As Lunar New Year 2022—the year of the tiger—begins, the largest economic trading pact you likely most never heard of went into effect. The Regional Comprehensive and Economic Partnership or RCEP is a Southeast Asia-inspired and China-lead 15-nation mega free trade deal.
Will it be a catalyst for Asia’s economic tigers and for what economists have been predicting as Asia’s global economic growth engine? What does RCEP mean for the geopolitical struggle for supremacy between the United States and China?
RCEP: a primer
Conceived in Southeast Asia decades ago, RCEP includes ASEAN, the 10 members comprising the Association of Southeast Asian nations; East Asia; China, South Korea, and Japan; and Australia and New Zealand. RCEP is concerned more with the policies regarding manufacturing, cross-border trade, and rules of origin. Essentially, trade barriers between countries will be removed and 90% of tariffs will be eliminated over ten years, spurring regional trade, investment, and economic growth.
Asia on the rise
There doesn’t seem to be any lack of literature making the case that the 21st century belongs to Asia. In fact, world renown commodities trader, Jim Rogers, is famous for having said, “If you were smart in 1807, you moved to London. If you were smart in 1907, you moved to America. And if you were smart in 2007, you moved to Asia.” In this context, Rogers relocated his wife and two girls to Singapore because he strongly believes that learning Mandarin and having his children exposed to Asia would be advantageous for their future. Moreover, in Parag Khanna’s seminal book, The Future is Asian: Commerce, Culture, and Conflict in the 21st century (2019) argues that though China is one reason for Asia’s dramatic rise, the emergence of South, West (The Middle East), and Southeast Asia’s continued growth and development are the real underlying story behind the Asian century. Finally, emerging markets expert, Ruchir Sharma, in an October 2020 New York Times opinion piece titled, “Is Vietnam the next Asian miracle?,” makes the case that this fast-emerging Southeast darling—closely following the ‘miracle tiger’ economies of Hong Kong, Singapore, South Korea, and Taiwan before it—is on the road to economic success. Two decades into the 21st century and Asia seems to be living up to its high expectations.
Conclusion—China in the driver’s seat
While RCEP’s January inception has been low key—it may take up to 10 years before consumers will see any significant changes—the world’s largest trade deal is another reason, to borrow Parag Khanna’s words, the future is Asian. The China-lead trade deal allows it to be at the forefront of global trade, bringing fast growing economies such as Indonesia, Malaysia, the Philippines, and Vietnam closer into its orbit, all the while the US is absent. While the US once did have a seat at the table in Asia vis a vis the Trans-Pacific Partnership or TPP (currently CPTPP), America shot itself in the foot as then newly elected President Donald Trump scrapped TPP his first day in office in 2017. For the time being it seems Asia’s tiger economies will continue to roar well into the 21st century, and China is happy to be leading the charge.
Contributed by Vinh Ho.
Vinh Ho has been based in Ho Chi Minh City since 2019 and runs a blog called Focus Asia-Pacific. Opinions expressed by contributors are their own.