China View: RCEP to Reshape the Global Economy
The Regional Comprehensive Economic Partnership (RCEP) has recently been welcomed among the world’s most important trade deals and potentially the largest ever made. It includes the Association of South East Asian Nations (ASEAN), made up of 10 members, plus China, Japan, South Korea, Australia, and New Zealand. This is an important deal because it finally connects Asia to Oceania on a big scale and is symbolic for the growth of this region and of the increasing power of China among others.
“World Trade Deals.” (CREDIT: Forumias.com)
The RCEP member countries all together make up nearly 1/3 of the world's population and have a significant impact on the global GDP (nearly 30%). The RCEP predicts the elimination of a range of import tariffs within the next decades and is arguably a development of the already existing bilateral Free Trade Agreements (FTAs) between some of the participatory countries. Some analysts believe that the RCEP could complicate the existing FTAs and that the economic benefits from this mega trade pact could take years to materialize.
“How the rcep may benefit regional members.” (CREDIT: GLOBAL TIMES)
This deal, however, has taken over 8 years to create and therefore does not necessarily expect immediate gains short-term, but rather it is an attempt to consolidate cooperation in the region in a sustainable manner. The RCEP could indeed function as a reason for peacebuilding in the contexts of dispute resolution (for instance, in the South China Sea).
It is also a successful demonstration that China can collaborate with other superpowers despite the political differences with countries like Australia and New Zealand, usually ideologically closer to the US. Through this deal, China not only has shown that it values regionalism in East Asia, but that it also prioritizes regionalism in the greater Asia-Pacific. The RCEP could put China in the legitimate position of regional hegemon. The Asian Development Bank confirms that “the formation of regional integration frameworks can be best understood as a dominant state’s attempt to create a preferred regional framework in which it can exercise exclusive influence.”
(CREDIT: Forumias.com)
The creation of the deal, however, did not go without challenges, because most countries had different views on what the RCEP should have implemented for them. As shown from the image to the side, China was mainly pushing for a quicker deal which would directly lower tariffs with ASEAN and other neighbors. Australia and Japan, on the other hand, wanted to negotiate a high standard deal covering services and investment, which would allow them to gain something more from the experiences gained from the Trans-Pacific Partnership (TPP).
The RCEP is also the ultimate symbol of the two faces of globalization, on one hand, interconnecting countries and decreasing the chances of destructive conflict, on the other hand leading to the realization that the world is increasingly money-driven and that relations among countries are as materialistic as ever.
For the Oceanian countries of Australia and New Zealand, this deal is important not only because of the negative impacts of the COVID-19 pandemic on their isolation from the rest of the world for safety reasons but also because they normally are countries which policies are much more inward-looking and have yet to affirm themselves as absolute leaders in the Asia-Pacific.
Analysts believe the RCEP is a weaker deal compared to the existing Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an extension of the TPP renegotiated in 2018. According to the Borgen Project, the “TPP aimed to remove tariffs completely on over 90% of traded goods whereas the Regional Comprehensive Economic Partnership attempts to merely reduce tariffs on only 80% of goods.” This is because more than 70% of trade among the ASEAN states is already conducted with zero tariffs, therefore South East Asia will nevertheless benefit significantly from the RCEP (predicted USD 19 billion annually by 2030), but certainly less Northeast Asian partners in the deal.
The map below showing the trade blocs of RCEP versus TPP is a visualization of the current narrative emerging in comparative studies within the academic fields of economics and political science. Analysts have framed the differences between the TPP and RCEP in terms of the balance of power between China and the US rather than focusing on the economic implications of these.
“RCEP vs TPP.” (CREDIT: Brookings)
While diplomatically and economically speaking this deal could bring valuable change to the current status quo of the global economy, a Japanese study arises concerns about the RCEP’s potential impact on greenhouse gas emissions, arguing that mega free trade agreements will eventually have an impact on the environment and that this should be a priority in the policy-making agenda of participatory countries for a truly sustainable deal.
Both the US and India are not part of the deal. While the reason not to include the US may be linked to the presence and dominance of China in the making of RCEP, it is also true that the US is not situated in the same regional context and Asia-Pacific countries may prefer a whole-regional deal rather than involving the US. India, instead, retracted from signing the deal only recently and decided that “no deal was better than a bad deal”, said the Minister of Foreign Affairs of India S. Jaishankar.
This decision was partly made to safeguard the interests of domestic industries in the primary and tertiary sectors, because India was worried that the current structure of the deal would not address appalling national issues and concerns. Another reason why India opted out from the deal may be linked to the ongoing border disputes with China in Kashmir, and the perceived threat of China’s presence in Bangladesh. Despite India’s decision, RCEP countries made it clear that the door will remain open for India to sit again at the negotiating table in the future. In the meantime, India does risk the loss of benefits other countries may gain from the RCEP.
