RCEP, often mistakenly called “China-led,” is a triumph of ASEAN middle-power diplomacy. The value of a major trade deal with East Asia has long been recognized, but neither China nor Japan, the region`s largest economies, were politically acceptable as architects of the project. The impasse was resolved in 2012 by an ASEAN-brokered agreement that included India, Australia and New Zealand as members and gave ASEAN responsibility for negotiating the agreement. Without such an “ASEAN centrality”, RCEP might never have been launched. Southeast Asia will benefit significantly from RCEP ($19 billion per year by 2030), but less than Northeast Asia, as there are already free trade agreements with RCEP partners. However, RCEP could improve access to China`s Belt and Road (BRI) funds and improve market access gains by strengthening transport, energy and communication links. RCEP`s favourable rules of origin will also attract foreign investment. India and the US were supposed to become members of RCEP and CPTPP, respectively, but withdrew under the Modi and Trump administrations. As the agreements are now configured (see Figure 1), they stimulate intra-Asian integration around China and Japan.
This is partly the result of American policy. The United States must rebalance its economic and security strategies to promote not only its economic interests, but also its security objectives. RCEP will also accelerate the economic integration of Northeast Asia. A spokesman for Japan`s Foreign Ministry stressed last year that negotiations on the trilateral free trade agreement between China, South Korea and Japan, which has been stalled for many years, will take action “as soon as they are able to conclude the RCEP negotiations.” In a high-profile speech in early November, President Xi Jinping promised to “accelerate negotiations on an investment agreement between China and the EU and a free trade agreement between China, Japan and South Korea.” On November 15, 2020, 15 countries – members of the Association of Southeast Asian Nations (ASEAN) and five regional partners – signed the Regional Comprehensive Economic Partnership (RCEP), arguably the largest free trade agreement in history. RCEP and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which was signed in 2018 and is also dominated by East Asian members, are the only major multilateral free trade agreements signed under the Trump era. The impact of RCEP is impressive, even though the agreement is not as strict as the CPTPP. It creates incentives for supply chains across the region, but also responds to political sensitivities. Its intellectual property rules contribute little to what many members have, and the agreement says nothing at all about labour, the environment or state-owned enterprises – all key chapters of the CPTPP. However, ASEAN-centric trade agreements tend to improve over time. We also believe that RCEP and CPTPP will together offset global losses due to the U.S.-China trade war, but not for China and the U.S.
The new agreements will make the economies of North and Southeast Asia more efficient and combine their strengths in technology, manufacturing, agriculture and natural resources. Without such an “ASEAN centrality”, RCEP might never have been launched. Of course, RCEP will help China strengthen relations with its neighbors and reward eight years of patient negotiations in the “ASEAN manner,” which participants typically describe with varying degrees of affection as exceptionally slow, consensual and flexible. In the future, one option for the United States is to continue the FOIP in its current form with greater multilateral support. Trump`s approach – minus the inflammatory rhetoric – is supported in Congress and even in some ASEAN countries like Vietnam. However, the approach risks marginalizing the United States as economic agreements such as RCEP, CPTPP and BIS continue to grow. Without an economic pillar, the FOIP will always push countries to choose between economic and security interests. A guide to facing the end of the post-Cold War era. Read all the content of Order from Chaos » Finally, RCEP and CPTPP are powerful counter-examples of the global decline of rules-based trading. If RCEP fosters mutually beneficial growth, its members, including China, will gain influence around the world. Figure 1: RCEP and CPTPP members (figures show 2018 GDP in trillions of dollars) A third option in the U.S.
is to focus on increased exposure to soft powers combined with strict but firm security commitments. This approach would build on U.S. strengths and save time for more ambitious initiatives. It would emphasize vigorous participation in regional forums, people-to-people exchanges, the promotion of principles for rules-based trade and a clearly articulated military presence. He would benefit from a favorable agreement between the United States and China, which is not an easy task in the current context. Related Content China Trade in Digital Services and China`s Data Governance: How Should the U.S. Respond? Joshua P. Meltzer October 2020 Play Audio Global Commerce Global Competition for Digital Commerce Joshua P. Meltzer and David Dollar Monday, 12. October 2020 China The new center of gravity of global energy trade Samantha Gross Monday, September 14, 2020 Meanwhile, the economic dimensions of the FOIP have remained secondary, ranging from modest investments and a plan to exclude China from supply chains to the evaluation of infrastructure projects, often funded by China. The US approach has angered ASEAN and other East Asian friends and forced countries to make unnecessary and risky political decisions.
U.S. policy in Asia must adapt to the changing realities of East Asia and recognize China`s growing role, the maturation of ASEAN integration, and the diminishing relative economic influence of America. In retrospect, the Trump administration`s Asian policy focused on a new vision of the free and open Indo-Pacific (FOIP). As the experts noted, the principles of the FOIP – an open, inclusive and peaceful region – were in line with established U.S. policy. But the government`s tactics then focused on isolating China from regional economic networks and prioritizing quad-focused security measures (Australia, India, Japan, and the United States). A second option for the United States is to fully reintegrate regional economic networks in addition to an active role in security. For example, the United States could join the CPTPP and approve its rapid expansion to Indonesia, the Philippines, South Korea, Thailand and the United Kingdom. U.S. markets and technologies make these deals attractive and could persuade China to join in the long run (we estimate big gains if that happens).
But current U.S. policy seems to offer little support for this approach. RCEP will connect about 30% of the world`s population and production and make significant profits in the right political context. According to the computer simulations we recently published, RCEP could contribute $209 billion a year to global revenue and $500 billion to global trade by 2030. .
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