. Since the election defeat, supporters of Bolsonaro have been demonstrating in front of the army headquarters against the transfer of power. The fact that parts of the armed forces do not accept Lula as supreme commander does not bode well for Brazil’s future stability.

Lula’s predecessor boarded a plane to Florida on Friday, thereby avoiding a symbolic seal of office. Because in Brazil it is customary for the old president to put the presidential sash around the new one. At least in times of political stability and respect for democratic customs.

Finally, I would like to share with you my personal New Year’s Eve experience, which I am currently still processing. Celebrating the turn of the year in the German capital means being yourself two days to save from stray projectiles. The German environmental aid confirms my impressions and called New Year’s Eve 22/23 a “night of terror”.
The inhabitants of the English town of Scarborough fared better. Here the authorities had canceled the New Year’s fireworks at short notice. The reason: A walrus was resting in the city’s harbor. You didn’t want to disturb the animal with the loud banging.

Unfortunately, I think it is unlikely that the visit of a walrus could bring more calm to Berlin next year. That’s why I’m planning to spend the next turn of the year somewhere in the country. Far from misguided firecrackers and smashed glass bottles.

You would have to be a walrus.

I wish you a very calm and relaxed start into the new year.

It greets you cordially

your

Teresa Stiens
Editor of the Handelsblatt