Six key points for China and Asia-Pacific countries to build a super economic circle RCEP

Source of information:

As the trade and technology confrontation between the United States and China continues, the Regional Comprehensive Economic Partnership (RCEP), which includes China and 14 other Asia-Pacific countries, was signed on Sunday (November 15th). This agreement is considered the world’s largest free trade agreement in terms of population coverage, trade, and economic volume. However, the United States, as the world’s largest economy, is not part of it. Prior to the signing of the agreement, ASEAN countries held a series of virtual summits with China, Japan, and South Korea. Chinese Premier Li Keqiang, Japanese Prime Minister Yoshihide Suga, South Korean President Moon Jae-in, and leaders from the ten ASEAN countries attended.

BBC Chinese has summarized the following key points regarding this agreement:

How large is the scope of RCEP?
RCEP was initiated by the ten ASEAN countries and initially invited six dialogue partner countries, including China, Japan, South Korea, Australia, New Zealand, and India, to participate. However, India withdrew from the agreement midway, and currently, there are 15 countries in the agreement, including Indonesia, Malaysia, the Philippines, Thailand, Singapore, Brunei, Cambodia, Laos, Myanmar, and Vietnam.
These countries have a combined population of approximately 3.6 billion, accounting for nearly half of the world’s total population of 7.8 billion. The total economic size of the 15 countries is around $27 trillion, accounting for about one-third of global GDP, and their trade volume also accounts for about one-third of global trade.
There have been reports that although the agreement countries do not intend to admit new member countries in the short term, they are open to India joining at any time. Once India joins, it will significantly increase the total population and share of global GDP of this enormous economic bloc.

What is the purpose of RCEP?
The Regional Comprehensive Economic Partnership (RCEP) aims to establish a free trade agreement among 16 countries by reducing tariffs and non-tariff barriers, creating a unified market.
The RCEP negotiations cover more than ten areas, including small and medium-sized enterprises, investment, economic and technical cooperation, goods and services trade, with a primary focus on tariff reduction in trade of goods and services and lowering market entry barriers. Due to the significant economic disparities among RCEP member countries, which include both the world’s second and third largest economies, China and Japan, as well as many emerging market countries, it is generally expected that the level of trade liberalization in RCEP will be lower than in agreements like the Trans-Pacific Partnership (TPP), which includes 11 countries such as Japan and Canada.
Observers have pointed out that the sequencing of tariff reductions among RCEP member countries will depend on the interests of the least developed countries within ASEAN. Additionally, unlike the TPP, RCEP does not establish high standards in areas such as intellectual property, state-owned enterprises, labor, and the environment. RCEP serves as a collective upgrade to the existing trade agreements based on ASEAN’s ten member countries. Having a unified trade rules system in the Asia-Pacific region helps reduce operating costs for import and export businesses and minimizes uncertainties in business operations.

History of RCEP

• In 2011, ASEAN countries proposed the concept of RCEP, and the idea was formally approved by the leaders of the ten ASEAN countries during the ASEAN Summit.
• In 2012, the leaders of the ten ASEAN countries, along with China, Japan, South Korea, India, Australia, and New Zealand, jointly issued the “Joint Statement on Launching the Negotiations for the Regional Comprehensive Economic Partnership (RCEP),” officially initiating the free trade agreement that covers 16 countries.
• In May 2013, the first round of negotiations took place in Brunei.
• In November 2019, after more than 30 rounds of negotiations, the Joint Leaders’ Statement of the 3rd RCEP Summit announced the conclusion of the text negotiations for all 20 chapters and the substantial conclusion of negotiations on market access issues. The statement was made by the 15 member countries.

International Reaction and Public Opinion:
The prospects of this trade agreement have been welcomed by all participating countries. Singapore Prime Minister Lee Hsien Loong praised RCEP as a “significant achievement,” demonstrating the determination of all parties to “uphold a rules-based multilateral trading system and promote regional economic integration.” International commentary on the creation of a super economic zone by the 15 Asia-Pacific countries has focused on its significance for China. Bloomberg News reports that the formation of the world’s largest economic zone by the 15 Asia-Pacific countries, including China, “marks the culmination of Beijing’s decade-long push for greater economic integration.”
Reuters, on the other hand, noted that the signing of this agreement coincides with a tense period due to the outcome of the US election, raising questions about Washington’s interactions with Asia-Pacific countries. It is likely to “further strengthen China’s position as an economic partner for Southeast Asia, Japan, and South Korea, and put China in a more advantageous position to shape trade rules in the region.” The Japan News commented that “as China was not part of the Trans-Pacific Partnership (TPP), a large-scale free trade agreement formerly led by the United States, China played an active role in making RCEP a reality.” Many commentators see this trade agreement as a manifestation of China’s growing influence in Asia and an inevitable result of China’s efforts to counterbalance the United States in the trade domain.

China’s Role:
However, Chinese media have been emphasizing that this agreement was initiated by the ASEAN countries, and China was only “invited” to participate. Prior to Chinese Premier Li Keqiang’s attendance at the East Asia Summit and related meetings, Li Chenggang, Assistant Minister of Commerce of China, stated that the conclusion of negotiations in all areas of RCEP was the result of “active promotion by all parties under the leadership of ASEAN.” The third RCEP Summit was held in November 2019 in Bangkok, Thailand, where a joint statement was issued, announcing the conclusion of all text negotiations and substantial market access negotiations among the 15 countries. In 2019, Chinese state media still mentioned China’s “constructive role” in the negotiations of RCEP.
In July 2017, Gao Feng, spokesperson for the Chinese Ministry of Commerce, stated that China would adhere to the principles of “promoting negotiations, promoting integration, and promoting completion” and make efforts to achieve a modern, comprehensive, high-level, and mutually beneficial agreement as soon as possible. China acknowledges the significant differences among RCEP members in terms of political systems, development stages, economic size, and levels of openness. Gao Feng stated that China would “firmly support the core position of ASEAN in the negotiations and take care of the comfort of the majority of members.”

Significance of RCEP for China:
China has repeatedly stated that signing the Regional Comprehensive Economic Partnership (RCEP) on schedule will “fully demonstrate the regional countries’ support for multilateralism and free trade and further deepen economic and trade connections.” For China, the signing of RCEP by multiple neighboring countries comes at a time when China and the United States are engaged in a power struggle. The U.S. trade investigations and restrictions on China have had a significant impact on the Chinese economy and trade, necessitating the need for China to seek breakthroughs from these limitations. Additionally, for China to realize its Belt and Road Initiative, it is necessary to reconstruct the global trade system. RCEP will serve as an important foundation for China to assert its initiative in shaping trade rules. On the other hand, the Trans-Pacific Partnership (TPP) was an important component of the U.S. Asian strategy during former President Obama’s tenure and was seen as a means to strengthen ties between U.S. allies in the Asia-Pacific region and Washington to counterbalance China.

With President Biden’s victory, the possibility of the United States rejoining the TPP has increased. If the new U.S. administration makes efforts to reshape the position of the guardian of the world trade order, China undoubtedly faces greater competition. The signing of RCEP at this time undoubtedly aligns with China’s interests. Chinese Premier Li Keqiang, in a speech at the ASEAN meeting prior to the signing of the agreement, once again reached out to East Asian countries, expressing China’s willingness to “strengthen strategic alignment with ASEAN countries on the basis of mutual benefit and promote cooperation in jointly building the Belt and Road.”

Remarks: For extensive collection of relevant information for reference.