Hira Bahadur Thapa

In the wake of anti-trade populist campaign, led by US administration for the last four years, the Regional Comprehensive Economic Partnership (RCEP) agreement has been signed by ASEAN plus five other Asian countries, which is marked as a stepping stone to multilateral trading system. This Indo-Pacific trade deal is dubbed an ASEAN initiative as exemplified by the objective statement of the agreement. Its purpose is to establish a modern, comprehensive, high quality, and mutually beneficial economic partnership that will facilitate the expansion of regional trade and investment and contribute to global economic growth and development.

Economic integration
RCEP is ASEAN conception because it aims to broaden and deepen the regional bloc’s engagement with five other members, two of which are coincidentally the world’s second and third largest economies. 15 members of the trade bloc account for 30 per cent of global GDP and 30 per cent of world’s population. Some have pointed out that the RCEP is China-led initiative, too. This agreement is China’s first regional trading arrangement. It is doubtless that this trade bloc will facilitate China’s efforts to expand its regional influence, which sounds natural. But it must not be forgotten that China’s big consumer market will prove beneficial to other partners. Expanded market will help strengthen regional value chains and thereby increasing RCEP members’ ability to reap the benefit of economic integration.
RCEP is world’s largest regional trade bloc. As per the estimate of Peterson Institute for International Economics (IIE) RCEP will boost global GDP by $186 billion a year. In view of the size of their economies China, Japan, and South Korea will gain $85 bn, $45bn, and $23bn respectively. It is a European Union-style trade bloc with single set of trade rules to govern the Indo-Pacific economy. It is expected to accelerate the shift in global trade toward Asia and away from the West. The economists opine that the US despite having the largest economy has become a loser in terms of international influence and economic prosperity by not being a party to the regional trade agreement.
India an emerging economic and regional power, nonetheless, pulled out of the negotiations last year though it had been involved for years. There are differing views regarding India’s withdrawal from the negotiating process which stretched for 8 years. Some critics contend that New Delhi’s abandonment of the trade deal is symbolic of its preference for protectionism. But India’s Minister for External Affairs S. Jaishankar argues that there are some valid reasons on the part of the country to stay away from the trading arrangement.
He spells out three reasons behind his country’s withdrawal decision. These are non-tariff barriers, state subsidies, and lack of transparency. No wonder that India prefers to remain outside the trading bloc against the background of China’s domination in the deal. In fact, around 80 per cent of the new trade bloc’s combined $25 trillion GDP comes from just two economies: China and Japan. Interestingly, it avoids difficult issues like government subsidies, government procurement, theft of intellectual property, and investor-state dispute settlement. Labour standards are conspicuously missing in the agreement.
RCEP is a straight tariff reduction agreement. It focuses on areas where tariffs are already low. Moreover, the trade bloc is concentrated on items where trade volume remains insignificant. In this regard examples are given about the existing trade relationships between China and Australia. Both are important trading partners. Australia’s main export to China is iron ore. But this is the area of trade where tariffs no more apply. RCEP will, however, eliminate China’s 3 per cent tariff on coal next year.
Under the agreement’s provisions China’s 14 per cent tariff on Australian imported wine will also be lifted next year, but in the meantime, China has slapped 20 per cent levy on that item as an anti-dumping measure. Considering the current political tensions between these two countries, it is presumed that the levy on Australian wine is a pressure resorted to by China. China wants to make sure that Australia abandons its efforts to stem the Chinese influence in the country.
RCEP is a low ambition trade deal but it is unique in the sense that it brings together countries that have often had prickly diplomatic relations like China-Japan and China-Australia. Viewed from this angle the new trade agreement has done an impressive job of separating itself from other things. This is why an analyst has commented, “You can both cooperate with someone and just loathe them, even as a human being”. Sino-India trading relations are not exception to this situation.

Employment opportunity
Compared to Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP), another regional trade deal, RCEP’s lack of provisions on labour and environment and scale of tariff reduction make the new trade bloc less significant. Nonetheless, RCEP is designed to create new employment opportunities, raise living standards and improve the general welfare of the people in the member countries. RCEP signatories will eliminate various tariffs on imported goods, align trade norms, and adhere to unified rules-of-origin standards. The agreement also includes provisions on intellectual property, telecommunications, financial services, e-commerce, and professional services.
Regional trading blocs do not necessarily revive multilateralism because non-members cannot access to agreement’s concessions. Nevertheless, trade agreements become talismanic symbols of internationalism, global cooperation, and liberal order. Based on this conviction, it is little surprise that internationalists have embraced them as bulwark against anti-trade backlash.

(Thapa is the former foreign policy advisor to the Prime Minister from 2008 to 09. thapahira17@gmail.com)