Since picking sides in geopolitical rivalry is not an option for ASEAN, its brainchild RCEP is certainly a better bet for spearheading the endeavor
The Regional Comprehensive Economic Partnership agreement has long been touted as the biggest ever free trade agreement in the world, even before it came into effect in 2022.
Prior to its inception, the combined GDP of all the 15 RCEP signatories in 2019, amounting to $25.84 trillion, had already surpassed that of the US-Mexico-Canada Agreement and the European Economic Area, which stood at $24.37 trillion and $18.85 trillion respectively. The mega FTA was optimistically prognosticated to generate significant gains for the world economy. It is anticipated that the RCEP could add $209 billion annually to world incomes and $500 billion to world trade by 2030.
As the saying goes: The proof of the pudding is in the eating. True enough, in 2022 — the year the RCEP was inaugurated — the total volume of trade between China and the 14 other RCEP signatories rose by 7.5 percent, amounting to 12.95 trillion yuan ($1.78 trillion) or 30.8 percent of the total global trade of China. The 2023 figures witnessed a slight dip to 12.6 trillion yuan, but still constituted an increase of 5.3 percent vis-a-vis the pre-RCEP figures in 2021.
Statistics show that among the 14 other RCEP signatories, 10 countries have posted a double-digit rise in their trade with China. In the case of Indonesia, Singapore, Myanmar, Cambodia and Laos, the increase has even exceeded 20 percent.
The key objective of the RCEP is to form a larger and advanced FTA beyond the existing ASEAN+1 free trade agreements with the inclusion of several new aspects, such as government procurement (Chapter 16), more tariffs to be eliminated in the trade in goods (Chapter 2) with the ultimate goal of doing away with 92 percent of all product tariffs within 20 years, allowing free flow of data among RCEP members, alongside prohibiting data localization for Electronic Commerce.
As of today, the nomenclature of the RCEP and its rules are still relatively alien to some segments of the business community in Southeast Asia. They are more well versed in the respective FTAs. The coexistence of FTAs and the RCEP rules has in several instances resulted in the so-called noodle bowl problem where some ASEAN entrepreneurs get confused and entangled in the diverse tariffs under the multiple FTAs and RCEP.
Understandably, these are part of the teething problems that have surfaced after the RCEP came into effect. The RCEP is the brainchild of ASEAN. It was initiated by the regional bloc amid rising protectionism, geopolitical tension and pandemic shock. It is a mammoth endeavor of economic integration in the Asia-Pacific region, rooted in ASEAN centrality. It's no exaggeration to say that the RCEP represents an important step toward creating an ideal framework of global trade and investment rules, as was proclaimed by the ASEAN leaders in the Joint Leaders' Statement on the RCEP.
In retrospect, the RCEP is inseparable from the evolving ASEAN Economic Community. One of the key pillars of the latter — "Integration into the global economy" — is now embodied in several ASEAN+1 FTAs and the full implementation of the RCEP.
Although the RCEP is now widely hailed as the first mega FTA for East Asia, where rapid economic growth gravitates, the 15-member deal owes its origin to intra-ASEAN economic cooperation. The ASEAN Economic Community was no doubt the special purpose vehicle dedicated to realizing the ideal of creating a single market and production base, where goods, services, investments, skilled labor and capital are free to flow within the region.
The AEC Blueprint has been evolving from the 2015 version to that of the present due next year (2025). Certain quarters are optimistic that the RCEP looks set to propel the AEC ideal into traction. Nonetheless, the ongoing progressive tariff elimination merely clears the path for the ultimate creation of a single market and production base. It is not as easy as a walk in the park. The present stage of RCEP implementation surely necessitates ample governmental intervening guidance alongside private sector involvement. While celebrating enhanced trade among the RCEP signatory countries, doubling down efforts to promote the use of RCEP rules is of utmost urgency in some ASEAN member states where the level of utilization is relatively low.
Parallel to this, given that most if not all the ASEAN member states share the same grave concern of supply chain disruption, China alongside developed economies in the RCEP, namely Japan, the Republic of Korea, Australia and New Zealand, should perhaps endeavor collectively to hedge against such a potentially disruptive crisis in the interest of keeping supply chains resilient. The endeavor should be above geopolitical dynamics. None of the ASEAN member states should be left out of the endeavor as their concerns and interests are intertwined in the face of challenges.
This calls into question the inclusivity of the US-sponsored "Indo-Pacific" Economic Framework for Prosperity supply chain agreement that encompasses seven of the ASEAN member states, leaving out the three least developed member states, namely Myanmar, Cambodia and Laos. Alongside this, China, the second-largest economy with a full gamut of supply chains, is also conspicuously left out on the pretext of averting overdependence on China.
Yet, an alternative supply chain without China is nowhere to be seen. The Supply Chain Agreement merely promised to form a "Crisis Response Network" to give early warnings to IPEF countries of potential supply chain disruptions, but is devoid of viable contingencies that can deliver in times of crisis.
In retrospect, the lack of coherent global governance and just leadership manifested by the unipolar power in the distribution of medical equipment and vaccines at the height of the COVID-19 outbreak is still fresh in our minds. It could be glossed over as "an elephant in the room" but the bitter experience should certainly serve as a good reminder to us.
Given that 11 out of the 14 member states of the IPEF are RCEP signatories, ASEAN should be confident enough to proactively commission a similar if not better "Crisis Response" mechanism under the watch of the RCEP.Since picking sides in the prevailing big-power geopolitical rivalry is not an option for ASEAN, henceforth better inclusivity is anticipated to prevail in the proposed mechanism. And the RCEP — a genuine vehicle dedicated to fostering regional integration — is certainly a better bet for spearheading the endeavor.
The author is president of the Belt and Road Initiative Caucus for the Asia-Pacific and former transport minister of Malaysia. The author contributed this article to China Watch, a think tank powered by China Daily.
The views do not necessarily reflect those of China Daily.
Contact the editor at editor@chinawatch.cn.
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