RCEP & CPTPP : shaping a new global order?
The RCEP (Regional Comprehensive Economic Partnership), which was signed on November 15th, 2020, is currently the largest trade deal in the world and is being branded as a success on China’s path to global leadership, thus displacing the United States from that role. The “US vs. China lecture” makes it impossible to talk about the RCEP without talking about the TPP (Trans-Pacific Partnership), a US led project that Trump ended abruptly as soon as he became president. However, its members decided to save it by creating the CPTPP (Comprehensive and Progressive Trans-Pacific Partnership), showing that multilateralism is also a viable path.
In fact, many countries are part of both RCEP and CPTPP treaties. So, I kept asking myself how CPTPP and RCEP influence each other (rather than opposing each other) and how this reflects the current global order ?
The TPP (Trans-Pacific Partnership) was composed by 12 members (USA, Brunei, Chile, Singapore, New-Zealand, Australia, Vietnam, Peru, Malaysia, Canada, Mexico and Japan), counting for around 40% of the global GDP. The origins of this agreement date back to 2006, when 4 countries, Brunei, Singapore, New Zealand and Chile (also called the P4) signed the TPSEP (Transpacific Strategic Economic Partnership Agreement), a very ambitious trade agreement that came into force in 2006 and that not only covered trade in goods, but also intellectual property in addition to the elimination of trade tariffs by 2050. Two years later, in 2008, the United States announced that it would like to negotiate a new agreement with these four countries. Gradually, other countries joined the negotiations : in 2008 Australia, Vietnam and Peru (The P8), in 2010 Malaysia (the P9), in 2012 Canada and Mexico (The P11) and finally, in 2013 Japan (the P12).
However, the TPP became increasingly unpopular after the divulgation of the chapter about intellectual property in Wikileaks in 2013 and was accused of being an undemocratic deal as negotiations were done under secrecy. Despite its unpopularity and after years of arduous negotiations, the TPP was signed on the 4th of February of 2016, and is considered one of the greatest achievements of Barack Obama during his administration. For Obama, the “terrorist threat” prevented him from pursuing a longer agenda and one of his most important priorities was US foreign policy in Asia, better known as “pivot to Asia”, which was based on strengthening alliances with emerging countries of the region and engaging in regional institutions in order to expand trade and investment. Obama was convinced that the future of his country depended on its relations with Asia. On one occasion, he also declared: “We can’t let countries like China write the rules of the global economy”. For him, the TPP was the most important instrument to contain China and represented the ability of his country to model a global order.
However, that year was also the year of Donald Trump’s victory in the presidential elections, who promised during his political campaign that he would withdraw the United States from the TPP. On January 23, 2017, Trump kept his promise, ushering in an era in which he questioned multilateralism and reiterated his preference for bilateral agreements. Trump’s approach rested on the old belief that the US is powerful enough to make other countries respond favourably to its interests. However, Asia is today the new commercial center of the world (for instance, 20 of the 25 most important ports in the world are in Asia, 14 of which only in China) and many countries in the region are experiencing significant growth such as Indonesia that could become the fourth largest economy in the world by 2050, displacing several western powers. Instead, Trump has either renegotiated or created new bilateral treaties to replace those he disagreed with.
The RCEP treaty, in contrast, is a free trade agreement (FTA) between the ten member states of the ASEAN (Association of Southeast Asian Nations) and the six countries that have a FTA with it (ASEAN +6). This bloc comprises 40% of the international trade and 45% of the world’s population. The RCEP has been under negotiation since 2003 and was finally approved and signed on November 15th, 2020. It is currently the largest economic bloc in the world and it is estimated that, in 2050, this bloc will represent more that 50% of the global economy. The RCEP is often presented or perceived as a Chinese project to counter the TPP. However, it is the result of a competition between the EAFTA (East Asia Free Trade Agreement) proposed by China to the ASEAN+3 countries (excluding Australia as judged too close to the US and a critical ally) and the CEPEA (Comprehensive Economic Partnership in East Asia) proposed by Japan to the ASEAN+6 countries (including Australia and India to counter Chinese influence in the region). The rivalry between these two Asian powers ended by joint cooperative efforts since 2011 through the formation of working groups to discuss both proposals. In November 2011, during the ASEAN summit in Bali, the RCEP was born by merging CEPEA and EAFTA.
The existence of these two projects in the same region and counting the same countries as members, makes us wonder if the two of them can exist at the same time ? Will one of them disappear ? Or as it has already happened with CEPEA and EAFTA, could a new treaty merging both projects be born ?
According to S. Hamanaka, regional integration projects could be seen as a way for a dominant country to build a preferential regional area where it exercises an exclusive influence. It is then interesting to observe what are the membership requirements, what countries constitute as parties and what countries are excluded from membership. There are different types of treaties : “truly open agreements” are open to any country demanding membership but only after fulfilling a certain number of conditions, “closed agreements” do not accept new members after being signed and “semi-open agreements” accept new members but only under the approval of the majority of the original members.
