The inclusion of all the big guns in East Asia namely China, South Korea, Indonesia and Thailand has turned RCEP into an indispensable trading bloc, underlining diminution of America's economic influence.
It seems that the global impetus of regionalism motivating multilateral attempts towards economic integration is still well and alive, despite the destructive impact of the Trump administration in US politics. However, the dynamism for regional integration via free trade agreements has recently been confined to the Asia-Pacific, considerably losing its appeal in other geographies.
While the looming agenda of neo-protectionism in the US turned into a deliberate policy of inciting trade wars with China under President Trump, trade liberalisation in the global economic system remained pretty much deprived of its main sponsor. As the US as the ‘reluctant global hegemon’ began to gradually withdraw from the international fora of multilateral governance in view of cost-efficiency calculations and focused on its own geopolitical priorities, regionalism fell into political limbo.
This was more or less valid for North and South America where the conditions for NAFTA were defined and its trade bloc MERCOSUR lost its vigour, while the EU struggled to keep its integrity intact under the pressures of the Brexit process.
Under these unfavourable conditions, the Asia-Pacific strikingly proved as the most resilient hub of economic regionalism where intensive multilateral efforts continued to be pushed forward. In this context, The Trans-Pacific Partnership (TPP) was an ambitious trade agreement proposed in the pre-Trump era among the East Asian and North-South American countries including Japan, Malaysia, New Zealand, Singapore, Vietnam, Australia, Brunei, Canada, Chile, Mexico, Peru and the US. Although the TPP project lacked crucial regional actors like China, South Korea as well as key South-East Asian nations, it was hailed as a geostrategically crucial project that could gather Asia-Pacific under a US-dominated free trade regime. But the rhetoric of trade liberalisation and attempts to break the regional dominance of Beijing via economic diplomacy proved fruitless as the Trump administration decided to withdraw from the agreement in what appeared to be an early neo-mercantilist turn, which encouraged exports-oriented economy and sought to alter markets as per Washington's national objectives.
Yet, much to the surprise of Washington, the remaining countries in the TPP persevered and produced a new trade agreement titled the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The CPTPP which entered into force at the end of 2018 included most of the original provisions of the TPP aimed at lowering tariffs and non-tariff trade barriers, as well as the foundation of a Dispute Settlement Mechanism for investor-state disputes. It was striking that the CPTPP constituted the only major multilateral free trade agreement signed during the Trump Presidency, countering the illiberal inclinations of the US administration in trade policy.
Against this background, while President-elect Joe Biden prepared to overtake his post in the White House, receiving the news of a second and even more comprehensive multilateral trade deal from the Asia-Pacific wouldn't have been surprising at all. On November 15, fifteen countries including the members of ASEAN (Malaysia, Indonesia, Thailand, Singapore, Vietnam, Cambodia, Myanmar, Laos, Philippines, Brunei) and five major regional partners (China, Japan, South Korea, Australia, New Zealand) signed the agreement for Regional Comprehensive Economic Partnership (RCEP). While Canada, Mexico, Peru and Chile were excluded in comparison to the CPTPP, the inclusion of all the big guns in East Asia namely China, South Korea, Indonesia and Thailand turned the RCEP into arguably the largest free trade agreement in world history. The most notable absence in the RCEP is Narendra Modi’s India which has been following a neo-mercantilist agenda in recent years, reflecting close parallels with the US policy line under Trump.
Although the Western perceptions of the Regional Comprehensive Economic Partnership largely suggest a Chinese-dominated attempt for regional restructuring, it's the patient middle-power diplomacy of the ASEAN group which helped the RCEP prevail and become an indispensable economic force.
The potential value of generating a comprehensive free trade agreement that will cover the dynamic East Asia has long been recognised by both policy makers and academics. Yet despite being the region’s strongest economic actors and political playmakers, neither China nor Japan were seen as acceptable architects of this grand project in light of multiple sensitivities. The stalemate for ‘policy entrepreneurship’ was resolved in 2012 by an ASEAN-brokered deal which included India, Australia and New Zealand as members of the proposed free trade zone and placed ASEAN in charge of carving out a mutually acceptable trade agreement. Although India also dropped out from the group in due course, the centrality of ASEAN representing flexible, consensual and participative diplomacy of the East Asian middle powers made RCEP possible.
When the agreement enters into force following ratification, the RCEP zone will connect around 30 percent of the world’s people and output. Therefore, under the right political conditions, trade integration might gradually intensify and make a substantial contribution to the economic and political weight of East Asia in the global system. An improved trade environment is likely to make the economies of North and Southeast Asia more efficient — linking their strengths in technology, manufacturing, agriculture, and natural resources. Regional supply chains will be integrated more thoroughly, creating structural transformation opportunities for relatively less-advanced countries in the region. RCEP would also improve access channels of the members to the Belt and Road Initiative (BRI) funds, enhancing productivity gains by strengthening transport, energy, and communications links. Initial provisions of the RCEP, which seem narrow in scope compared to the CPTPP, are open to gradual enhancement into critical areas such as public procurement, labour regulations and the environment.
Such an expanded trade and investment platform would spur regional dynamism in East Asia and contribute positively to global growth, offsetting some of the losses in international markets due to the trade wars between the US and China. From the vintage point of regional political economy, the RCEP might act as a catalyst for accelerated trade integration among the strongest actors in Northeast Asia. In this context, both China and Japan officially indicated that negotiations on the trilateral China-South Korea-Japan free trade agreement, which has stagnated for a long time due to geopolitical wrangling, would be activated as soon as the RCEP becomes operational.
Both the RCEP and the CPTPP represent powerful alternatives to the global trends of decline in rules-based trading systems, and East Asia carries a strong potential to produce more such counter-trading fronts.
A critical issue at this juncture concerns the official American position regarding regional trade integration in East Asia. While the geostrategic competition between Washington DC and Beijing is bound to continue in the medium term, the Biden administration would be under pressure to revisit the mix of political and economic elements in its foreign policy towards East Asia. The new posture shall take the following factors into account: changing regional dynamics while the US was engaged in the trade wars agenda; increased political-economic effectiveness of China; matured will and diplomatic capacity of the ASEAN group and diminishing economic influence of Washington. A radical policy shift in this regard will be pertinent as the Trump administration’s East Asia policies were based on the hollow ‘Free and Open Indo-Pacific (FOIP) Vision’ proved futile. While the rhetoric of creating an open, inclusive and peaceful region was maintained in the global public opinion, most of the tactics adopted in recent years were based on the goal of isolating China from regional economic networks and security arrangements around the so-called Quad (Australia, India, Japan, and the US).
Concrete developments on the ground indicate that regional integration moves forward in an accelerated fashion in the Asia-Pacific and both the US and India which shares its sceptical approach towards Beijing and neo-mercantilist agenda are clearly left out. US initiatives which specifically targeted blocking expanded trade and investment opportunities around China, rather than positively contributing to regional economic integration has antagonized both major regional actors such as Japan and South Korea as well as the pragmatic ASEAN group. Asian policy makers proved reluctant to make difficult and risky choices between win-win models of economic cooperation and prioritized security arrangements around the US alliance network.
Hence the Biden administration will be expected to provide an economic pillar and soft-politics instruments to its allies in the region. Otherwise, the geostrategic weight of the US will be continually undermined by its side-lined status in grand economic integration projects such as the CPTPP, RCEP and the BRI. As things stand, the clear imbalance between the economic and security strategies of the US administration paves the way for a pattern of intra-East Asian trade and investment integration which augments the central roles of China and Japan in the region. A more participatory policy shift in US economic strategy might bring both Washington and Delhi back into the regional drawing table.
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