RCEP is now front and center

As the year draws to a close and I reflect on my two years column writing for China.org.cn, I realize it's time for my end of the year columns. 2016, as everyone knows, has been an annus horribilis for the liberal financial order.

In a year which started with Brexit, went through Filipino bandwagoning with China, and ended with Donald Trump being elected president of the United States, it is only prudent for one to say that the post-cold war consensus of trade and free market liberal order is arguably over.

Brexit and the rise of Trumpism are, however, not the cause, but the manifestations of an economic backlash to globalization in the Euro-Atlantic region. And it won't stop their either. So, here, let's take a look at the chief economic development that will be at the forefront for policy makers and which will have ramifications for international relations in the Asia-Pacific.

Firstly, TPP is going to a headache. The transpacific partnership, which is likely dead with the rise of Trump, will now possibly be replaced by some other trade deal. This is arguably going to be the biggest development next year, as Japanese PM Abe said that if the TPP falls apart, there's no question Japan would like to be a part of the Regional Comprehensive Economic Partnership (RCEP), which already includes the potential seven TPP countries, all 10 ASEAN members and major Pacific economic powers like Australia, New Zealand, China, Japan, South Korea and India.

Australian Foreign Minister Julie Bishop echoed the same sentiment, saying that if the TPP fails, the vacuum will be filled by RCEP. "We are fully committed to the RCEP negotiations, an early signing of that agreement and its operationalization," said Indian foreign ministry spokesman Vikas Swarup. China is also separately leading a Free Trade Area of the Asia-Pacific initiative.

Not all is good, however; after Brexit and Trump there's an increasing wariness about liberal visa processes, and Singapore, New Zealand and Australia are also worried about migrants from China and India. That fear needs to be urgently addressed.

The fundamental difference between TPP and RCEP is this. TPP wants to do away with tariffs and cut non-tariff barriers like state subsidies and wants countries like Vietnam and Malaysia to start reforming urgently. RCEP has no rules as such, even though on aggregate RCEP controls over 30 percent of world's GDP and half of the population. RCEP on the other hand has no strict criteria with state controlled and overseen enterprises. In the strangest irony, RCEP will perhaps force U.S. industries to outsource more, as a strange consequence of Trumpian protectionism.

There's another unlikely ramification of RCEP. "The collapse of the TPP agreement may galvanize momentum for the successful conclusion of the RCEP, with China and ASEAN playing central roles in strengthening the APAC trade architecture," IHS Global Insight's Asia-Pacific chief economist, Rajiv Biswas, was quoted as saying.

This means a new geopolitical reality. The ultimate geopolitical strategy is always based on economic mileage. With the death of TPP, Chinese economic power will be greater and smaller countries will pivot to Chinese-led trade pacts. This means, in a curious way, the pivot to Asia will be dying as well. The biggest challenge therefore is to navigate carefully, and if China seeks a geopolitical role in the Asia-Pacific region, it should make RCEP its priority and seek to coalesce nations under the economic and trade umbrella in the vacuum inevitably left by U.S. retrenchment.

Sumantra Maitra is a columnist with China.org.cn. For more information please visit:

http://www.china.org.cn/opinion/SumantraMaitra.htm

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