The TPP is not a “truly open agreement”. Latecomers, however, have to accept the agenda and the rules imposed by incumbent countries and eventually accept disadvantageous additional requirements. For instance, to not become a latecomer and to secure its leadership, the USA did not join the TPSEP but preferred to negotiate a new deal, the TPP. Later, Japan, Canada and Mexico became TPP latecomers. To be accepted, Mexico had to sign the Anti-Counterfeiting Trade Agreement (ACTA) on intellectual property, Canada had to phase out its control over dairy and agricultural products and Japan had to lift its restrictions on US beef. Also, the TPP was not against the possibility of a Chinese inclusion. In fact, Obama envisioned the TPP as a way to limit China’s power in defining international trade rules.
The RCEP, however, has an exclusive principle : only countries having a bilateral agreement with ASEAN (ASEAN+3 and ASEAN+6) can be members. By excluding the United States, this project is seen as a way for China to regain control over its area of influence. Therefore, the RCEP embodies the emergence of China in the region as the only regional power and globally as a Pacific superpower.
In a realistic reading of international relations, regional organisations are preferential spaces where a dominant state can exert its influence. In other words, FTAs reflect the current global order. It is the theory of the balance of powers : a competition between two states results in the creation of regional cooperation structures. This lecture is being questioned today by multilateralism : the CPTPP (or the new TPP without the USA) doesn’t have a clear and unique leader, but still exists and expands. The exit of the US from the TPP confirms that the global order is changing since its retreat did not mean the end of this trade integration project (so the US is no longer necessary to guarantee sustainability). The retreat also weakened the strategic ties that the US had with the region, establishing a feeling of mutual mistrust with its major economic partners.
The retreat of the US also meant that intermediary powers gained more credibility to balance power. To save the treaty, members opted for its expansion. TPP members decided to create a new agreement, the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), in October 2017 in Tokyo. Japan played a key role in ensuring this transition by convincing the other 10 members to not withdraw from the treaty. That’s how the CPTPP was saved, signed and entered into force in December of 2018. Furthermore, Japan has started ambitious negotiations to persuade other countries to join the project such as Thailand and even the UK.
We can observe that Japan is trying to impose itself in the negotiations as a benchmark for standards. According to Mathieu Arès and Eric Boulanger, by saving the agreement, Japan wants to emphasize multilateral trade policies in addition to instituting norms and rules that allow countering Chinese and American unilateralism, as well as the negative effects of the China-US trade war on the economic growth of the region. In fact, there has been a greater willingness among Asian countries to work together. More surprising, former PM Shinzo Abe made an official visit to China in December 2019 and pledged with his counterpart Xi Jinping to take bilateral relations to a new stage. In fact, even if the CPTPP members are working to maintain the standards of the original TPP, they don’t exclude China as a potential member. As a result, Frank K. Wong thinks that the CPTPP could have “positive impacts on the RCEP and promote further liberalisation in Asia-Pacific trade relations ». Some countries, that are part of both RCEP and CPTPP such as Australia, New Zealand and Japan, established pressure groups to import some provisions of the CPTPP to the RCEP during the negotiations, raising the standards of the latter with more rigorous rules by creating, for example, a dispute resolution mechanism.
However, the scope of RCEP is modest compared to CPTPP. If New Zealand and Japan were successful importing a dispute resolution mechanism from CPTPP to RCEP, they failed to establish labour or environmental standards. In fact, if China didn’t join the CPTPP and expressed its interest in becoming a member only very recently in 2020, it is because that agreement could disrupt China’s economic reforms. China is also very critical of CPTPP’s “competitive neutrality approach” to state-owned enterprises (SOEs) which constitute the keystone of its economy (more that 70% of Chinese first 500 companies are SOEs). It makes sense that China didn’t allow the RCEP to be redirected to CPTPP’s regulations. This shows that China is the decisive voice inside the RCEP blocus as it has secured a dominant position.
Nevertheless, the RCEP agreement could still be subject to some modifications in the coming years to ensure deep relations between signatory countries. Beyond its limits, RCEP still represents a major resurgence of economic multilateralism and many hope it will help to surpass historical rivalries between China, Japan and South Korea and ideological rivalries between China and Australia/New Zealand. But as those rivalries continue, questions about its own sustainability are raised. For example, RCEP could have represented a viable space for Chinese leverage on artificial intelligence and surveillance systems. However, Australia has opposed many Chinese technology standards during the negotiations. China has responded by establishing investment restrictions against Australia and draconian tariffs on food imports as retaliation measures. As a result, Australia-China relations are turning extremely fragile. Moreover, Japan and Australia (both RCEP members) along with India and the US, are part of the security “QUAD” group aimed at containing China, unveiling that distrust is still present.
