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10.11.2021 Author: Salman Rafi Sheikh

How the RCEP Could Derail the US Plans in the Indo-Pacific


The recent ratification of the Regional Comprehensive Economic Partnership Agreement (RCEP) by Australia and New Zealand have opened up the possibility of meaningfully, if not fundamentally, altering the geo-political scenario in the Indo-Pacific in favour of China. The fact that this ratification has come within months of the AUKUS and the Biden administration’s persistent attempts at reviving and militarising the QUAD shows that the US’ ‘Asia Pivot 2.0’ is not being welcomed in ways many in the White House would have originally imagined, or hoped for. The fact that the US’ shifting focus towards the Indo-Pacific lacks a strong economic component shows why China, the economic power house in the Indo-Pacific, continues to gain grounds vis-à-vis the competition the US has been offering in past few years. The fact that Australia, a key participant in the AUKUS treaty, has ratified the RCEP – which is going to become the world’s largest free trade agreement – means that its ties, and those of the other RCEP participants, with China will be informed more by the underlying economic framework than the on-going US-China rivalry.

While the RCEP is yet to be ratified by a number of countries – Indonesia, Malaysia, Myanmar, the Philippines and South Korea – its ratification by Brunei, Cambodia, Laos, Singapore, Thailand, Vietnam, Australia, New Zealand, Japan and China has already operationalised it. If the US has traditionally relied on long-standing inter-state rivalries in the Pacific to project its own role, the RCEP, in many ways, cuts across many rivalries that have long underpinned the Pacific region. For instance, the RCEP, which covers roughly 30% of the global economy, is also the first trade agreement linking Japan, China and South Korea, eliminating tariffs on about 90% of traded goods and standardizes many customs, investment, IP and e-commerce regulations.

In other words, the RCEP is not only a geo-economic platform, but the fact that it is institutionalising new interdependencies across the region means that even China’s traditional rivals will have little incentive to jump on the US bandwagon to ramp up geo-political tensions with China as well. As it stands, tariffs on some 86% of Japan’s industrial exports to China and 92% of its exports to South Korea will be eliminated when the agreement goes into effect. Tariffs on 91.5% of Japan’s exports to and 98.6% of its imports from signatory countries will be removed.

Economic logic, therefore, seems to have trumped the US’ sole emphasis on security and conflict. For instance, Japanese government data show that 21% of Japan’s trade is with China, 5% with South Korea and 15% with ASEAN, for a total of 41%. Trade with the US, on the contrary, amounts to only 15%. Hence, a more powerful incentive even for a long-term US ally like Japan to ally, economically, with China – a decision that directly undermines that US’ Indo-Pacific strategy. Participating in the RCEP makes sense for all of the member states also because the current 15 RCEP participating economies will grow to account for 50% of global output by 2030, a possibility that any participating country can hardly chose to ignore at a time when the world economy has been devastated by the COVID-19 pandemic.

The RCEP is, in other words, a direct geo-political win for China not only vis-à-vis the US, but also its rivals in the region. Even though rivalries are unlikely to disappear overnight, it remains that member countries will seek to use the RCEP, rather than the US overlordship, to mediate conflicts and tensions across the region. Economic interdependencies will, thus, generate new mechanisms of regional conflict resolution that do not involve the US.

The focus on the region, rather than extra-regional actors, is evident from how the member and rectifying countries have received the agreement. According to the official Australian readout, “When in force for all 15 signatories, RCEP will be the world’s largest free trade agreement, bringing nine of Australia’s top 15 trading partners into a single economic framework.”

A press-release issued by the ASEAN said that “The expeditious ratification process by signatory states is a true reflection of our strong commitment to a fair and open multilateral trading system for the benefit of the people in the region and the world.”

The regional emphasis is a major contrast to what Joe Biden had hoped the US would be able to block when he came into power earlier this year and announced the US return to the world-stage as a leading power. To quote Biden,

“The question is: Who writes the rules that govern trade? Who will make sure they protect workers, the environment, transparency and middle-class wages? The United States, not China, should be leading that effort. As president, I will not enter into any new trade agreements until we have invested in Americans and equipped them to succeed in the global economy.”

The fact the Indo-Pacific has entered into an agreement despite Biden’s resolve to put America at the centre of global geo-politics shows the growing irrelevance, rather influence, of the US, especially its emphasis on rolling the growing Chinese influence back. However, instead of the Indo-Pacific countries seeking to ally with the US to ‘contain’ China, their agreement with China to liberalise trade and create new geographies of economy shows that the actual room for the US to manoeuvre vis-à-vis China has shrunk to a very large extent.

Salman Rafi Sheikh, research-analyst of International Relations and Pakistan’s foreign and domestic affairs, exclusively for the online magazine “New Eastern Outlook”.

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