Understanding RCEP in Xi Jinping’s world trade game

Since the launch of negotiations in 2012, a few months into Xi Jinping’s presidency, China has been the leading force behind the Regional Comprehensive Economic Partnership (RCEP), which is in essence a free-trade agreement between the 10 members of the Association of Southeast Asian Nations and the six countries with which ASEAN has existing FTAs, namely China, Japan, South Korea, India, Australia and New Zealand.

The RCEP negotiations failed to wind up by the end of 2015 as initially planned. The city of Songdo in South Korea is to host the 20th round at the chief-negotiator level from October 17 to 28, just as the 19th National Congress of the Chinese Communist Party kicks off.

If the RCEP is accomplished in the near future, it will be the world’s largest free-trade agreement, covering a population of 3.5 billion and about 40% of world trade volumes, as per World Trade Organization data.

Thus far, the core agenda of the RCEP negotiations has covered trade in goods and services, investment, economic and technical cooperation and dispute settlement. The negotiators have generally regarded the RCEP as a favorable economic opportunity to integrate the region  further in global production networks and reduce the inefficiencies of the plethora of existing Asian FTAs.

The remaining challenges in the final negotiating rounds appear steep, more so in geopolitical terms than for exquisitely economic reasons. In particular, cross-border trust falters when the significant disparities of the participating countries in population and territorial size, as well as in terms of socio-economic development, emerge for complex foreign-policy issues, as in the South China Sea dispute and in the North Korea crisis.

Another significant challenge to concluding the RCEP is the still low harmonization level of trade policy attached to more than 20 bilateral FTAs among the so-called ASEAN+1 frameworks. Nevertheless, these remaining challenges do not seem insurmountable, especially since in August 2016 India removed one of the main technical causes of the negotiating standoff when it signaled flexibility to adopt a single-tier approach on tariff reduction in exchange for increased foreign direct investment (FDI).

Given that the Trans-Pacific Partnership (TPP) agreement is dead in the water after the US withdrawal, many see the RCEP as China’s first serious attempt to offer a geopolitical alternative to the American world order.

According to Beijing’s official position, the RCEP differs from the TPP as it does not aim to establish a new multilateral trade framework, but merely to consolidate the existing global standards on trade for their integration in the Asian economic relations.

At the same time, the Chinese leadership does not hide that promoting pan-Asian economic integration outside of the US control serves the purpose of carving greater geopolitical autonomy and flexibility into the global decision-making processes.

In the lead-up to the 19th National Congress of the Chinese Communist Party starting on October 18, this is the first in a series of pieces on the RCEP in the context of Xi Jinping’s world trade game. These briefs are edited excerpts from my research paper forthcoming on Geopolitica Rivista (Volume VI-1), a peer-reviewed journal published by the Italian Institute of Geopolitical Studies (ISAG).

This series seeks to understand whether and to what extent Xi’s China is leading the RCEP negotiations to pursue its own geopolitical paradigm shift in Asia, which is to avoid the creation of a regional anti-China alliance under US auspices in the short term, and to create an alternative to the American world order in the long term.