Editorial | Lessons from the Asia-Pacific trade deal
Analyses, so far, of the trade agreement signed on Sunday between 15 Asia-Pacific countries have been largely framed as a Beijing-manufactured geopolitical victory for China against the United States, which faltered on its Asian policy. Which may be true; at least, that’s one way of looking at it.
That reasoning, however, is limited. It fails to acknowledge the evolutionary history of the Regional Comprehensive Economic Partnership (RCEP), as the agreement is called, or the fact that its participants, some of which are close allies of America – notably, Japan, South Korea, Australia, New Zealand and Singapore – are capable of assessing what is in their own interest and how to pursue it without being dragged by China. They aren’t passive participants in the process.
From the vantage of the Caribbean, however, the RCEP reaffirms the logic of the integration project via the Caribbean Community and should be a prick to CARICOM’s leaders to fulfil their obligations so that the community can deliver on its promises. RCEP ought to be a reminder, also, of the lingering threats to multilateralism and the value of regional conglomeration in resisting its dissipation.
RCEP encompasses the 10 members of the Association of South East Nations (ASEAN) – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam – as well as Australia, China, Japan, New Zealand and South Korea. Between them, they account for 2.2 billion people, or 30 per cent of the world’s population, and 28 per cent of its output by value (US$26 trillion). The Peterson Institute for International Economics in the United States estimates that the trade deal will add US$186 billion to the size of the global economy and 0.2 per cent to the gross domestic product (GDP) of its members.
OPPORTUNITIES FOR CHINA
Conventional wisdom is that RCEP’s creation, which will significantly lower tariffs on most goods traded between its members (leading to their elimination over two decades), was facilitated by President Donald Trump’s decision to pull the United States out of the Trans-Pacific Partnership (TPP) trade agreement, upending Barack Obama’s “pivot to Asia”, as a strategy to counter China’s growing influence in the region. Mr Trump’s action, according to the narrative, left a vacuum which Xi Jinping filled, to China’s benefit.
Mr Trump’s geopolitics probably provided opportunities for China. Yet, that analysis isn’t the whole story. It misses the fact that ASEAN, as early as 2012, even as the Americans worked on the TPP, of which some of its members were partners, had itself begun to develop its own Asia-Pacific arrangement. China and its rival, India, were invited to join.
Indeed, many in the area felt that China was too important a player in the global economy to be left out of any significant trade agreement in the Asia-Pacific region. New Delhi, after several years at the table, dropped out in September, under pressure from domestic interests, who feared that India’s firms, especially those in manufacturing, would falter under the competition of free trade.
Others, however, friendship with the United States notwithstanding, see advantage in the pact. “At a time when multilateralism is losing ground and global growth is slowing, the RCEP shows Asian countries’ support for open and connected supply chains for trade and closer interdependence,” said Singapore’s Prime Minister Lee Hsien Loong.
There is no gainsaying Mr Loong’s observation about the erosion of multilateralism, especially over the four years of Mr Trump’s presidency, which raises significant policy issues for Jamaica and its CARICOM partners, as Joe Biden prepares to displace Mr Trump in the White House. While a Biden presidency will lead to a reversal of the Trump administration’s disengagement from some segments of its America First ideology, it isn’t foregone that it will, in all areas, act in a fashion that is in the best interest of Jamaica and its CARICOM partners.
Mr Biden may wish to tiptoe around the large protectionist constituency that Mr Trump will leave behind. The Caribbean, however, has to be clear, in the context of developments like RCEP, about what it expects from the US administration.
What happens at the World Trade Organization (WTO) is a case in point. Even prior to Mr Trump, America complained about the supposed unfairness of the WTO dispute rulings. It pushed for a ‘reform’ of the organisation. The work of the WTO has long been gummed up. This month, despite her strong support, the selection of Nigeria’s Ngozi Okonjo-Iweala as the WTO’s new director general was frozen by the United States because of its preference for South Korea’s Yoo Myung-hee.
The aim of WTO members, obviously, is to maintain the status quo until the Biden presidency. CARICOM, via back channels, should be telling Mr Biden what this region believes to be in the best interest in matters of international trade, globalisation and multilateralism – with a reminder that the people of this region look very much like those American voters who helped him cross the election and whose backs he promised to have.
At the same, CARICOM’s leaders must themselves make sure that the community works.