RCEP and the Shifting Global Economy
As a product of growing globalization in an age of international connectivity, trade has become increasingly important for maintaining the current international system. Furthermore, free trade and the removal of barriers for countries to trade with one another is an essential feature of the modern economy that helps in facilitating prosperity and economic growth; in order to ensure this, states form multinational, international, and regional trade agreements with one another to ensure trade operates smoothly and fairly. Such examples of international and regional trade agreements include the North American Free Trade Agreement (NAFTA), the European Free Trade Association (EFTA), and many others.
Recently, a new major trade agreement has been formed in the Pacific which includes fifteen different countries in the Central and South Pacific region. Among these countries are China, Japan, South Korea, and Australia, which are all among the world’s largest economies; this new agreement is known as The Regional Comprehensive Economic Partnership (RCEP). The states included in this new free trade agreement constitute about a third of the world’s population and thirty percent of the world’s global gross domestic product. Moreover, this new partnership also constitutes the first formal free trade agreement between China, Japan, and South Korea, three of the five largest economies in Asia. However, an important point to note within this trade agreement is the exclusion of a major economic and political power in the Pacific: the United States.
Ultimately, the current administration in the United States pulled out of the previously established Trans-Pacific Partnership in 2017 and opted not to join the newly established RCEP in favor of establishing bilateral agreements with specific states in the Pacific. But this new agreement will undoubtedly cause the United States to reconsider its approach and strategy in dealing with trade in the Pacific and Asia as a whole. It appears unlikely that the U.S will opt into joining the agreement in the coming years as President-elect Joe Biden expressed hesitation in joining the agreement, which is largely headed by China.
Although the absence of the United States from the partnership is certainly worth noting, it is not inherently of central importance in the wider context of the free trade agreement. The main point of importance of this agreement is that RCEP has now become the world’s largest free trade agreement, even larger than the North American Free Trade Agreement and the European Union. RCEP, which is largely headed by China as the dominant political and economic power in the region, is part of wider trends reflecting both China’s rise as the hegemonic organizational power of the Pacific and the shifting of the global economy to center more so around Asia.
It is not outrageous to claim that China is attempting to challenge the United States on a global scale and particularly in the Pacific. By being the primary organizer of RCEP and predominant power in the region, China has taken on a considerable responsibility in shaping the economic environment of the Pacific. But, by taking on this responsibility of playing the role of an organizer in the Pacific economy China is asserting more of its influence across the region, which was previously primarily (since the end of the second world war) under the influence of the United States The development of RCEP, initiated by China, is not an instance of isolated economic policy reform, but a part of continual constant trend of China taking a more active role in its region. This drive to take a more assertive political and economic role in both the pacific and Asia is arguably a reflection of China’s foreign policy shift in 2013 when Xi Jinping assumed the office of president.
The shift in China’s foreign policy from the former President Hu Jintao (2002-2012) to that of the current President Xi Jinping was rather drastic. Previous presidents of China sought to deal with more with domestic issues such as stimulating industrial and economic growth, as well as dealing with widespread poverty. However, in the last 20 years China has been able to rapidly modernize its economy and cut poverty from approximately 50% in 2000 to 6% in 2017. From this domestic success, China was easily able to articulate its foreign policy in the early 2010’s to fit its new status as a top global economic power. China did just that, and shifted its foreign policy approach by taking a more active role in shaping and funding numerous economic and infrastructural projects throughout the pacific and Asia.
RCEP, while positioned to benefit all member states through jointly growing their economies by facilitating multilateral trade, reflects growing Chinese power and capability in the region and the United States increasing absence from trade relations in the pacific. While the United States remains the dominant world power, China has been flashing its economic and material capabilities in the last decade or so, in turn revealing its status as a state that can, in time, rival the United States.
Image courtesy of the Department of Foreign Affairs and Trade via Wikimedia, ©2019, some rights reserved.
