RCEP: Peril or Impetus for a Greater ASEAN Regionalism?

Against the backdrop of global pandemic, ASEAN successfully held its 37^th summit from 12-15 November 2020. During the four days course of the conference, ASEAN members mainly discussed multilateral cooperation to recover from pandemic and the tension that was escalating in the region, notably in the South China Sea months prior to the conference. In the midst of rising tension, ASEAN reaches a historic milestone with the signing of Regional Comprehensive Partnership Agreement/RCEP. The trade agreement unites ten ASEAN member states, China, Japan, South Korea, New Zealand, and Australia under the same flagship—countries that previously cooperated under ASEAN +6 excluding India.

The trade pact that comprises of 15 countries across Asia-Pacific and covers almost a third of the world population is regarded as the world’s biggest trade agreement, next after the US-Mexico-Canada Agreement and European Union. Other than the sheer number of the countries participating in this agreement, the mega-regional agreement also demonstrates the feats of bridging three East Asian countries—China, Japan, and South Korea that are traditionally reluctant to engage under the same economic framework—with its counterparts in Western Pacific. The agreement is expected to progressively cut down the already low tariff among member countries and incentivize investment flow when it finally comes into effect (Lee, 2020). Vietnam, a country that has been profoundly affected by rivalry between the United States and China in the region, is optimistic about the cooperation.

Final negotiation of RCEP coincides with two important momenta that highly affect the region: economic recession prompted by the Covid-19 pandemic and the ongoing power transition in the United States after the presidential election. Despite its feat on uniting Asia-Pacific under the same trading platform, many actors view RCEP in a skeptical way, including India that was originally involved in the deal’s formulation but withdrew during the negotiation last year. India’s approach also reflects the growing animosity towards China, especially after the border clash in Himalaya early in May. Some commentators view that RCEP signals a growing Chinese dominance over Asia-Pacific, including ASEAN that has long become a battle ground between great powers. Reuter and Wall Street Journal, for instance, labelled the RCEP as the ‘China-backed trade deal’ that will eventually pose a threat to ASEAN and other Asia-Pacific countries (Pearson, 2020; Emont & Gale, 2020).

Reflection of China’s Growing Influence?

The making of RCEP has undergone a lengthy debate for eight years since it was first introduced in 2012. Prior to RCEP, several ASEAN member states and Asia-Pacific countries have been cooperating under several trade agreements; one is the Trans-Pacific Partnership/TPP that was led by the US in 2016. TPP was the emanation of Barack Obama’s strategic pivot to Asia. TPP originally became the biggest trade deal in the region by covering almost 40% of the world’s economy and—as the name suggests—bridging countries across the Pacific Ocean, from Brazil, Chile, Mexico, to Southeast Asian countries such as Vietnam and Malaysia (Gong, 2020, p. 40).  However, under the presidency of Donald Trump, the US withdrew from the agreement, arguing that the deal will ultimately lead to decline of US manufacture and lower wages for domestic workers. As a consequence, US withdrawal left the vacuum in the Asia-Pacific that was later seized by its rival (Gong, 2020, p. 45). In later remarks, China hailed RCEP as a win for its side. “The signing of the RCEP is not only a monumental achievement in East Asian regional cooperation, but more important, a victory of multilateralism and free trade,” said China Premier Li Keqiang.

Compared to TPP and its evolution, Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), RCEP is less rigorous. It puts a lower standard on policy harmonization. RCEP also doesn’t mention certain standards over labor rights or environmental protections that were covered in CPTPP. Different standards, however, are understandable since RCEP tries to bridge diverse economies, starting from the highly developed countries like Japan and Australia to developing economies like Cambodia and Laos in Southeast Asia. Moreover, the huge economic gap between countries in RCEP make some commentators believe that it will give harm to some countries in ASEAN. Big margin in economic capability will make the developed industries like China and Japan reap the most from this agreement and consequently make the economic gap within ASEAN countries exacerbated. “Who, actually, are gaining benefit from this project” is the focal point over the current debate. The RCEP and trans-Pacific Deal “together will offset global losses from the U.S.-China trade war, although not for China and the United States,” stated Petri & Plummer (2020).

Previously, China already had a number of bilateral trade agreements with members of RCEP, including ASEAN countries. However, RCEP marks a historic moment when, for the first time, the world’s second largest economy signed up in a regional multilateral trade pact. It’s without mentioning China’s geopolitics opponent—Japan, South Korea, and Australia—also included in this agreement. Despite its less rigorous standard, the sheer size of RCEP is showing its significance over Asia-Pacific political constellation. Rather than economic cooperation in itself, RCEP symbolizes a bigger geopolitics and diplomatic triumph over the region. Kishore Mahbubani, former Singapore minister of foreign affairs also pointed out during one of the Global Town Hall (GTH) panels, “RCEP is the sign of China’s victory.” Being excluded in the process, RCEP delivers a strong message to the United States that Southeast Asia and other Asian countries are growing more solid on defining their own relations. As former U.S. Trade Representative Wendy Cutler noted in his commentary,

 “RCEP is another reminder that our Asian trading partners have developed a confidence about working together without the United States (Cutler, 2020).”

