The Regional Comprehensive Economic Partnership (RCEP) represents an important riposte to the perceived rollback of multilateralism in the global economy, senior figures told an Asia House webinar, held in partnership with CKGSB.
Fifteen economies across Asia, including China, Japan and ASEAN, are signatories to RCEP, which came into force on 1 January 2022. The deal covers roughly 30 per cent of global GDP and a third of the world’s population.
“The significance and consequence of RCEP cannot be overstated,” Dr Xiang Bing, Founding Dean and Professor of China Business and Globalization at CKGSB, told the forum, held on 13 January, during a keynote address. “RCEP should be appreciated, especially with the ongoing wave of protectionism and anti-globalisation,” he said.
The deal reflects “Asia’s response and contribution to promoting free trade and globalisation,” Dr Xiang added.
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The Dean’s comments were echoed by former Indonesian Trade Minister Gita Wirjawan, who said RCEP sends an important message. “We’ve seen the death of multilateralism in the last decade,” Wirjawan said, highlighting the recent rise of protectionism throughout the world economy. RCEP, however, shows “our ability to re-multilateralise in a much-needed way.”
The deal could also reshape the geopolitical dynamic in the Asia-Pacific by strengthening trade and investment bonds, according to Anna Robeniol, Advisor to the Secretary-General of ASEAN and the Deputy Secretary-General for the ASEAN Economic Community. “The changes that RCEP brings to the geopolitical landscape in the region will be good for businesses operating not only inside the region, but outside too,” she said.
RCEP’s capacity to ease regional tensions was emphasised by Andrew Sheng, former Central Banker, HKMA & Bank Negara Malaysia, who identified the value in pushing for free trade and removing barriers – particularly investment barriers – at a time “when geopolitical tensions are growing.”
“RCEP could also become a back channel in which more people are able to discuss and build bridges together rather than trying to cut ties,” he said.
China and Japan, for example, will see an easing of duties due to the deal which could strengthen bilateral ties within RCEP’s multilateral framework, according to Tetsuya Watanabe, Vice-President, Research Institute of Economy Trade, and Industry.
“RCEP will provide a sort of FTA arrangement within the mechanism,” he said, adding that the deal “reduces – bilaterally, between Japan and China – many tariff barriers across cars and component products.”
Doubts and challenges remain
However, some doubts around RCEP endure in the region, with Indonesia yet to ratify the deal. For Shinta Kamdani, CEO of Indonesian giant Sintesa Group, this is a cause for concern. “We think it’s a good deal, but we are worried about our late ratification,” she said. “We think the cost of this delay will impact Indonesia.”
“Studies have found that joining RCEP could cost Indonesia by a greater trade imbalance of almost US$500 million, but it will also generate up to US$1.52 billion in exports and so forth.”
Robert Yap, Executive Chairman, YCH Group and President of Singapore National Employers Federation, highlighted the element of uncertainty around the deal. “Moving forward with RCEP, we do not know if it is going to be more a plus or a slight minus,” he said. “But on the whole I think it is more plus than minus. RCEP gives us better access and makes shifting supply chains across borders more seamless.”
Moving supply chains is a downside risk that China sees in its RCEP membership, particularly in terms of job losses across manufacturing, according to Tao Zhigang, Associate Dean for MBA Program, Executive Academic Director for Business Scholars Program, Professor of Strategy and Economics, CKGSB.
“Indonesia’s trade deficit against China will drop when Chinese factories relocate to Indonesia,” he said. “There will be job losses in China.”
“The other challenge for China is that, in high-tech segments, they will be facing import competition coming from Japan and Korea.”
However, overall RCEP will be seen as a positive for China as it works towards greater multilateralism, Professor Tao said, because China “is a true believer in globalisation.”
An engine for growth
Ultimately, there was broad optimism and support across the panellists for RCEP and its potential impact on Asia and beyond, especially given the challenges of COVID-19.
“We expect RCEP to be a key engine for growth that could significantly contribute to the region’s post-pandemic economic recovery efforts,” Robeniol said.
Moderated by former UK Minister for Asia Pacific, Jeremy Browne, the discussion provided Asia House’s network with insights on RCEP’s geopolitical and economic implications from some of Asia’s leading thinkers on trade and investment.
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