Tomorrow a new trade agreement between 15 Asian states will be signed. It will soon be seen as a milestone in the global economic history. But only very few ‘western’ media have taken note of it or of the huge consequences the new agreement will have.
The agreement is also a huge victory for China over U.S. hegemony in Asia:
Fifteen Asia-Pacific nations including China and Japan plan to sign the world’s biggest free trade deal this weekend. The FTA will cut tariffs, strengthen supply chains with common rules of origin, and codify new e-commerce rules.
The Regional Comprehensive Economic Partnership (RCEP) is expected to be announced at the Association of Southeast Asian Nations (ASEAN) Summit, which Vietnam is hosting virtually. It will involve the ten member states of the ASEAN bloc – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam – as well as their trade partners Australia, China, Japan, New Zealand, and South Korea.
The new economic bloc will thus represent around a third of the world’s gross domestic product and population.
It will become the first-ever free trade agreement to include China, Japan, and South Korea – Asia’s first, second and fourth-largest economies.
The economies of the RCEP members are growing faster than the rest of the world. The agreement is likely to accelerate their growth.
India is the only country that was invited but is missing in the deal. Its Hindu-fascist Modi regime had bet on the U.S. led anti-Chinese QUAD initiative pressed for by Trump and Pompeo and thereby lost out in trade terms:
Prime Minister Narendra Modi’s remarks at the 17th ASEAN-India Summit on November 12 makes sad reading. It comes in the specific context of the signing of the Regional Comprehensive Economic Partnership [RCEP] on Sunday — the mega free trade agreement centred on the ASEAN plus China, Japan and South Korea.
Modi avoided mentioning RCEP, although it signifies a joyful occasion in ASEAN’s life as much as Diwali is for an Indian. He instead took detours — ‘Make in India’, ‘Act East Policy’, ‘Indo-Pacific Oceans Initiative’, ‘ASEAN centrality’.
To be sure, RCEP heralds the dawn of a new post-Covid regional supply chain. As a new RCEP supply chain takes shape, India has not only excluded itself but is unwittingly facilitating its “arch enemy” China to become the principal driver of growth in the Asia-Pacific.
On the other hand, extra-regional economic ties cease to be a priority for the ASEAN, in relative importance. There isn’t going to be any takers in the Asia-Pacific region for even a partial US-China “decoupling”. The RCEP is in reality an ASEAN-led initiative, which is built on the foundation of the six ASEAN+1 FTAs and it secures ASEAN’s position at the heart of regional economic institutions.
The U.S. Pivot to Asia, launched under the Obama administration, as well as the anti-Chinese ‘decoupling’ initiatives by the Trump administration have thereby failed.
One would have expected that such a gigantic trade agreement with its extensive geopolitical consequences would find some echo in the U.S. media. But a search for ‘RCEP’ on the site of the New York Times finds only one mention from 2017. It is about a letter five U.S. ambassadors had sent to warn of the demise of the Transpacific Trade Agreement, an Obama initiative that excluded China:
The partnership, called the TPP, was a hallmark of the Obama administration. It would have been one of the largest trade agreements in history, covering about 40 percent of the world’s economy and setting new terms and standards for trade for the United States and 11 other Pacific Rim nations. China was not included but would have been able to join.
In their letter, the ambassadors warn that “walking away from TPP may be seen by future generations as the moment America chose to cede leadership to others in this part of the world and accept a diminished role.”
“Such an outcome would be cause for celebration among those who favor ‘Asia for the Asians’ and state capitalism,” it added.
The Ambassadors were right. But domestic U.S. policies (and resistance to ‘liberalization’ from Asian countries) did not allow for such an agreement to happen:
The 2016 presidential race was shaped by anti-globalization trends. Donald J. Trump promised to destroy the pact if he became president. Hillary Clinton also denounced it, even though she supported a form of it as secretary of state.
Senator Mitch McConnell, Republican of Kentucky and the majority leader, said after the election in November that Congress would not take it up. That meant it was dead.
The RCEP is less controversial in Asia than the U.S. centric TPP would have been:
Unlike the TPP, or Trans-Pacific Partnership, and other U.S.-led trade deals, the RCEP doesn’t require its members to take steps to liberalize their economies and protect labor rights, environmental standards and intellectual property. U.S. Commerce Secretary Wilbur Ross has called it a “very low-grade treaty” that lacks the scope of the TPP. But RCEP’s imminent implementation illustrates America’s diminished clout and could make it harder for U.S. businesses to compete in the vast region.
While it has less regulations and ‘liberalization’ requirements than the U.S. had wanted to sneak into the TTP deal the RCEP is still comprehensive enough to have huge effects:
Malaysian Trade Minister Azmin Ali, who told reporters the deal would be signed on Sunday, called it the culmination of “eight years of negotiating with blood, sweat and tears.”
First proposed in 2011, RCEP will eliminate as much as 90 percent of the tariffs on imports between its signatories within 20 years, and the deal will come into effect by early as next year. It will also establish common rules for e-commerce, trade, and intellectual property.
“China has pulled off a diplomatic coup in dragging RCEP over the line,” Shaun Roache, Asia-Pacific chief economist at S&P Global Ratings, told Bloomberg. “While RCEP is shallow, at least compared to TPP, it is broad, covering many economies and goods, and this is a rarity in these more protectionist times.”
Asian countries will now preferably trade with other Asian countries and every non-Asian country will have to trade with them on only secondary terms.
It seems that U.S. media are unhappy to report on such an immense victory for China and the demise of the U.S. position in the world.