China has declared for the first time its interest in joining the CPTPP agreement during the virtual APEC summit in Kuala Lumpur, in November of 2020. But is it possible to create FTAs or regional integration projects when members have so many differences and when global superpowers use their power to punish opposing countries which are also members of the regional blocs they have promoted and created ?
The RCEP agreement could have constituted an instrument of soft power for China as it expands the scope of Chinese norms and regulations to the whole southeast Asian region. Following a realist lecture, member countries should have recognised China’s leadership “naturally”. However, according to a regional survey conducted by the Center for ASEAN Studies of the ISEAS-Yusof Ishak Institute, although China is perceived as the country with the most economic and political influence in the region, this influence is not well received since 71% of the respondents expressed their concern about Chinese foreign policies (on topics related to global peace, security and governance). The United States has also suffered in popularity under Trump’s presidency and when it retreated from the CPTPP, it was no longer perceived as a good strategic partner.
Many international relations analysts observe that a change in the global order is currently happening. However, China has not (yet) positioned itself as an undeniable leader in the RCEP and the USA has lost credibility in the CPTPP (on the assumption it will return to the treaty someday). Negotiations show that other countries inside those blocs are trying to assume leadership as intermediary powers. The case of the CPTPP is particularly interesting : many believed that the retreat of the United States would put an end to the treaty since international relations analysts could not conceive the existence of a bloc without a “great leader”. However, other countries assumed that leading role, particularly Japan, Australia and Canada. These three countries are, for example, supporting South Korea and Taiwan to join the treaty. The critical question is, of course, Taiwan. It might be problematic since these countries would also like China to join the CPTPP. However, the bold gesture embodies the will of Japan, Canada and Australia to not let China dictate everything inside the bloc. Also, even if the CPTPP has kept many of the original TPP resolutions, the United States will be treated as a latecomer. This explains why the administration of Biden is careful not to rush in any declaration expressing its willingness to join this treaty.
All this data makes us think that multilateralism is, for the moment, the rule inside the CPTPP bloc. For instance, China has expressed its intention to join the CPTPP, proving that it might be ready to adopt the rules and standards of the treaty. But this shift could also be seen inside the RCEP. Even if China was able to bloc Japanese and Australian pressure groups to include environmental standards and labour rights to the treaty, China could not impose its policies on surveillance and 5G technologies. In fact, O. Stuenkel believes that China will eventually have to adopt at least a certain number of those international rules. China is aware that its image remains negative in the region and that its credibility was seriously affected by corruption and its management of the Covid-19 at the beginning of the pandemic. According to O. Stuenkel, if China wants to be a world leader (or a regional one), it will have to accept many international standards to gain the trust of its major opponents. As a comparison, in the 1970’s, Japan was seen as a global threat because it was perceived as a predatory and corrupt power. Japan decided to opt for transparency and to adopt international standards. Adopting those measures did have a positive impact on Japan’s image. In the same way, China keeps much information secret from the public eye : to give just one example, we don’t know exactly how the money China invests in other countries in the framework of the Belt and Road Initiative is being used. However, China is making some efforts to appear as a “good citizen”, by joining international treaties like the Paris Climate Agreement, which makes us think that it will eventually adopt more standards to improve its image.
But CPTPP and RCEP members have another important challenge : some of them are members of both groups, as seen in the image above. The CPTPP (as it is the only truly open agreement between the two) might even expand to some RCEP members like South Korea and China. In fact, the two treaties are seen by the 21 member countries of APEC (Asia-Pacific Economic Cooperation) as a step forward FTAAP (Free Trade Area of the Asia-Pacific). FTAAP is not only a trade deal project but also a regional integration project, like the EU. In fact, many members of CPTPP or/and RCEP are also members of APEC.
From Oliver Stuenkel, TPP vs. RCEP: trade and the tussle for regional influence in Asia
Update: India is no longer part of RCEP / TPP is currently named CPTPP without the US
In fact, APEC’s declaration of 2010 states that : “We will take concrete steps toward realisation of a Free Trade Area of the Asia-Pacific (FTAAP), which is a major instrument to further APEC’s regional economic integration agenda. FTAAP should be pursued as a comprehensive free trade agreement by developing and building on ongoing regional undertakings, such as ASEAN+3, ASEAN+6, and the Trans-Pacific Partnership, among others”. In fact, APEC is used by China and the US as an advertising platform for their own projects. TPP was conceived and negotiated during APEC summits and Xi Jinping promoted RCEP during the 2016 APEC summit in Peru.
In that case, we must ask whether the existence of the RCEP and the CPTPP jeopardises the FTAAP agenda. Or on the contrary, if they favour it by creating a normative precedent. In this scenario, we must also consider the possibility of China joining the CPTPP and even that the United States will return to it. And above all, how these agreements are currently shaping a new global order.
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