Regional Comprehensive Economic Partnership: The World's Biggest Trade Pact
By Javier Vidal Cano (BA: Chinese Studies)
On 15 November 2020, 15 nations (among them China, South Korea, Japan and Australia) signed the Regional Comprehensive Economic Partnership (RCEP) at the virtual ASEAN summit. The advent of such a symbolic deal in the current global climate may have groundbreaking implications for the economic and strategic future of the South East Asian region and for American foreign policy towards China.
It must be acknowledged that the RCEP is not as comprehensive as the Trans-Pacific Partnership (TPP) or the agreements that the European Union is spearheading for economic integration in the region.
Despite this, it is economically noteworthy as it will serve to further reduce the already low tariffs on trade between members and push for an economic recovery in the post pandemic world. This is crucial to some of its lower-income and export-dependent signatory nations such as Laos, Vietnam, and Cambodia that were devastated by the collapse of international demand and logistics networks this year.
However one must not forget that this is merely an agreement regarding tariffs; it is not an extensive trade agreement or a customs union. The potential of this agreement to develop into something more substantial still remains a far-fetched fantasy.
The RCEP includes a range of more and less economically developed countries that possess different trade systems, institutions, norms, standards, and systems of governance. Any form of an advanced treaty still seems inconceivable. However, this is a small step in the right direction.
For the time being, the RCEP is enough to support mutual interests in the region and expand possibilities for future negotiations. Unfortunately, India was not part of the agreement due to domestic opposition to increased foreign competition. Given the potential of the Indian market and the role that it plays in transnational trade, its exclusion is a significant drawback to the potency of the pact, but doors are open for its inclusion in the near future.
On the other hand, the symbolic ramifications of the RCEP are much more significant. It encompasses 30% of the world’s population and boasts 30% of global GDP with China at its forefront. Additionally, it forms the biggest trade bloc in world history and taps into one of the worlds largest potential markets.
It is important to note that in the current stalemate of the World Trade Organization (WTO), the RCEP is yet another example as to how plurilateral negotiations are increasingly replacing multilateral ones for short term gains. China is the only major economy in the world that is projected to have net growth this year, and this deal solidifies its stance as the dominant force in the southeast asian region. It allows China to portray itself as the torchbearer for plurilateralism and international cooperation, and gives it a greater influence over governing the rules of trade.
It is important to note that Japan and Korea are also not part of any other similar economic agreement, so this is a historic achievement for their foreign policy. As a whole, this deal demonstrates that Asia remains committed to multilateralism and free trade arrangements as the key to prosperity, and will accelerate trade flows amongst the two billion people that inhabit the 15 nations.
One must also consider the strategic significance of this development in the context of growing Sino-American tensions. Repeated visits by American diplomats to Taiwan, coupled by sanctions on Chinese exports by the Trump administration, have strained relations. President-elect Joe Biden has shown no signs of relaxing this hardline approach. However, contrary to Trump, he will push for multilateralism within the Southeast Asian region and create a strong international response to contain China’s growing ambitions in order to protect global interests.
Therefore, some experts believe that the RCEP may indeed be a veiled warning from China to the West as it marks its territory. The RCEP serves to expand China’s growing presence in the region as it conveniently increases the incentives for nations to rely on Chinese imports, thus strengthening their own economy and creating further dependence on China.
With regards to economic power, in the past China has not been afraid to weaponize its economy to enforce its narrative and punish dissidents with sanctions or trade embargoes. It is not difficult to imagine that it may abuse the RCEP as strategic leverage to ensure compliance from member states.
As of right now, it is difficult to say how the RCEP will affect Biden’s policy in Southeast Asia, but China seems to be sending a direct message against foreign interference within its sphere of influence.
‘It will no doubt have implications for the geopolitical future of Asia and help bolster a post-COVID economic recovery‘
Regardless, the RCEP is a symbolic achievement for the region due to its sheer scale. It will no doubt have implications for the geopolitical future of Asia and help bolster a post-COVID economic recovery for nations that suffered with the loss of consumer demand.
It serves as a reminder of the importance of ASEAN (Association of SouthEast Asian Nations) for plurilateral trading and assisting in future post-pandemic recovery efforts. On a more ominous note it demonstrates that the Southeast Asian region might indeed be the next battlefield in the growing Sino-American trade war.
Photo Caption: RCEP MEETINGS, SATURDAY 3 AUGUST 2019 (Credit: DFAT photo library).
