By mid-November 2019, the Regional Comprehensive Economic Partnership Agreement (RCEP), which has been in existence since 2012, seems to have finally come to the fore. Although during the ASEAN summit that ended not long ago, India finally decided to “exit the negotiations,” which made other countries including China somewhat unhappy. But the remaining 15 countries are still ready to finally sign the agreement in February 2020.
If this seven-year negotiation can be terminated in 2020, it means the establishment of the world’s largest free trade market. It covers more than 3.5 billion people, accounting for about 48% of the world’s total. Gross domestic product (GDP) accounts for more than 31% of the world’s total, and foreign trade accounts for nearly 28% of the world’s total. Today, when trade protectionism prevails, its significance is not only in volume.
China’s formation of the core position of RCEP
For the outside world, the RCEP mechanism has always had an intriguing detail: the plan was first proposed by the 10 ASEAN countries in August 2012, although the 16 countries participating in the discussion have not specifically talked about who dominates it, but Public opinion generally places China at its core.
Considering the strong economic nature of RCEP itself, as long as China pays attention to China’s position in the global economy, it can be found that even if RCEP should only be a merger of six “10+1” mechanisms, namely ASEAN and China, Australia, New Zealand, Japan, South Korea, and India have a comprehensive FTA, but when these six agreements are merged, China’s core role in RCEP is even more prominent.
According to statistics from the McKinsey Global Institute, from 2000 to 2017, the global comprehensive dependence index on the Chinese economy has gradually increased from 0.4 to 1.2. China contributes 35% of the global manufacturing output. Due to the huge size of China’s economy, almost all industries in the world are attached to China to a certain extent.
This dependency is more pronounced in the core areas of RCEP, namely the 10 ASEAN countries. At present, China has maintained ASEAN’s position as the largest trading partner for ten consecutive years. By 2018, the bilateral trade volume exceeded 580 billion US dollars, and the two-way investment accumulated more than 200 billion US dollars.
Not only ASEAN, but the trade quota between China and other RCEP countries is also quite large. In 2018, the trade volume between China and RCEP countries was close to 1.5 trillion US dollars, and its GDP accounted for 16% of the world’s total, directly accounting for more than half of the total RCEP.
According to data from the Chinese Ministry of Commerce, in addition to India, China’s trade with 14 other countries in RCEP exceeded US$1.3 trillion in 2018, of which exports reached US$620 billion and imports reached US$760 billion, accounting for China’s total trade. One-third; China’s investment in 14 countries reached 16 billion U.S. dollars, attracting foreign investment in the region to reach 14 billion U.S. dollars.
At this point, the outside world should be able to draw a clear conclusion that even if Beijing does not actively seek the leading role of RCEP related mechanisms, agreements or negotiations, considering its economic volume and capacity, once China enters, it will automatically become this economy. The core of the oriented protocol. Today, in 2019, this is becoming more and more prominent.
New interest community under the new trend
China has become the center of RCEP, and the outside world will associate with him as a tool for China.
In the past, public opinion talked about RCEP often juxtaposed with the already-bankrupted Trans-Pacific Partnership Agreement (TPP). The latter was formed by the United States’ involvement in the Trans-Pacific Strategic Economic Partnership Agreement (TPSEP) established by Chile and other four countries in 2008. After taking office, Trump withdrew from this US-led, clearly exclusive Asia-Pacific economic development framework and platform. The RCEP is now announcing that the agreement will be signed. Many observers believe that China may take the lead in geo-economic competition.
If we look at the Sino-US game from the perspective of the Cold War confrontation, such an argument is not without reason. But today, RCEP is by no means a geo-economic tool. It is worth noting that RCEP is an economic cooperation organization involving both developing and developed countries. It is different from the loose APEC in the past, and it is different from the previous abduction of regional organizations by big countries.
The RCEP Agreement has more comprehensive rules than the World Trade Organization (WTO) system. Its openness is relatively high and its openness is over 90% in terms of trade in goods, which is much higher than the level of the WTO.
It is also based on this basis that the relevant parties to the RCEP delineate the scope of investment by means of a negative list (ie determining the scope of the government’s prohibition and other areas are accessible) and on this basis realize trade in goods, trade in services, investment and rules. Mutual benefit in areas and so on.
Under this premise, RCEP currently has a relatively high degree of capital and material flows between the contracting member states. After all, RCEP is established on the premise of the merger of six free trade agreements with ASEAN as the core. This agreement minimized the exclusivity between Contracting States on the basis of ASEAN at the very beginning.
In contrast, the GATT and the WTO system, which were transformed from the post-World War II international system, are full of exclusivity due to political factors. Since the beginning of the 21st century, the major developed countries headed by the United States have not prepared themselves to cope with the major changes in the structure of the global economy and trade. They have not considered the imbalance of their own economic structure and have not taken necessary structural adjustment measures. Instead, they have tried to pass the exclusive free trade zone. Regain the arbitrariness of formulating global trade rules.
