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Australian Trade Minister Simon Birmingham (right) and Prime Minister Scott Morrison at the Regional Comprehensive Economic Partnership signing ceremony in Canberra on November 15. America’s closest allies, such as Australia, have forged ahead with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and RCEP without US participation. Photo: EPA-EFE
Opinion
Opinion
by Christian Le Miere
Opinion
by Christian Le Miere

RCEP trade deal: US should worry less about China’s role and more about being left out

  • The challenge is not that the world’s biggest trade deal is China-led or heralds a Sinocentric order – both of which are misrepresentations anyway – but that the Asia-Pacific region has shown no need of US leadership or even involvement
The signing of the Regional Comprehensive Economic Partnership on November 15 is no doubt a significant achievement. The RCEP is the largest free-trade bloc in the world, overtaking the European Union, and includes nearly a third of the world’s population and economic output.
Unsurprisingly, this has immediately fed into the narrative of a rising China and a declining United States: a cacophony of commentators have suggested that the RCEP reflects the shifting geopolitical sands, with China corralling regional states into a massive free-trade agreement while the US founders on the other side of the Pacific indulge in self-defeating isolationism.

The RCEP, according to this view, is the latest evidence of an emerging Sinocentric regional, and maybe even world, order. But this is a misrepresentation.

Certainly, the RCEP provides a stark contrast to the policies of the Trump administration. One of the president’s first acts after coming to power in January 2017 was to issue an executive order withdrawing from the Trans-Pacific Partnership, a free-trade agreement involving the US and 11 other Pacific nations.
The Obama administration had viewed the agreement as a way for the US to lead on regional trade agreements, setting rules and norms for much of Asia. With Washington declining to participate, the remaining countries continued the pact as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Now, seven members of the CPTPP have joined the RCEP, laying bare the wide gulf between the continued push for multilateralism and trade cooperation in Asia, and the trade isolationism pursued by the Trump administration and reflected in Britain’s decision to leave the EU.

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RCEP: 15 Asia-Pacific countries sign world’s largest free-trade deal

RCEP: 15 Asia-Pacific countries sign world’s largest free-trade deal

The RCEP thus indicates that Asian nations are willing to forge a path without US leadership, or even involvement, where necessary. Even some of America’s closest allies – Japan, South Korea, Australia and New Zealand – have forged ahead with the CPTPP and RCEP without US participation.

But while it may underline a missed opportunity for the US, the RCEP does not necessarily point to a new Sinocentric order. For a start, the RCEP was not led by China, even though the Chinese economy is by far larger than the other 14 economies involved. Rather, the RCEP was led by the Association of Southeast Asian Nations and effectively follows on from a series of trade agreements that Asean had signed with China, South Korea, Japan, Australia and New Zealand.

The RCEP does not so much break new ground as consolidate existing agreements into one overarching accord. RCEP members already have some bilateral free-trade agreements among themselves that are more profound and ambitious than the RCEP. Far from making rules and setting standards in the region, the RCEP is working to the lowest common denominator.

It is therefore not true to say the RCEP reflects an emboldened China leading Asia to develop a regional order without the US and setting itself up as the region’s rule-maker.

The RCEP has been signed, but resistance to China could prove a hurdle

Still, the RCEP’s creation is good news for China (and, by extension, bad news for the US). By creating a large trade bloc, the RCEP eases trade friction throughout much of East Asia. While certain areas of the deal, such as rules for services and intellectual property, are no stronger than existing rules, suppliers across East Asia will now need just one certificate of origin, which will ease regional trade.

For China, which is seeking to demonstrate its centrality to the global trading system as the US tries to decouple its economy and encourages allies to seek alternative supply chains, this is a significant boon.
And while the RCEP is not China-led, China’s sheer scale ensures its influence on regional trade architecture – China makes up more than half of the RCEP’s gross domestic product. This is also the first free-trade agreement between China, Japan and South Korea, creating a trading bloc that includes the second-, third- and 10th-largest economies in the world.

All of which is to say that while the RCEP is significant, momentous and reflective of broader global trends, it does not yet indicate a region led by China. But Washington is also being left behind – or left out – in the development of regional architecture, even as it tries to demonstrate its relevance and interest in the region.

In the longer term, this may be the biggest challenge the RCEP poses: a region not led by China, but also not looking for US leadership.

Christian Le Miere is a foreign policy adviser and founder of Arcipel, a strategic consultancy

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