What Might RCEP Mean for the Future of Development?
From left to right: Singapore’s Prime Minister Lee Hsien Loong, Myanmar’s State Counsellor Aung San Suu Kyi, Laos’ Prime Minister Thongloun Sisoulith, Cambodia’s Prime Minister Hun Sen, New Zealand’s Prime Minister Jacinda Ardern, India’s Prime Minister Narendra Modi, China’s Premier Li Keqiang, Thailand’s Prime Minister Prayut Chan-O-Cha, Vietnam’s Prime Minister Nguyen Xuan Phuc, Australia’s Prime Minister Scott Morrison, Japan’s Prime Minister Shinzo Abe, South Korea’s President Moon Jae-in, Brunei’s Sultan Hassanal Bolkiah, Indonesia’s President Joko Widodo, Malaysia’s International Trade and Industry Minister Darell Leiking and Philippines’ Trade Secretary Ramon Lopez photographed at the third RCEP Summit (CNBC).
By Matthias Wu
It’s a time of change in the global economic and political climate. Yet another attempt to return the world onto global free trade and regional economic integration took shape in the Asia-Pacific region. This came at a time when the world is once again paying close attention to the US elections, which ushered in a trend of isolationism and retreat from global cooperation back in 2016. The signing of the Regional Comprehensive Economic Partnership (RCEP) by 15 regional economic powerhouses was the culmination of a decade-long effort to consolidate the various individually signed treaties and agreements on trade in the region. Signatories include all members of Association of Southeast Asian Nations (ASEAN), most of which are high-growth developing countries, along with other larger regional economies including China, Japan, Korea, Australia and New Zealand.
The completion of the trade pact could mean very different things for the economic futures of countries within the region and beyond. The stakes are high. Such an agreement could impact the livelihood of billions of people in emerging economies.
Many have asserted, perhaps rightfully, that the significance of the signing of RCEP is more symbolic than it is substantive. The pact was more of a what some called “tidying-up work” of the previously existing free trade agreements. The negotiation also faced an early setback as India, the largest untapped potential market for the member countries, withdrew from negotiation over fear of having foreign, especially Chinese, goods flood its domestic market. Despite the hiccups, the prospects and risks of RCEP in regard to economic and human development in the region carry considerable weight, as the agreement encompasses some of the most rapidly developing nations, with the possibility of admitting more.
Widely characterized as a Chinese gain of power amid a protracted trade war with the US, the benefit of RCEP for the ASEAN countries is overlooked, and yet so crucial for economic development in the region. The consolidated reduction of tariffs on most goods is indeed a good omen for businesses and consumers looking to take advantage of the leap of regional economic integration and strengthen global value chain. Access to foreign investments, China and Japan being the among the largest sources of which in the region, especially on infrastructure and other capital projects, might turn out to be extremely beneficial for some of the least-developed countries among the signatories such as Laos, Myanmar, and Cambodia.
Southeast Asian countries may have yet another victory to celebrate: the fruition and implementation of RCEP could bring about increased economic and geopolitical independence from the US and Europe, which are experiencing political instabilities of their own. Concerns about the threat of China’s rapidly expanding sphere of influence may appear plausible, but strong linkages with regional economic powers, whether financial, commercial, or infrastructural, would go a long way to kickstart transformational development of the least-developed member countries, perhaps much more so than economic linkages with economies outside the region.
The arguments of the RCEP skeptics were not completely unfounded either. Many were particularly concerned by the agreement’s potential impact on the less-developed member countries, likening the impact of RCEP to that of the North American Free Trade Agreement (NAFTA) in Mexico. After the signing of NAFTA, many had continuously decried the destruction of small businesses and farmers in Mexico by American corporate exporters, while a great number of Americans attributed sustained job losses to the free-trade agreement. It is the fear of many that the agricultural and retail sectors of the ASEAN countries, being essential to their socio-economic fabric, would fall prey to sweeping expansion of foreign corporates from China, Japan or Korea. Income inequality and access to opportunities in the less-developed countries could be severed, instead of ameliorated, by the adoption of RCEP.
Like most others in the international arena, the impact of RCEP is to be both praised and criticized, and it will take a long time before any such verdict can be reached. Yet given the divisive changes the world has seen towards the end of the past decade, signs of a return to global economic integration and partnership are nonetheless refreshing and optimistic in regard to economic development.
