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Commentary: The RCEP will change the economics and politics of the region

The US needs to rebalance its economic and security strategies to advance not only its economic interests, but also its security goals, say observers.

Commentary: The RCEP will change the economics and politics of the region

A tugboat pulls a container vessel out of a port in Singapore on Aug 17, 2020. (Photo: AFP/Roslan Rahman)

WALTHAM, Massachusetts: On Nov 15, 15 countries — members of the Association of Southeast Asian Nations (ASEAN) and five regional partners — signed the Regional Comprehensive Economic Partnership (RCEP), arguably the largest free trade agreement in history.

RCEP and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which concluded in 2018 and is also dominated by East Asian members, are the only major multilateral free trade agreements signed in the Trump era.

India and the United States were to be members of RCEP and the CPTPP, respectively, but withdrew under the Modi and Trump governments.

As the agreements are now configured, they forcefully stimulate intra-East Asian integration around China and Japan. This is partly the result of US policies. The United States needs to rebalance its economic and security strategies to advance not only its economic interests, but also its security goals.


RCEP will connect about 30 per cent of the world’s people and output and, in the right political context, will generate significant gains.

According to computer simulations we recently published, RCEP could add US$209 billion annually to world incomes, and US$500 billion to world trade by 2030.

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We also estimate that RCEP and CPTPP together will offset global losses from the US-China trade war, although not for China and the United States. 

The new agreements will make the economies of North and Southeast Asia more efficient, linking their strengths in technology, manufacturing, agriculture, and natural resources.

FILE PHOTO: Employees wearing protective face masks and face guards work on the automobile assembly line during the COVID-19 outbreak at the Kawasaki factory of Mitsubishi Fuso Truck and Bus Corp. in Kawasaki, Japan. (Photo: Reuters)

The effects of RCEP are impressive even though the agreement is not as rigorous as the CPTPP. It incentivises supply chains across the region but also caters to political sensitivities.

Its intellectual property rules add little to what many members have in place, and the agreement says nothing at all about labour, the environment, or state-owned enterprises — all key chapters in the CPTPP. However, ASEAN-centred trade agreements tend to improve over time.

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Southeast Asia will benefit significantly from RCEP - US$19 billion annually by 2030 - but less so than Northeast Asia because it already has free trade agreements with RCEP partners.

But RCEP could improve access to Chinese Belt and Road Initiative (BRI) funds, enhancing gains from market access by strengthening transport, energy, and communications links. RCEP’s favourable rules of origin will also attract foreign investment.


RCEP, often labelled inaccurately as “China-led,” is a triumph of ASEAN’s middle-power diplomacy.

The value of a large, East Asian trade agreement has long been recognised, but neither China nor Japan, the region’s largest economies, were politically acceptable as architects for the project.

An officer adjusts China's national flag before the ASEAN Plus Three (APT)

The stalemate was resolved in 2012 by an ASEAN-brokered deal that included India, Australia, and New Zealand as members, and put ASEAN in charge of negotiating the agreement. Without such “ASEAN centrality,” RCEP might never have been launched.

To be sure, RCEP will help China strengthen its relations with neighbours, rewarding eight years of patient negotiations in the “ASEAN way,” which participants typically describe, with varying degrees of affection, as unusually slow, consensual, and flexible.

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RCEP will also accelerate Northeast Asian economic integration.

A spokesman for Japan’s Ministry of Foreign Affairs noted last year that negotiations on the trilateral China-South Korea-Japan free trade agreement, which has been stuck for many years, will become active “as soon as they are able to conclude the negotiation on RCEP.”

As if on cue, in a high-profile speech in early November, President Xi Jinping promised to “speed up negotiations on a China-EU investment treaty and a China-Japan-South Korea free trade agreement.”

Finally, RCEP and the CPTPP are powerful counterexamples to the global decline in rules-based trade. If RCEP spurs mutually beneficial growth, its members, including China, will gain influence across the world.


US policies in Asia need to adjust to the changing realities of East Asia, recognising the increased role of China, maturing ASEAN integration, and America’s diminished relative economic influence.

Looking back, the Trump administration’s Asia policies focused on a new Free and Open Indo-Pacific (FOIP) vision.

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As experts have noted, the principles of FOIP — an open, inclusive, peaceful region — were consistent with established US policy. But the administration’s tactics then emphasised isolating China from regional economic networks and prioritised security arrangements centred on the Quad - Australia, India, Japan, and the US.

US Secretary of State Mike Pompeo attends a meeting with Foreign Ministers of the Lower Mekong countries, Cambodia, Laos, Thailand, and Vietnam during the ASEAN Foreign Ministers' Meeting in Bangkok, Thailand, Aug 1, 2019. (Photo: Reuters/Jonathan Ernst) U.S. Secretary of State Mike Pompeo attends a meeting with Foreign Ministers of the Lower Mekong countries, Cambodia, Laos, Thailand, and Vietnam during the ASEAN Foreign Ministers' Meeting in Bangkok, Thailand August 1, 2019. REUTERS/Jonathan Ernst/Pool

Meanwhile, FOIP’s economic dimensions remained secondary, ranging from modest investments and a plan to exclude China from supply chains to rating infrastructure projects often funded by China. The US approach antagonised ASEAN and other East Asian friends, forcing countries into unnecessary and risky political choices.

Looking ahead, one US option is to continue FOIP in current form with greater multilateral support. The Trump approach — minus inflammatory rhetoric — has support in Congress and even in some ASEAN countries like Vietnam.

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Yet the approach risks side-lining the US while economic arrangements like RCEP, CPTPP, and BRI continue to grow. Without an economic pillar, FOIP will still push countries to choose between economic and security interests.

A second US option is to reengage fully in regional economic networks alongside an active security role. For example, the US could join the CPTPP and advocate its rapid enlargement to Indonesia, the Philippines, South Korea, Thailand, and the United Kingdom.

US markets and technology make such arrangements attractive and, in the long run, might persuade China to join - we estimate big gains if it does. But current US politics appears to offer little support for this approach.

A third US option is to emphasise intensified soft-power engagement combined with narrow but firm security commitments. This approach would build on US strengths and buy time for more ambitious initiatives. 

It would emphasise vigorous participation in regional forums, people-to-people exchanges, principled advocacy of rules-based trade, and a clearly articulated military presence.

It would benefit from supportive US-China understandings, no mean feat in the current context.

Peter A Petri is Nonresident Senior Fellow at John L Thornton China Center. Michael Plummer is Director of SAIS Europe and Eni Professor of International Economics at Johns Hopkins University. This commentary first appeared on the Brookings Institution’s blog, Order From Chaos.

Source: CNA/el


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