Japan Institute for National Fundamentals

Fifteen countries including Japan, China, South Korea and the 10 Association of Southeast Asian Nations members have signed their Regional Comprehensive Economic Partnership, or RCEP, agreement creating a huge economic bloc accounting for 30% of global population and gross domestic product. The signing can be appreciated as a progress in trade liberalization as introverted thinking prevails in the world. But the RCEP signing should not be overrated. Its trade liberalization level is considerably lower than that of the Trans-Pacific Partnership agreement. The average tariff reduction rate among the 15 signatories is limited to 91%. Rulemaking for trade and investment other than tariff reduction is also limited. Nevertheless, Japan has done a good job to have China even portionally accept e-commerce rules.

Beijing seeking framework excluding U.S.

The RCEP agreement is often explained as having been led by China. But such explanation is a misperception ignoring the history and realities of RCEP negotiations. Originally, ASEAN took the initiative in launching RCEP negotiations and ASEAN centrality was clearly mentioned in a joint statement issued after the RCEP signing. As ASEAN has bilateral free trade agreements with the other RCEP participants, the RCEP agreement represents their integration. Moreover, any large power has not forced its rules to the others during the RCEP negotiations. The talks have not really been led by China.

Nevertheless, it is true that China has hoped to see an early agreement on the RCEP not only because China felt upset about the TPP conclusion deemed by Beijing as a network of containing China but also because an Asian framework excluding the United States is politically valuable for Beijing amid the China-U.S. confrontation. Chinese commentaries on the RCEP agreement are full of insinuation against the U.S., boasting the agreement as amounting to “the victory of multilateralism and free trade.” Beijing even expressed interest in realistically impossible accedence to the TPP as a political gesture.

Japan reluctantly accepts RCEP

Why has Japan agreed to conclude the RCEP negotiations? In fact, Tokyo has not willingly agreed but rather postponed the agreement as long as possible. An early RCEP conclusion has been the most wanted by none other than ASEAN. Significant for ASEAN has been a centripetal force that promotes the integration of the 10-country association. Japan’s original thinking of bringing India into the RCEP as a counterbalance to China has failed as India refused to join the agreement. At a time when the U.S. Trump administration has seemingly been making light of ASEAN, Tokyo has wanted to prevent itself from being isolated by delaying the RCEP conclusion in a manner against the will of ASEAN. Japan’s isolation would have only pleased China. Tokyo has had no choice but to accept the conclusion of the RCEP negotiations.

The point now is how to deal with India that has withdrawn from the RCEP. Japan needs to support India economically as India is a key player for the Japan-advocated Indo-Pacific initiative. In this respect, Tokyo has come up with the Japan-Australia-India Resilient Supply Chain Initiative. On September 1, the three countries agreed on their joint statement to negotiate specifics of the RSCI. But the three-nation initiative would be meaningless unless it is joined by ASEAN. Japan’s diplomacy in persuading ASEAN to take part in the RSCI will be tested.

The U.S., for its part, has seemingly taken a wait-and-see attitude towards the RCEP agreement but might have been uneasy deep down. Historically, Washington has reacted quickly against any Asian framework excluding the United States. U.S. President-elect Joe Biden has noted that the U.S. would have to cooperate with other democracies to set trading and investment rules to counter China’s growing influence. I would like Washington to have a sense of crisis in the wake of the RCEP signing. I hope to see the sense of crisis having a positive impact on the incoming Biden administration’s attitude towards the TPP.

Masahiko Hosokawa is a professor at Meisei University and a former director-general of the Trade Control Department at Japan’s Ministry of Economy, Trade and Industry. He is also a Planning Committee member at the Japan Institute for National Fundamentals.