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WALTHAM, Massachusetts: On November 15, 15 countries, members of the Association of Southeast Asian Nations (ASEAN) and five regional partners, signed the Regional Comprehensive Economic Partnership (RCEP), possibly the largest free trade agreement in history .
RCEP and the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which concluded in 2018 and is also dominated by members from East Asia, are the only major multilateral free trade agreements signed in the Trump era.
India and the United States were to be members of RCEP and CPTPP, respectively, but withdrew under the Modi and Trump administrations.
As the agreements are now configured, they stimulate strongly–Integration of East Asia in China and Japan. This is in part the result of American policies. The United States needs to rebalance its economic and security strategies to advance not only its economic interests, but also its security objectives.
ECONOMIC IMPORTANCE OF RCEP
RCEP will connect approximately 30 percent of the world’s population and production and, in the right political context, generate significant profits.
Based on computer simulations we recently released, RCEP could add $ 209 billion annually to global revenue and $ 500 billion to global trade by 2030.
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We also estimate that RCEP and CPTPP together will make up for global losses from the US-China trade war, though not for China and the US.
The new agreements will make the economies of North and Southeast Asia more efficient, uniting their strengths in technology, manufacturing, agriculture and natural resources.
FILE PHOTO: Employees wearing protective masks and face shields work on the car assembly line during the COVID-19 outbreak at Mitsubishi Fuso Truck and Bus Corp.’s Kawasaki factory in Kawasaki, Japan. (Photo: Reuters)
The effects of RCEP are impressive although the agreement is not as rigorous as the CPTPP. It incentivizes supply chains across the region, but also addresses political sensitivities.
Its intellectual property rules add little to what many members have, and the agreement says nothing about labor, the environment, or state-owned companies – all key chapters of the CPTPP. However, ASEAN-focused trade agreements tend to improve over time.
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Southeast Asia will benefit significantly from RCEP ($ 19 billion annually by 2030), but less than Northeast Asia because it already has free trade agreements with RCEP partners.
But RCEP could improve access to China Belt and Road Initiative (BRI) funds, improving market access gains by strengthening transport, energy and communications links. RCEP’s favorable rules of origin will also attract foreign investment.
GEOPOLITICAL MEANING OF RCEP
The RCEP, often incorrectly labeled “led by China,” is a triumph of ASEAN’s middle-power diplomacy.
The value of a large East Asian trade deal has long been recognized, but neither China nor Japan, the region’s largest economies, were politically acceptable as architects of the project.
An officer adjusts China’s national flag ahead of the ASEAN Plus Three (APT) Summit in Singapore on November 15, 2018 (Photo: REUTERS / Athit Perawongmetha)
The deadlock was resolved in 2012 by an ASEAN-negotiated agreement that included India, Australia and New Zealand as members, and put ASEAN in charge of negotiating the agreement. Without that “ASEAN centrality,” RCEP may never have been launched.
The RCEP will undoubtedly help China strengthen its relations with neighbors, rewarding eight years of patient ASEAN-style negotiations, which participants typically describe, with varying degrees of affection, as unusually slow, consensual and flexible.
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RCEP will also accelerate the economic integration of Northeast Asia.
A spokesman for Japan’s Ministry of Foreign Affairs noted last year that negotiations on the China-South Korea-Japan trilateral free trade agreement, which has been stalled for many years, will be activated “as soon as they can conclude the negotiation on RCEP. “
As if it were a signal, in a high-profile speech in early November, President Xi Jinping promised to “accelerate negotiations on a China-EU investment treaty and a China-Japan-South Korea free trade agreement.”
Finally, RCEP and CPTPP are powerful counterexamples to the global decline of rules-based commerce. If RCEP stimulates mutually beneficial growth, its members, including China, will gain influence around the world.
AMERICA OPTIONS
American policies in Asia must adapt to the changing realities of East Asia, recognizing the growing role of China, the mature ASEAN integration, and the diminishing relative economic influence of the United States.
Looking back, the Trump administration’s policies in Asia focused on a new vision of the free and open Indo-Pacific (FOIP).
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As experts have noted, the principles of FOIP – an open, inclusive, and peaceful region – were consistent with established US policy. But the administration’s tactics then emphasized isolating China from regional economic networks and prioritized Quad-centric security arrangements – Australia, India, Japan and the United States.
US Secretary of State Mike Pompeo attends a meeting with foreign ministers from the Lower Mekong countries, Cambodia, Laos, Thailand and Vietnam during the ASEAN Foreign Ministers Meeting in Bangkok, Thailand, on August 1, 2019 (Photo: Reuters / Jonathan Ernst). )
Meanwhile, the economic dimensions of FOIP remained secondary, from modest investments and a plan to exclude China from supply chains to qualifying infrastructure projects often funded by China. The US approach antagonized ASEAN and other East Asian friends, forcing countries to make unnecessary and risky political decisions.
Going forward, one US option is to continue FOIP in its current form with increased multilateral support. Trump’s approach, minus the inflammatory rhetoric, has support in Congress and even in some ASEAN countries like Vietnam.
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However, the approach risks sidelining the US as economic deals like RCEP, CPTPP and BRI continue to grow. Without an economic pillar, FOIP will continue to pressure countries to choose between economic and security interests.
A second option for the US is to re-engage fully in regional economic networks along with an active security role. For example, the United States could join the CPTPP and advocate for its rapid expansion to Indonesia, the Philippines, South Korea, Thailand, and the United Kingdom.
US markets and technology make these deals attractive and, in the long run, could persuade China to join; We estimate big profits if you do. But current US policy seems to offer little support for this approach.
A third American option is to emphasize the intensified commitment of soft power combined with narrow but firm security commitments. This approach would build on America’s strengths and buy time for more ambitious initiatives.
It would emphasize vigorous participation in regional forums, people-to-people exchanges, upholding the principles of rules-based trade, and a clearly articulated military presence.
It would benefit from a supportive understanding between the United States and China, which is no small feat in the current context.
Peter A Petri is a non-resident senior fellow at the John L Thornton China Center. Michael Plummer is Director of SAIS Europe and Eni Professor of International Economics at Johns Hopkins University. This comment first appeared on the Brookings Institution blog, Order From Chaos.