Ushering the ASEAN Centrality

ASEAN countries have long been polarized when it comes to defining their approach towards China. While China is currently the biggest trading partner in the region, each country shows various degrees of cooperation or hostility toward the country. Laos, Cambodia, and other Mekong Basin countries are highly dependent, whereas countries like Malaysia, the Philippines, and including Indonesia are facing opposition both from domestic forces and policy makers. RCEP demonstrates that ASEAN countries can reach the consensus on formulating economic partnership with a partner that traditionally cooperates by using bilateral channels, including with Australia, New Zealand, and other East Asian countries that are linked under ASEAN+6 platform. RCEP can further push ASEAN regionalism, primarily on how it develops the existing ties with the additional ASEAN+6 economic cooperation.

Moreover, the signing of RCEP also asserts ASEAN’s position on defining countries relations in Asia-Pacific. Contrary to the previously mentioned opinion, some analysts argue that RCEP is a win for ASEAN’s middle power diplomacy. Given the diverse members of the mega-trade pact, neither China nor Japan as a traditional trade leader will become the architect of this agreement when it finally comes into effect. Rivalry between great powers that also pose a danger in the security aspect of the region will necessitate a different approach to bring RCEP further. Speaking in GWT, Chinese Minister of Foreign Affairs, Wang Yi, also stated that through RCEP, “China firmly supports the ASEAN centrality.”  ASEAN’s neutrality—emanated in last year’s ASEAN Outlook on the Indo-Pacific—in this context, will ultimately take a greater role in shaping RCEP when it comes into effect. Thus, the label “China-led agreement” is inaccurate. It was previously shown in 2012 when a stalemate over negotiation was resolved by ASEAN. Instead of being led by China, as many commentators suggest, RCEP exhibits a triumph for ASEAN. As Petri and Plummer (2020b) pointed out in Brookings,

“Without such ‘ASEAN centrality,’ RCEP might never have been launched.”  

Apart from recovering from the post-pandemic economic downturn, RCEP also expected to offset the harms caused by the years-long trade war between the United States and China. Especially for ASEAN countries that have long been affected by the rivalry, including Vietnam that hosted the ASEAN summit this year. In short, despite its less rigorous standards, RCEP can further incentivize the global value chain within the region. ASEAN, in particular, is projected to gain $19 billion annually by 2030 through this agreement (Petri & Plummer, 2020a)

Due to its volume and modesty compared to the previous trade pact, RCEP will take years before it finally comes into effect. It can also face a challenge upon the ratification in each member country, especially in the country with growing anti-China or anti-international sentiment. Malaysia, for instance, cancelled two of Belt and Road Initiatives projects after Mahathir Muhammad won the election on 2018. Regardless of its impact, RCEP will ultimately cement the position of ASEAN in a greater Asia-Pacific dynamic. The overall process and finalization of this agreement signify the message that ASEAN cannot be seen narrowly as the battle ground between the so-called ‘two great powers.’ Instead, RCEP denotes ASEAN’s rising primacy in defining their own region.

REFERENCES

Brookings. (2020, November 16). RCEP: A new trade agreement that will shape global economics and politics. https://www.brookings.edu/blog/order-from-chaos/2020/11/16/rcep-a-new-trade-agreement-that-will-shape-global-economics-and-politics/

Cutler, W. (2020, November 15). RCEP Agreement: Another Wake-up Call for the United States on Trade. https://asiasociety.org/policy-institute/rcep-agreement-another-wake-call-united-states-trade

Emont, J., & Gale, A. (2020, November 13). Asia-Pacific Countries Push to Sign China-Backed Trade Megadeal. https://www.wsj.com/articles/asia-pacific-countries-push-to-sign-china-backed-megadeal-11605265208

Gong, X. (2020). China’s Economic Statecraft. Security Challenges, 16(3), pp. 39-46.

Lee, Y. N. (2020, November 15). ‘A coup for China’: Analysts react to the world’s largest trade deal that excludes the U.S. https://www.cnbc.com/2020/11/16/rcep-15-asia-pacific-countries-including-china-sign-worlds-largest-trade-deal.html

Pearson, J. (2020, November 11). Asian leaders to sign China-backed trade deal amid U.S. election uncertainty. https://www.reuters.com/article/us-asean-summit/asian-leaders-to-sign-china-backed-trade-deal-amid-u-s-election-uncertainty-idUSKBN27R0QJ

Petri, A. P., & Plummer, M. G. (2020, June). East Asia decouples from the United States: Trade war, COVID-19, and East Asia’s new trade blocs. https://www.piie.com/publications/working-papers/east-asia-decouples-united-states-trade-war-covid-19-and-east-asias-new

Writer : Arrizal A. Jaknanihan

Editor : Angganararas Indriyosanti