The world’s largest trade agreement, the RCEP, seems on course to commence next year
After seven years’ efforts, the 10 members of the Association of Southeast Asian Nations, Australia, China, Japan, New Zealand and the Republic of Korea have agreed to sign the Regional Comprehensive Economic Partnership into being next year.
This is a major breakthrough in East Asia’s regional cooperation. The birth of the world’s largest and most populous free trade area will have a far-reaching impact on the regional and global economic landscape.
ASEAN proved to be the leader in securing the regional deal as it signed free trade agreements with the five other countries. An influential regional player that has always promoted greater regional cooperation, ASEAN succeeded in bringing about the agreement without offending any of the other countries or the bloc being manipulated by others.
The coming together of the 15 countries, holding different social ideologies and security concerns and at different development stages, is the fruit of dedicated efforts by ASEAN and the other five countries.
But how did these countries manage to come together? The key lies in finding a common ground for reciprocal cooperation.
First, the countries share the common aspiration of continued prosperity and stability. Following the Asian financial crisis at the end of the last century, the countries embarked, one after another, on a path of open cooperation and common development. The result? In the past two decades, East Asia has become a model of relative stability and fast development.
Second, countries in the region have benefited from their free trade agreements. It has helped increase their capabilities and confidence in enhancing cooperation. They all realize that making the cake larger will bring about greater development dividends and win-win outcomes.
Third, at a time when a Western power seeks hegemony and resorts to trade bullying, the only option for countries in East Asia is to unite to safeguard their interests by stabilizing the region and expanding cooperation.
Being the largest trading partner for most of the 14 other countries and ASEAN as a whole, China is of great importance to the RCEP. After all, China has signed bilateral or multilateral FTAs with all the other countries except Japan. Also, China and the 14 other countries have made generous investments in each other in recent years. The cooperation is working fine. In particular, the currency swap arrangements are helping to stabilize regional financial markets.
China is a huge country with a population of 1.4 billion. But, in spite of its large market, different areas in the country are at different development levels. So, it needs high-quality investment and marketable goods, as well as raw materials.
China’s manufacturing sector is now undergoing fast upgrading, producing quality products at reasonable prices. Cooperation in high-tech areas also holds huge potential. Infrastructure building is another of China’s strengths.
Furthermore, China advocates bilateral and multilateral cooperation, and stands ready to welcome other countries onboard its fast development train or to assist others with their infrastructure construction and development projects. Comprehensive cooperation with China has become an indispensable component of East Asia’s overall development.
The RCEP economies are very complementary to each other.
Australia, Japan, New Zealand and the ROK are developed countries. Japan and the ROK have strong manufacturing industries while Australia and New Zealand are endowed with rich mineral resources and strong agricultural industries. Given their distinctive strengths, the four countries need the support of a powerful and stable market.
China and most ASEAN countries are developing countries which need imported goods, technologies and an international market. In contrast to the Central America Free Trade Agreement, the RCEP incorporates more developed countries and thus gains larger scale and higher quality. The developing countries meanwhile will encounter fierce competition pressure, which could force their companies to upgrade products.
Trade is always conducted at some cost, but a certain period of adaptation can help generate more benefits than costs. The 16th prospective member of the RCEP, India, decided to step away at the final stage, but the country deserves time to reconsider.
With a large population and fragile economic base, India is at a relatively low stage of development in spite of its rapid economic growth in recent years. Neither the political and business communities nor the ordinary Indian people are prepared to join the RCEP club now. They need to be given more time and a welcome when they are ready.
In the long run, India’s participation will further strengthen the RCEP. After all, Asian cooperation can never ignore such a huge market with over 1 billion people.
The RCEP’s influence will cover multiple sectors. Its boost to regional cooperation can be felt in the tripartite FTA negotiations of China, Japan and the ROK. If the three could agree on their FTA at an early date, it would boost people’s confidence in the RCEP and elevate East Asian cooperation to a higher level.
E-commerce may offer a good chance of being included in regional cooperation, enabling people to buy foreign goods via their smartphones. This could revolutionize companies in all sectors. It could be some time before this idea becomes part of the agenda, but it is not beyond imagination, or reach.
The RCEP will also trigger a new round of investment boom and enable people-to-people exchanges on a greater scale. Within the RCEP framework, trade, investment, finance, services, tourism, infrastructure building and even people-to-people exchanges can be reinforcing of the general framework of cooperation.
The RCEP, as agreed by the leaders of the 15 countries, is to be officially signed into being in 2020. When it is, the RCEP will usher in a new chapter for regional cooperation.
The author is former ambassador of China to Malaysia. The author contributed this article to China Watch, a think tank powered by China Daily.
The views do not necessarily reflect those of China Daily.
HONG KONG NEWS