Free Trade:
After signing the RCEP, the world's largest trade bloc, China announced its intention to join the CPTPP, sending a message of reconciliation to the US
Joining Up Politics
On November 15, the Regional Comprehensive Economic Partnership (RCEP) was finally signed by 15 Asia-pacific countries on the sidelines of the ASEAN Summit, held virtually this year. Incorporating China, Japan, South Korea, Australia, New Zealand and the 10 members of ASEAN – Indonesia, Laos, Thailand, Singapore, Malaysia, the Philippines, Vietnam, Brunei, Cambodia and Myanmar – the RCEP creates the world's largest trade bloc, covering about 30 percent of the world's total population and economic output.
According to the agreement, member states will lower tariffs on more than 90 percent of trade products within the bloc to zero in 10 years. Other than tariffs, the agreement adopts the global value chain framework covering areas including investment, services and intellectual property rights based on a negative list approach. Before the deal comes into effect, it still needs to be ratified by the parliaments of at least nine member states, including at least six ASEAN countries and three NON-ASEAN countries, a process expected to take up to two years.
Launched in November 2012, the RCEP negotiations were led by ASEAN. Initiated around the same time as the Trans-pacific Partnership (TPP), another major trade pact led by the Obama administration, supposedly designed to counter China's rising influence in the Asia-pacific region, the RCEP has long been considered a rival trade pact under China's influence, a notion repeatedly rejected by China.
Although it will take several years before the deal results in any economic impact, the signing of the RCEP, in stark contrast to the four years of protectionism under the Trump administration's “America First” agenda, which included pulling out of the TPP in 2017, is widely seen as a victory for China, though economists disagree on the real economic impact for the country.
Economic Benefits
The most optimistic estimate comes from researchers at the Chinese Academy of Social Sciences (CASS). According to a report by Shen Minghui and Li Tianguo, associate fellows at CASS, the deal would add 0.22 percent to China's GDP, 11.4 percent of total exports and 17.1 percent of imports in 10 years if trade liberalization under the deal comes into effect as scheduled.
The authors argued that the RCEP can help China offset the negative impact of the Comprehensive and Progressive Agreement for Trans-pacific Partnership (CPTPP), an updated trade pact negotiated and signed by the remaining 11 countries in 2018 after the US pulled out of the TPP.
“For example, the CPTPP'S rules of origin require that all textile manufacturing processes must be conducted within its member states, which has a negative impact on China,” reads the report. “With the establishment of the RCEP, it can help prevent the institutional division and fragmentation of regional economic integration among Asian countries.”
But the economic benefits of the RCEP may not be enough to offset potential damage imposed by the trade war launched by the US against China. According to a study by Washington, Dc-based think tank, the Peterson Institute for International Economics, the RCEP could lead to 0.4 percent growth in China's GDP by 2030. By comparison, if the trade war continues, it would trim 1.1 percent off China's economic output by the same time.
Other economists are even more conservative about the RCEP'S economic benefits to China. Liang Yixin, a researcher with the China Center for Information Industry Development, a think tank under the Ministry of Industry and Information Technology, estimated the deal would only lead to a marginal 0.04 percent increase in economic
output, or 1.95 percent in export growth by 2025.
According to Chen Pin, a professor at the National School of Development at Peking University, and a Senior Fellow at the Center for New Political Economy at Fudan University in Shanghai, the deal's economic benefits to China may have been exaggerated. In a widely shared article posted on Fudan University's website on November 23, Chen said that to reach agreement with other countries, China made major concessions both to advanced economies like Japan and to less developed ASEAN countries.
He warned that while the deal will promote Chinese exports and help China mitigate the impact of the trade war with the US, it will also make it easier for Chinese companies to relocate to Southeast Asia, which will negatively impact China's employment situation. “Ultimately, China will face similar problems as the US is currently facing,” Chen said.
Chen believes that the biggest winner of the RCEP is not China, but ASEAN countries. “[With the RCEP], ASEAN countries declared that the bloc will not take sides between the US and China,” he wrote.
Political Significance
For Chen, China's gain is mostly political, rather than economic. “With ASEAN countries taking center stage, the RCEP will help China reduce the frictions and hostilities between China and other countries such as Japan, South Korea, Australia and New Zealand,” Chen said.
“By strengthening economic cooperation with regional countries, the deal can also reduce the impact of political offensives from the US,” he added.
