RCEP AND THE GLOBAL ASIAN CENTURY
Time needed to unlock new Asia-pacific trade pact’s potential to be a game changer
Some experts caution it’s easy to overestimate the economic, political, and geostrategic significance of the newly signed Regional Comprehensive Economic Partnership (RCEP) and how it may transform Asia and global affairs. On one hand, the agreement is more structure than details at this point, and the global economy and multilateralism face tremendous headwinds presently. On the other hand, the same was true when the World Trade Organization (WTO) rose from the ashes of the General Agreement on Tariffs and Trade, and more so with the founding of the Association of Southeast Asian Nations (ASEAN) and other agreement-based international orders becoming major drivers of regional and global development.
Economic significance
Economically, the RCEP is a larger trading bloc than the U. S.- Mexico- Canada Agreement (aka North American Free Trade Agreement 2.0) and the EU, and some estimates project it might push the current 15 signatories to a combined GDP exceeding $100 trillion by 2050 from the more than $26 trillion at present.
The agreement reduces and even prohibits some tariffs, cuts red tape and includes unified rules of origin that will above all benefit the region’s intensively interconnected supply chains. Nevertheless, critics argue that the agreement is not, in fact, “comprehensive,” as it largely avoids concerns for the environment, worker protection and government subsidies—all potentially serious sources of friction as the agreement moves forward, both in the upcoming period of ratification in individual countries and beyond.
However, these omissions reflect the reality of uneven levels of economic and national development between the signatories, which is comparatively extreme in some cases, as well as the shared conviction that moving forward where feasible at this point supersedes squabbling over, essentially, those same differences.
Indeed, the hope is that the economic benefits that come from the agreement will help improve conditions nationally and regionally, and through development and growth those problems will be addressed. And when disagreements emerge, the agreement will provide a framework for resolving them. That said, despite proliferating intersections, no one agreement can address all problems. Progress on the environment, for example, can be made on other fronts. The Paris Agreement on climate change also includes all of the RCEP’S signatories.
Political significance
Both economically and politically, the agreement arrives with almost impeccable timing. Global economic struggles related to the novel coronavirus disease (COVID-19) encouraged it, as did the U.s.-instigated trade war against China and Washington’s aggressive position in trade with most countries, even allies, along with its efforts to undermine the WTO specifically and multilateralism generally—all of which encouraged political and economic instability long before the pandemic.
The immediate context is the RCEP’S success in the wake of U.S. President Donald Trump’s possible re-election defeat, as well as the humanitarian disaster facing the U.S. given the Trump administration’s stunning failure to contain COVID-19.
Despite Joe Biden’s projected presidential election win, the likelihood is high that he will face a hostile senate and a polarized population, nearly half of which view his victory as illegitimate. This means the U.S. must be viewed as an unreliable partner, even if Biden reverses Trump’s withdrawal from the Trans-pacific Partnership, softens the aggressive policies that undermined U.S. economic and strategic relations around the world, oversees effective virus responses including rebuilding the U.S. economically, and recommits the U.S. to multilateralism.
In these contexts, the RCEP marks a major defeat for Trumpism and a major victory for the sort of new world order promoted by China, one that moves beyond a U.S.led world order and gives more credence to the idea that we are now living in the “Asian century.”
These developments, in tandem with China’s growing economy, have prompted concerns that the RCEP further signifies the rise of a Sinocentric world order. To be sure, as the biggest player in the agreement, and with its own unique political system and values, China will need to stay sensitive to these fears and work deliberately to avoid related problems. However, there are three reasons why these are not so serious, which helps
explain why the agreement’s signatories— which are so tremendously diverse, political, economically, and culturally—have joined all the same.
The first, above all, is that the RCEP represents China’s deepening commitment to multilateralism in lieu of using its size to simply bully smaller economies, which stands in stark contrast with the United States’ efforts.
Second, because the agreement is not as comprehensive as others, it avoids the sort of national impositions that have undermined other agreements, i.e., the EU common market, and it fits with China’s foreign policy principle of self-restraint when it comes to the domestic affairs of other countries and vice versa.
Third, China’s new dual circulation strategy for economic development at home remains committed to global trade but with a focus on rebalancing away from export-led growth, improving strategic independence and increasing domestic consumption. In other words, this new strategy not only helps mitigate some worries that China will be aggressive through exports, it also encourages others to get on board as potential increases in Chinese consumption create a boon for imports .
Geostrategic significance
The RCEP can also be expected to have positive carry-over effects on a number of regional and national differences. No doubt its prospects helped China and Japan reach a new agreement on taxes, and it might help resolve indirectly other issues as well, including disagreements in the South China Sea and ongoing conflicts between Japan and the Republic of Korea.
It might also provide a push to continuing negotiations for the EU- China Comprehensive Agreement, which will be especially valuable to China because Biden is expected to have warmer relations with the EU than Trump.
Additionally, the RCEP will strengthen ASEAN and intersect positively with the Belt and Road Initiative and the Asian Infrastructure Investment Bank, which in turn will help these efforts carry their projects far beyond RCEP countries.
Finally, this agreement marks a major defeat for Indian Prime Minister Narendra Modi, with wide-ranging implications for Asia as a whole. Although Modi wanted to join the agreement, India withdrew last year given the intensive backlash New Delhi faced domestically.
India is in a precarious position currently:
It has not been able to contain COVID-19, and above all, while it has seen remarkable economic growth in recent years, many experts agree that its local producers are not developed enough to compete and survive in the RCEP.
This policy failure might help explain India’s aggression on the China-indian border earlier this year, where Modi diverted domestic criticism by returning to his party’s Hindu nationalist roots. But all of it hinders Indian development. Likewise, it also bodes ill for the U.s.-proposed Indo-pacific Quad, as other members, Australia and Japan, increasingly appear to be looking past the era of U.S. hegemony.
Although India has been invited to join the RCEP when ready, joining or staying out presents a difficult decision with serious national and regional implications. Failing to join may undercut further economic development, particularly as it gives advantages to other countries, but more dangerously, it may encourage additional retrograde, aggressive policymaking in New Delhi, especially if it tries to externalize its internal weaknesses.