The Regional Comprehensive Economic Partnership (RCEP) trade pact pooling China, Japan, South Korea, Australia, New Zealand as well as ten ASEAN members started as an ASEAN integration initiative and finished eight years later as a China-led mega-strategy.
Chinese Premier Li Keqiang, at a virtual meeting of the pact’s 15 signatories on Sunday, lavished superlatives on the “spirit of Asia” and multilateralism in his speech at the RCEP’s online signing ceremony.
The free trade pact, now the world’s largest with China firmly at its center, will cover nearly a third of the world’s population and annual economic output and notably excludes the United States and European members.
State news agency Xinhua acknowledged in a feature report on the RCEP’s negotiations that Beijing had at one point feared that the coronavirus could disrupt the eight-year marathon talks just as they neared completion earlier this year.
China’s Commerce Ministry also reputedly drafted contingency plans to keep the ball rolling, including through a “phase 1” agreement with select allied ASEAN partners, if the Donald Trump administration sought to pressure its Asian allies like Japan, South Korea and Australia to walk away from the deal at the eleventh hour.
Some Chinese state papers have gone so far as to suggest that Tokyo, Seoul and Canberra had ignored Washington’s arguments against the deal and that their decision to join was the latest indication of the US losing its primacy in the Asia-Pacific region.
The state-backed CGTN went further in suggesting that these countries’ signing of the RCEP meant that they had acceded to a new Beijing-led order for Asia.
Zhang Jianping, director of the Chinese Commerce Ministry’s Regional Economy Research Center, told state broadcaster China Central Television that Chinese President Xi Jinping’s “Asia dream” had finally come to fruition with the pact’s signing.
Xi’s dream, first articulated at an Asia-Pacific Economic Cooperation (APEC) summit meeting held in Beijing in 2014, spoke of a “shared destiny” of peace, development and mutual benefit in the region.
Zhang also said the RCEP would provide new solid ground for China to build on its ambitions for Asia, seen most vividly in Beijing’s $1 trillion, infrastructure-building Belt and Road Initiative.
However, not all commentators agree that Xi’s dream has necessarily been achieved with the RCEP.
Johnny Lau, a Hong Kong-based China affairs commentator, wrote in an op-ed that “Beijing would be fooling itself by entertaining the thought that a trade pact, even though Beijing has more of a stamp on it, will tip the balance of Asia’s power dynamic to its advantage, since the fact is that the ASEAN, Japan, Australia, and so on are trying to divorce their economic ties with China from geopolitics and existing political rows.
“Their stance is that, while pitching a key business deal with China, they are still reluctant to fall into line on other issues like territorial disputes.”
Lianhe Zaobao, Singapore’s largest Chinese language newspaper, noted in an op-ed that the biggest incentive for the city-state and other signatories like Japan and South Korea to join the RCEP was to resuscitate their Covid-battered economies via more free trade and economic integration with China and not about subscribing to China’s geopolitical designs.
The RCEP’s tariff-reducing trade benefits are substantial. For instance, Japan expects that tariffs will be quickly pared down on 86% of its exports to China including food, cosmetics and electronics shipments.
The RCEP will eliminate as much as 90% of tariffs on imports between signatory nations within 20 years and will also establish common rules for e-commerce, trade and intellectual property. Clearly, there will be winners and losers from trade liberalization.
China’s Commerce Ministry warned in a research paper that China’s labor-intensive manufacturers may lose orders to Vietnamese rivals under the pact’s terms. On a higher value-added tier, Chinese consumer goods and electronic brands may lose out to less expensive Japanese and Korean products thanks to lower tariffs, the Commerce Ministry report said.
Chinese farmers may also see Australian and New Zealand produce flood local markets. The official cost-benefit report has since been pulled from the ministry’s website for unclear reasons. But those assessments have raised certain doubts about Beijing’s resolve to honor the RCEP’s tariff-reducing, market-opening and intellectual property-protecting measures.
Japan’s Yomiuri Shimbun newspaper revealed on Sunday that a major point of contention during the talks with China concerned the establishment of a disciplinary and follow-up mechanism. The report said Japanese representatives insisted on stiffer penalties for RCEP violations, citing Beijing’s track record of slippage in meeting certain WTO commitments.
It also said Beijing’s insistence on protecting some of its “understrength manufacturing sectors” led to the pact’s tariff abolition rate of 91.5%, which the report said pales in comparison to other similar treaties like the Japan-European Union Economic Partner Agreement.
At the same time, the RCEP is expected to give vital breathing room and new markets to many of China’s Covid-hit and US trade war-distressed exporters.
Zheng Yongnian, a professor at the Chinese University of Hong Kong-Shenzhen and the former director of the National University of Singapore’s East Asian Institute, was quoted as saying by China News Service that the RCEP would make it “challenging” for the US to form a new united trade front against China.
The RCEP, he said, would effectively negate President Trump’s rising efforts to lock China out of various sectors of the global trade system, including for semiconductors.
Zheng added that as the largest economy and trading nation under the RCEP, China would stand to gain the most from the deal and thus has strong incentive to follow through on its commitments to make the pact work and in turn burnish China’s global image.