The world is now divided between allies of the United States and allies of China, specifically when it comes to trade.
The signing of the Regional Comprehensive Economic Partnership (RCEP) – a China-backed bid to complete the world’s largest trade deal without the US – has been pushed back to 2019. Economic and trade officials came to this conclusion at the economic community council meeting of the 33rd Asean Summit in Singapore last week.
The RCEP, covering half the world’s population, is billed as an antidote to President Donald Trump’s “America First” agenda, which has seen tariffs imposed on almost half of all Chinese imports to the US and retaliatory levies by Beijing.
Negotiations on the proposed agreement began last week, with RCEP scheduled to be signed during the Singapore summit. The RCEP was given extra impetus after Trump pulled the US out of the rival Trans-Pacific Partnership (TPP).
The RCEP is a free-trade deal among the 10-member states of Asean and six Asia-Pacific states – Australia, China, India, Japan, South Korea and New Zealand.
The remaining 11 countries in the TPP are preparing to launch a revised version of the trade deal renamed the Comprehensive and Progressive Trans-Pacific Partnership, following Australia’s ratification earlier this month. This deal is due to take effect on December 30. Several other economies are preparing to try to join the pan-Pacific accord, including the Philippines and South Korea.
Although the US Army’s Pacific Commander, Robert Brown, recently visited the Philippines to assure Manila that its defence and security alliance is intact, it is undeniable that China is now the standard-bearer of global free trade, with the RCEP at the heart of its strategy. The Trans Pacific Partnership may still be alive despite the US pullout, but the RCEP is now the world’s biggest trade deal. And we can add to this China’s trade and finance influence via the Shanghai Cooperation Organisation, BRICS, and the China-led Asian Infrastructure Investment Bank.
The latter organisations are countering US-led trade in the Asia Pacific, given that the six non-Asean member states in the RCEP are also bidding to join the revised TTP by the end of December. Should they do so, it would be a game-changer, tilting Asia’s trade framework away from Chinese control under the RCEP. Now, the battle is on to secure those six – Australia, China, India, Japan, South Korea and New Zealand – as trade partners. The propaganda war has already begun, with China claiming that it is trying to sway Asia-Pacific partners to stand by free trade via the RCEP amid rising US protectionism. But a serious sticking point for RCEP negotiations is India, which has concerns over opening its markets to competition, in particular from Chinese businesses.
The negotiations have reached the most critical stage, as the focus shifts to market access for goods, investments and services. Meanwhile China’s economy is facing challenges in the wake of the trade war with the US. What happens next in the RCEP talks could change Asia – and the world – forever. Interesting times, indeed.
Jumel G Estranero