Chen's view is shared by many analysts. The RCEP sends a message that multilateralism is still achievable, Chen Fengying, a research fellow at the China Institutes of Contemporary International Relations, told Newschina.
“At a time when the trend of globalization appears to be reversing and the global supply chain is subject to disruption with the rise of populism and protectionism, the signing of the RCEP is a light in the darkness,” Chen Fengying said.
The Peterson Institute report also acknowledges the political significance of the RCEP. “Even more important than economic gains, however, may be the effects of East Asia's regional turn on China's prospects for leadership in the region,” said the report.
“The CPTPP and RCEP agreements, without the US and India, remove powerful balancing influences in determining economic policies in East Asia,” it said.
This perception has led to renewed calls for US President-elect Joe Biden to join the CPTPP. In an editorial published on November 20, Bloomberg called for a bipartisan focus on “reasserting America's leadership” to join the CPTPP.
Asia-pacific Trade Groupings RCEP vs CPTPP?
While the signing of the RCEP led analysts to increasingly interpret the political significance of the RCEP and CPTPP primarily from the lens of the Us-china rivalry, Beijing offered a different perspective. On November 20, days after the RCEP was signed, Chinese President Xi Jinping surprisingly announced at the virtual Asia-pacific Economic Cooperation leaders' meeting that China will actively consider joining the CPTPP.
This is not the first time Chinese leaders expressed interest in joining the bloc. In May, in response to a question by a Japanese journalist at a press conference at the end of the annual session of the 13th National People's Congress, Chinese Premier Li Keqiang said that China has a “positive and open” attitude toward the idea of joining the CPTPP.
But unlike Li's comments, which attracted no substantial coverage from China's domestic media, Xi's announcement was followed by a heated discussion among Chinese media and experts.
In a commentary released just a day after Xi's announcement, CGTN, the English-language arm of China's State-owned broadcaster China Central Television (CCTV) offered analysis to a question it posed in a commentary titled “Why is China now considering joining a bloc which was initially pitched as anti-china?”
“With the incoming Biden administration now on the horizon, China has decided the ‘strategic time' is now right to actively consider joining the CPTPP,” said the commentary.
Acknowledging that the CPTPP has higher standards for participation than the RCEP, the commentary said that China is “sending a message of conciliation, not ambition, to those involved.”
Stressing that China's pursuit of multilateralism does not “represent a zero-sum game of ‘win' or ‘lose' as has been depicted by the Trump administration,” the article said the CPTPP “should not be viewed in binary terms as a pro-china or anti-china coalition as many of its participants have free trade arrangements with China and are also part of the RCEP anyway.”
In another article published on November 21, the State-owned Global Times put it more directly. “China's interest in joining the CPTPP would also create a new chance for China and the US to seek common ground and work out their divergences.”
In a commentary published on Jiemian.com on December 1, Su Qingyi, a senior research fellow and deputy head of the department of International Trade of the Institute of World Economics and Politics at CASS, noted that joining the CPTPP would be a major strategic focus for China's future policy.
Arguing that most of the CPTPP rules converge with China's reform targets, Su said that joining the CPTPP can address the concerns the West has over trade issues and enable China to fully integrate into the global trade system.
“If joining the World Trade Organization [in 2001] was China's first phase of joining the global trade system and the global division of labor, China's joining of the RCEP is the second phase, and its future joining in the CPTPP will be the third,” Su stated.
Regarding the prospect of the US rejoining the CPTPP under a Biden administration, Su said that China could propose joining the CPTPP at the same time as the US, although it would not be straightforward.
“The question for China is not whether or not to join the CPTPP, but how China could join it,” Su said.
On November 20, the same day that Xi expressed China's interest in joining the CPTPP, Japanese Prime Minister Yoshihide Suga said that Japan aims to expand the CPTPP, although no specific mention was made of China. In June, the UK announced its intention to join the CPTPP. But even if Japan and other CPTPP members agree to start negotiations with China, it would take years before there is a concrete outcome.
According to Zhai Kun, a professor at the School of International Studies at Peking University in Beijing, a major problem with the ongoing discussion of the relationship between the RCEP and CPTPP is that the rivalry aspect of the relationship is exaggerated.
“While different trade pacts may compete with each other on some level, they can be supplementary as well,” Zhai told Newschina.
“What is most important is to uphold the principle of multilateralism and free trade, which is key to the peace and prosperity of both Asia and the whole world.”