Injecting vitality into multilateralism
RCEP sends the right message of cooperation to the world at a time of severe challenges
The year 2020, thanks to the novel coronavirus pandemic, may not have been particularly good for trade, regional and global, yet it has added vitality to multilateral economic and trade cooperation and win-win partnerships. The signing of the Regional Comprehensive Economic Partnership agreement by 15 countries on Nov 15 is indeed a booster to free trade.
As the 10 ASEAN member states, China, Japan, the Republic of Korea, Australia and New Zealand signed the RCEP after eight years of negotiations, it shows that many countries in the region uphold multilateralism and are opposed to protectionism and unilateralism. It also means the establishment of the largest free trade zone in the world, which is expected to become the main engine of the global economy in the postpandemic era.
The RCEP accounts for about 30 percent of the world’s population and global GDP, and nearly 28 percent of global trade. In its simplest form, it can be seen as a framework for facilitating free, streamlined trade arrangements among the 15 signatory countries. And the fact that the RCEP comprises both developed and developing countries, it sends the right message of cooperation to the world at a time when trade tensions and high tariffs seem to have become the de facto trade policy of some economies.
But instead of welcoming the joint efforts of the 15 countries to establish the world’s largest free trade zone and uphold multilateralism, some people are spreading misinformation about the free trade agreement, alleging that China is leading the RCEP to counter the United States, and that the new regional trade mechanism will prevent the US from trading with the countries in the region.
It was the Association of Southeast Asian Nations that initiated the RCEP talks, starting with the 10+3 mechanism, that is, the 10 ASEAN members plus China, Japan and the ROK. True, China has been a party to the negotiations from the beginning to the conclusion of the RCEP process. But neither China nor the other 14 member states have signed the RCEP agreement to challenge other countries. The very basis of the new trade mechanism is multilateral cooperation.
While signing the agreement, the RCEP members not only pledged to jointly promote global economic recovery but also work for the longterm prosperity of the region and beyond.
The RCEP is inclusive in nature and, given that it aims to boost codevelopment, will accelerate free trade in the region, strengthening the regional economy in the process. It will also help the ASEAN members and the other five RCEP signatories to better coordinate the bilateral economic and trade deals they had signed prior to the RCEP.
The COVID-19 pandemic has heightened the need for many enterprises to reconsider their supply chains. As a result, a number of trends have emerged including regionalization, digitalization, nearshoring, reshoring and rebasing of manufacturing. Customs and tariffs, government subsidies, changing costs of and access to labor, and taxation are all having an impact on the decisions of the enterprises.
The RCEP will play a crucial role in their assessment process, and could even trigger supply chain reorganizations.
Preferential items under the RCEP framework will reduce trade costs, promote the streamlining and smooth operation of industrial chains, and diversify markets, which will help many Asia-Pacific countries to regain their vigor.
And as a signatory to the RCEP and a country with the most comprehensive manufacturing sector in the world, China believes it is its responsibility to help stabilize regional trade. The stable development of the RCEP will help the signatory countries maintain friendly relations and promote free trade. Ironically, the RCEP has put the focus on the US administration too, not least because it has pulled Washington out of many international organizations and multilateral agreements including the Trans-Pacific Partnership.
It was the United States that initiated and led the TPP negotiations, in order to regain its leadership in the Asia-Pacific region and offset the impact of various multilateral trade deals on its economy. But the incumbent administration took the radical decision of withdrawing from the TPP, after which Japan led the negotiations with the 10 other members of the original TPP leading to the signing of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in 2018.
Since several signatories to the CPTPP and the RCEP are the same — such as Japan, Australia, Malaysia, Vietnam and Singapore, there was a proposal, mainly by Japan, to include the US in the RCEP. But the US administration showed little interest in the trade agreement.
The RCEP is not a threat to the US economy, and that is why the incoming Joe Biden administration is expected to be less hostile toward the new trade mechanism. The US cannot remain a silent onlooker while the world’s largest free trade zone boosts regional trade. So Biden may make efforts to ensure the US dominates global rulemaking, especially because one of his campaign promises is to regain the US’ global leadership.
The president-elect has also said he would seek multilateral solutions to repair and strengthen the US leadership in global democratic alliance and could even help restructure some key elements of global mechanisms. So the possibility of Washington cooperating with the RCEP and returning to the CPTPP cannot be ruled out.
Incidentally, China is considering joining the CPTPP with the aim of boosting regional and multilateral cooperation, which, unfortunately, has fueled speculation that the China-US competition could further intensify. There is a broad global consensus on the need to boost international cooperation. And spreading conspiracy theories vis-àvis China and the US is harmful to global cooperation. Let us hope such negativity soon becomes history with the passing of 2020.