Regrettably, in a highly interdependent global economy, exclusive arrangements cannot solve the structural imbalances in developed countries, and only by seeking new growth factors can growth be restored. China firmly supports the multilateral trading system and advocates that the establishment of a free trade zone must be open, transparent and non-exclusive, so that it complements the multilateral trading system. A more balanced comparison of powers between China and RCEP parties also ensures this.
Two different ways of survival for RCEP
In view of the 15 countries that RCEP is about to sign, the two countries are divided into two groups, namely, developing countries led by the 10 ASEAN countries and developed countries represented by Japan and Australia. These two countries have different strengths and different powers with China, but they have similar development space within the same system, which has become the basis for RCEP to avoid becoming an exclusive free trade zone.
At present, the GDP of the ASEAN member states Brunei, Cambodia, the Philippines, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand and Vietnam add up to more than 2.5 trillion US dollars. ASEAN is still the seventh largest economy in the world.
However, ASEAN, which is based on economic development and gradually promotes market opening in the region through the ASEAN mechanism and improves the comprehensive environment for development, has fully demonstrated its economic vitality.
Since the mid-1970s, ASEAN has been promoting the opening of the internal market and optimizing the internal development environment as the focus of cooperation. By 1992, ASEAN proposed the establishment of the “ASEAN Free Trade Area” (AFTA) and planned to reduce the intra-regional tariffs to 0 to 5% in 15 years. Between 2014 and 2018, 98.7% of the goods in ASEAN have achieved zero tariffs.
In addition, ASEAN has adopted a method to promote market opening, improve the market environment in the region, and enhance the attractiveness of the region to external resources. This move allows ASEAN’s open market to actively create resources, and then accelerate the opening to enhance attractiveness and create vitality. This will not only allow ASEAN to seize the important opportunities in the international market, but also enable the ASEAN countries to drive economic growth under the influence of medium-sized enterprises and global supply chain transformation and regionalization of trade. This trend has also led many analysts to believe that ASEAN may have the opportunity to become the world’s fourth largest economy by 2030.
As for Japan and Australia, the two countries signed a free trade agreement in 2014 and signed a “10+1” agreement with ASEAN. They also constantly balanced their positions and chose an agreement between the TPP and the RCEP in line with national interests.
After 2014, the United States has been forcing Japan and Australia to release the market to the United States in the fields of agricultural products. Japan does not want domestic rice, wheat, beef and pork products to be impacted by cheap foreign products; Australia does not want US beef and other agricultural products to seize His position in the Japanese market.
As the United States officially abandoned the TPP in 2017, Japan and Australia accelerated the progress of RCEP in 2018, while taking over the remaining framework of the TPP and transforming it into a comprehensive and progressive cross for its own interests. The Pacific Partnership Agreement (CPTPP) system, which allows Australian agricultural products to enter the Canadian market, increasing Japan’s GDP by $71 billion.
In fact, even after Japan and Australia seek to seek benefits in agreements such as RCEP and CPTPP after 2018, they have not forgotten the US system. For example, after the two countries in December 2017, they also committed to the US and the US. India-Australia” Quartet System. However, the US’s “new plan” with a total amount of US$113 million launched in July 2018 is more than a glass of water. This has caused the two countries to refocus their attention on RCEP and ASEAN and China.
Some analysts believe that if RCEP is fully established in 2025, all products in the free trade zone will achieve zero tariffs, all agricultural product tariff quotas will be abolished, and there will be no trade barriers and other non-tariff trade barriers. Then the vast majority of countries will experience real growth in imports and exports and GDP. The largest increase in exports is Japan, which will increase by 19.4% compared with 2010. In terms of economic growth, Australia has the most benefit, and real GDP is expected to grow by 2.17%. But India’s GDP will fall by 1.25%. Therefore, India has indeed temporarily withdrawn from the agreement due to economic reasons. Now, the outside world can confirm that RCEP will further improve the value chain of the industrial supply chain in the region and inject strong power into regional economic development.
From here, under the current RCEP framework, China can protect its economic line with its influence. The Western routes of Japan, Australia and New Zealand can also be reflected. As for ASEAN and other weaker third world countries, their interests can be basically ensured. As for the current status of RCEP’s internal interconnection, it is easy for the outside world to think of China’s further actions under the Shanghai Cooperation Organization and the Belt and Road Initiative.
After all, whether it is the Shanghai Cooperation Organization, and the RCEP or the “Belt and Road”, China is striving to build a connected environment under various mechanisms and build its own samples in their respective regions and fields. This is good for the current international environment. At present, the focus of the world economy is shifting to the Asia-Pacific region, while the economic focus of the Asia-Pacific region is in Asia. Through the exploration of political and economic-related mechanisms, Beijing has bridged the economic rift between the East and the West and sought to allow developing and developed countries, large and small countries to Economic cooperation is becoming more and more equitable, which is also beneficial for building a community of economic interests that transcends political significance.