By Melissa Cox
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After 8 years of negotiations, the Regional Comprehensive Economic Partnership (RCEP) was signed on November 15 2020 at the 37th ASEAN summit, by the following fifteen Asia Pacific nations; China, Japan, South Korea, Malaysia, Indonesia, Thailand, Australia, New Zealand, Vietnam, Singapore, the Philippines, Brunei, Laos, Cambodia, and Myanmar. Their aims include boosting the economy of members in the light of the devastating impact of COVID-19, and eliminating several import tariffs over a twenty-year period, uniting the Asian region.
The RCEP has become the world’s largest trade agreement in history, as all countries involved makeup 30% of the world’s population (2.2 billion) and 30% of the global economy (26.2 trillion USD). After ratification, the RCEP will result in a number of tariffs lowered and equal treatment of all members regarding trade deals. China is seen as a leading figure within this agreement by many, as China has been one of the only countries to see positive economic growth after the impacts of COVID-19. It is hoped that China will be able to aid members who have struggled due to COVID through various strategies, such as increasing the number of imports accepted from those countries.
India pulled out of the RCEP in 2019 for numerous reasons, but primarily over protests from farmers as well as low to mid-level business owners. They raised concerns of a potential rise in trade deficits with other RCEP members. As India and the US are not involved in the RCEP, there are concerns that China will have unrivalled power regarding its economic stance among members. This was an issue debated frequently during the formation of the RCEP by other members such as Japan; with whom China has previously experienced political tensions.
Despite not being a large contributor to the formation of the RCEP – this was done primarily by the members of the ASEAN agreement – China has proudly boasted of the victories that have come of it. Many believe that China has used the RCEP to promote multilateralism in order to combat the USA’s preference for bilateralism. China could also be using the RCEP as a safety net in preparation to potentially decouple with the US after four years of high tensions and competition. The RCEP has become larger than the Trans-Pacific Partnership (TPP), of which the US was originally a member of. President Donald Trump chose to withdraw the US from this partnership in 2017, due to his opposition to multilateralism.
Despite China’s boasts of victory in regards to the union of the Asian region, the importance of the US and Europe to the Chinese economy cannot be denied; both the US and Europe are the main destinations for much of Chinese exportations. Many are anticipating the signing of the China-Europe Bilateral Investment Treaty (BIT), which is expected to be signed by the end of this year. There is also anticipation regarding the future development of US-China relations.
Many have been critical of the RCEP, claiming there will likely be little change or elimination of existing tariffs as most members already had existing trade deals with each other. Out of 2.3 trillion USD in goods traded between RCEP members in 2019, 83% of this was done between those who were already party to existing trade deals. Several changes are not set to happen until after a decade or two, resulting in low expectations for significant adjustments to existing tariffs. Typically, multilateral agreements only benefit large corporations, whilst low to mid-level business is neglected, resulting in cutting down in size. Such concerns led India to pull out of the agreement.
Despite negative speculation, as the RCEP has only recently been signed, it will be interesting to see how the situation develops. There is no denying that this agreement is, as Chinese Foreign Ministry Spokesperson Zhao Li Jian has stated, “an important milestone of regional economic integration”.
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