Excluded from Indo-Pacific deal, China pushes for trade deal with RCEP

US President Joe Biden, Indian Prime Minister Narendra Modi and Japanese Prime Minister Fumio Kishida attend the Indo-Pacific Economic Framework for Prosperity (IPEF) launch event at the Izumi Garden Gallery in Tokyo, Japan, on May 23, 2022.

Jonathan Ernest | Reuters

Amid the fanfare of US President Joe Biden’s new Indo-Pacific strategy, China flew under the radar and staged a high-level discussion on RCEP, the world’s biggest trade pact.

It came days after the Biden administration launched the Indo-Pacific Economic Framework, or IPEF – a partnership that involves 13 countries, excluding China, as the United States seeks to expand its political leadership. and economy in the Indo-Pacific region.

The Regional Comprehensive Economic Partnership (RCEP) meeting in the southern island of Hainan underscored analysts’ expectations that, instead of reacting or countering the IPEF, China is likely to press ahead with agreed trade pacts and take advantage of out-of-the-box tariffs and marketplaces. accessed.

“China will not take immediate or very targeted measures to respond to IPEF,” said Li Xirui, a trade scholar at the S. Rajaratnam School of International Studies at Nanyang Technological University in Singapore.

At the second RCEP Media & Think Tank Forum, held in Hainan’s capital, Haikou, the weekend after the IPEF announcement, non-governmental business experts from across the region gathered to discuss other ways to expand trade within the bloc.

China will likely continue to push the adoption of RCEP, as it grants member states huge market access, which the IPEF lacks.

Li Xirui

S. Rajaratnam School of International Studies, NTU

RCEP includes China and the 10-member ASEAN bloc, as well as Australia, Japan, South Korea and New Zealand.

Led by the Hainan government, the meeting also marked another provincial effort to respond to Beijing’s broader strategy of implementing RCEP since its launch earlier this year.

“In line with its support for multilateralism and globalization, China will likely continue to promote the adoption of RCEP, as it grants member states enormous market access, which IPEF lacks,” Li told CNBC. ..

She said China would likely respond to the United States on one of the its future economic forays into Asia-Pacific by expanding its economic dominance in the region and expanding its trade under the RCEP.

Beijing will also focus on its bids to join other large-scale trade deals, including the world’s second-largest trade pact, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Digital Economy Partnership Agreement. (DEPA), Li added.

China’s strategy will be IConsistent with how he and other states and political observers view IPEF — a non-trade deal and Biden’s geopolitical rather than economic tilt toward Asia-Pacific, Li added.

In late May, after the launch of the IPEF, former Malaysian Prime Minister Mahathir Mohamad criticized the Indo-Pacific deal and said it was a political decision by the United States to isolate China .

Malaysia is one of 13 countries that joined the IPEF which did not include China.

RCEP is the only mega regional trade deal that China is a party to, and China would probably point that out.

Heng Wang

Herbert Smith Freehills CIBEL Center

Trade scholar Heng Wang, who works at the Herbert Smith Freehills China International Business and Economic Law (CIBEL) Center at the University of New South Wales, also said China will continue to use the market access it has. has within the framework of the RCEP because they will deepen its presence in the region.

“RCEP is the only mega regional trade agreement that China is a party to, and China would probably point that out,” Wang said.

The threat of a competing trade deal by the United States remains a reality, however, said Henry Gao, an associate professor of law at Singapore Management University.

“In case anyone doubts the American view of IPEF as an RCEP killer, the White House has explicitly stated in the [IPEF] announces that: “Together, we represent 40% of the world’s GDP”, Gao said.

“Why [use] this statement when IPEF is not supposed to deal with market access? »

Gao pointed to the symmetry of comments from RCEP members, particularly China, who announced that RCEP accounts for 30% of global GDP. »

Major Chinese projects for RCEP

Meanwhile, China has already made progress in implementing RCEP since its launch in January, according to Li.

He outlined a plan for Chinese companies on how to expand trade and find opportunities through RCEP.

Beijing has set guidelines in six areas, including trade and manufacturing, and has encouraged the use of the Chinese yuan for commercial settlement of business transactions. Authorities also asked businesses to continue using its high-profile free trade port in Hainan, which was setting up an independent customs system.

Li, who has observed the implementation of RCEP in China, pointed out that at least 10 provinces, including Fujian and Zhejiang, have made extensive plans to use RCEP.

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Yunnan, for example, wants to increase exports of agricultural products, while Guangxi seeks to upgrade jointly operated industrial parts in Malaysia.

The governments of Guangxi and Fujian also want to build more industrial facilities in Vietnam, Malaysia and Indonesia.

Many provinces have pledged to provide a range of RCEP-related support services in intellectual property rights protection and trade dispute resolution mechanisms, Li said.

As for signing other trade agreements to potentially counter the IPEF, China is unlikely to sign any other bilateral or trilateral pacts in the region, such as concluding the China-Japan-Korea free trade pact, he said. Li said, citing China’s preference for “gradualism” or a slow reform approach to trade agreements.

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