RCEP: how the pact signals US downfall
Salman Rafi Sheikh
The signing of a 15-member trade pact, Regional Comprehensive Economic Partnership, is a watershed moment not only for the proponents of a post-American ‘Asian Century’, but also a major even in the history of US-China economic competition, a power-struggle that certainly has major implications for global political and economic system. RCEP includes all member of the Association of Southeast Asian Nations and China, Japan, South Korea, Australia, and New Zealand. The presence of these major economic powers makes the RCEP the largest free trade agreement the world has ever had in history. The 15 nations account for roughly a third of the world’s population, and their combined GDP is a whopping $26.2 trillion, bigger than both the US-Mexico-Canada Agreement and the European Union.
While an ASEAN initiative launched in November 2020 in Cambodia, the pact received a lot of boost and became a lot more important for the member countries when the out-going US president Donald Trump, soon after becoming president, scrapped the US-led Trans Pacific Partnership, a mega trade project that was to allow the US to lead the world’s largest geography of trade. The TPP became a casualty of Trump’s policy of ‘America First’, a thinly disguised form of economic nationalism.
While there are many economic-power-houses in the deal, the RCEP will naturally be leveraged by China geo-politically and go-economically not just in terms of allowing it to expand its reach to Southeast Asia, but also in terms of enabling it to counter US politics of counter-influence in Asia.
At the same time, the RCEP will give China some breathing room from Trump’s tariff-raising trade war and generally rising protectionism. Already, the ASEAN bloc has surpassed European Union to become China’s largest trading partner in the first eight months of 2020.
These developments clearly dispute the recent ‘findings’ of RAND Corporation, a Pentagon think-tank, claiming that ‘Southeast Asian countries rank economic development over security concerns and are generally more worried about Chinese economic influence than Chinese military threats.’ While the pact shows a significant and a hard-negotiated leap forward, the RAND report said that ‘Regional countries have more shared interests with the United States, but Beijing has more tools it is willing to use against Southeast Asia, including more incentives (“carrots”) and coercive capacity (“sticks”).’
The report, while it considers that regional countries consider the US as a bigger military power, also shows that these countries also believe that US military influence is not a counter-weight to China’s economic influence and that China can use its economic influence to weaken the US military influence as well.
This situation is significantly compounded by a ‘widespread expectation [among regional countries] that China will overtake the United States as the largest economy in the next ten to 15 years and play a critical role in driving regional economic growth… [The RCEP] would deepen economic ties between the countries involved. There is expectation that trade with China will continue to increase.’
RCEP, while it does allow China to better neutralise US policies, is also an expression of frustration over the US.
The RAND report itself says that ‘there is frustration and anxiety over the US withdrawal from the Trans-Pacific Partnership, US protectionism (including threats of US tariffs), and the US-China trade war. The TPP was viewed as a primary vehicle to reduce economic dependence on China.’ However, the member countries have concluded ‘the RCEP to strengthen free trade and shield the region from US protectionism and the negative impacts of the US-China trade war.’
The agreement seems to have effectively killed the QUAD as well. As against militarising the Quad in an anti-China move, two major members of the organisation, Japan and Australia, have entered into a trade pact that is inevitably going to raise the existing level of regional and mutual interdependence — something that defies the need for greater militarisation.
Consider this: this is Japan’s first even trade agreement with China. The RCEP will probably abolish tariffs on 61 per cent of agricultural imports in ASEAN, 56 per cent of those in China, and 49 per cent in South Korea. This will be crucial for post-COVID economic recovery, driving the Asia Pacific region’s GDP growth by 2.1 per cent. This clearly heralds a new post-COVID regionally oriented geography of trade, economy and supply–one that effectively cuts across regional rivalries, which the US would often exploit to its advantage to maintain its supremacy.
Towards a more integrated world
WHILE the RCEP does signal a sharp decline, as evidenced by the RAND report, in the US influence, it also reverses a prevailing global, rather Western trend, of economic nationalism. Whereas Trump’s ‘America First’ strongly signals this, the UK’s exit from the EU also highlights how ‘the West’ is internally fragmenting. As against this fragmentation is Asia’s coming together as one of the largest economic blocs.
As it stands, the RCEP is not just a trade agreement. It has a certain philosophy, grounded in the belief about regionalism as the panacea of economic growth.
It is an economic cooperation arrangement, bringing together a group of countries some of which previously had no free trade agreement that linked them. Significantly enough, it is an opportunity that was previously never available to these countries during the years of US supremacy.
ASEAN and other erstwhile US allies — Japan, Australia and New Zealand — have, by signing the RCEP, chosen openness over protectionism, regionalism over nationalism, cooperation over confrontation, and solidarity over suspicion. They have sent a clear and unambiguous signal to the world that Asia remains very much open for business, committed to open regionalism that has seen East Asia’s share of global GDP soar from 15 to 30 per cent since 1980.
In short, the region has changed while the US, under Trump, embarked upon ‘America First.’ What we are seeing is ‘America Last’ in Asia & the Pacific.
RCEP: how the pact signals US downfall