By Magnus Obermann
The conclusion of the world’s largest free trade agreement on 15th November marks the next episode in the emergence of the Pacific century. The new US administration will face the decision of whether it wants to take part in Pacific power contestations or not. In the meantime, however, the EU remains the world’s trade champion.
With Donald Trump still refusing to acknowledge his election defeat, it appears the US has been added to the list of former British colonies struggling with a democratic transition, things in Asia are moving forward. On the 15th of November, fifteen Asian and Pacific nations met virtually in Hanoi to conclude one of the world’s largest free trade agreements, the Regional Comprehensive Economic Partnership Agreement, or RCEP.
RCEP unites the ten ASEAN states and its five neighbours China, South Korea, Japan, Australia, and New Zealand, with which the Southeast Asian federation previously only had bilateral agreements. The new agreement creates a free trade area that accounts for 28% of world trade, 30% of world GDP, and almost 30% of the world’s population. All these figures are expected to grow in the future.
In the words of the joint leaders’ statement, RCEP is meant to “play an important role in building the region’s resilience through an inclusive and sustainable post-pandemic economic recovery process.” The agreement, however, is deemed to convey a geopolitical message: while Trump starts trade wars and undermines multilateralism, China concludes free trade agreements and fosters its economic influence. For the first time, Beijing, Tokyo, and Seoul are united under a common trade agreement.
Is the US still a Pacific power?
Most significantly, RCEP symbolises the new economic powerhub in the East. This may come as a disappointment for all who dreamed of the return of a new transatlantic century under US President Biden. For the non-dreamers, this observation is neither new nor surprising. In fact, it was Obama’s Secretary of State Hillary Clinton who in a 2011 Foreign Policy article initiated the United States’ “pivot to new global realities,” i.e., towards a rising Asia.
The difference between the Pacific century envisaged by Clinton and the post-Trump reality is that the US has lost the initiative. Instead of pursuing Obama’s Trans-Pacific Partnership (TPP), Trump in 2017 withdrew the US and started trade wars with many of America’s earlier partners. One of the apparent aims of the TPP and the US “pivot” was to curb China’s influence in the Southeast Asian and Pacific region. Therefore, China should not be accused of creating its own geoeconomic sphere of influence to exclude the US. Yet Beijing’s ability to turn the tide and promote cooperation in the region is remarkable, despite all the challenges this new responsibility holds.
China plays Weiqi
Beijing’s narrative of the RCEP’s creation stresses the benign intentions of the People’s Republic. Speaking with this reporter, Major-General Gong Xianfu of the People’s Liberation Army criticised the notion of a Chinese geopolitical victory. “RCEP means more economic cooperation and trade between all the members, including two US allies. RCEP is open to India as well, this is in the self-interest of the region,” Mr Gong said, and continued to claim that “it was a pity that the US left TPP, but China is willing to join the new TPP in the future.”
In fact, the Chinese Communist Party’s (CCP) international propaganda loudspeaker Global Times on the 21st of November announced China would “favourably consider” joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). CPTPP was concluded in 2018 among the remaining TPP members after the US withdrawal. China’s accession to CPTPP, in addition to RCEP, would be yet another symbol of the shift of trans-Pacific initiative from DC to Beijing.
Reflecting on US-China relations, Mr Gong, a former Vice-President of the China Institute of International Studies, said: “The US wanted China out of TPP, but China just wanted everyone together. That’s why we supported RCEP, not to keep the US out. Under Biden there should be a normalisation of US-China relations, but still, I can’t see the USA joining RCEP. They have too many domestic problems at this point.”
Indeed, the composition of RCEP is quite heterogeneous. Perhaps surprising members among the signatories of RCEP are New Zealand and also Australia, two countries not included in the ASEAN+3 scheme. The Australian membership could prove particularly problematic, as Canberra has repeatedly expressed suspicion Beijing might be behind the recent cyberattacks against the Australian government’s IT infrastructure. It is also important to note that the RCEP will lead not to immediate market opening but rather long-term increases in market access. In this sense, RCEP is not a very ambitious agreement.
Questions remain about who benefits the most from RCEP, and who was the chief negotiator.
Reshuffling the geo-economic cards
The conclusion of RCEP is likely to strengthen China’s economic position in the region. In a recent interview, former Australian PM Kevin Rudd posited that the agreement is creating an “increasingly confined ecosystem of intra-regional trade. The US withdrawal from TPP was a mistake that the new administration should correct soon, before it is too late.”
So, has China outmanoeuvred the US and forced its neighbours into a trade agreement on its terms? A sensible observer might arrive at this conclusion, but the correct answer is no. At most, Beijing is exploiting Trump’s isolationism and curing Obama’s exclusivity with its own medicine. Both may be in China’s best interest. The theory does not explain, however, why China’s neighbours and close allies of the US would want to enter into a trade agreement with an increasingly assertive Beijing.
Singaporean diplomat Kishore Mahbubani extrapolated on the sentiment: “Yes, the 21st century will be the Asian century. But to all you Westerners: You don’t get it! The story of Asia is not only about China. ASEAN is the driving force behind this, and together with the rest of Asia and Europe we should persuade China and the US to stop their childish rivalry.”
Consequences for Europe and the World
The conclusion of RCEP coincides with a time when post-Brexit relations between the EU and the UK are still uncertain. Although the Commission and the British government brokered a deal on Christmas Eve, the agreement seems cosmetic rather than comprehensive. Despite the latest progress in free trade agreements with Vietnam, Singapore and Mercosur, new negotiations with Australia and New Zealand, and a dominant position in world trade of the EU27, RCEP will make it more complicated for the EU to find its place between the powers of the Pacific.
Indeed, the demographic and macro-economic situation is such that with RCEP, the EU could lose eventually lose its leading position in world trade and global standard-setting. But not today, and not any day soon. Aside from its potential, RCEP stands no chance of emulating the EU in terms of supranational integration. Lacking the latter’s high degree of institutionalisation, it is unlikely that RCEP will put its members in a position to influence global standards and trade regulations in the way the EU does today. Moreover, it would be far-fetched to call RCEP a monolithic bloc with common interests.
Moreover, RCEP is by no means a threat to the rules-based international order that the EU supports. The legal text of the agreement, which entails provisions about trade in goods and services, investment, intellectual property etc., stresses that the agreement is in full compliance with WTO rules. Of course, one could link RCEP to the Belt and Road Initiative (BRI), warn of an Asian trade supremacy and sing the requiem to market power Europe. However, this would prove simplistic, overlooking important inter-Asian dynamics and reducing the EU to a mere customs union, which is certainly is not.
In conclusion, we would be wise to closely monitor the further development of RCEP. Will it succeed to become an influencer of global trade regulations, like the EU? Or will it even fail to abolish all tariffs and customs between its member states, as so many other FTAs before? Little is certain, however when comparing free trade agreements, one should not only look at quantities, but at qualities as well. While it is always beneficial to reflect upon one’s position and avoid hubris, especially in the West, there is no need to be nervous about RCEP. 2020 is the right moment to engage more with Southeast and East Asia, not a time to be alarmed by geopolitical Cassandras.
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