RCEP and Indo-Pacific initiatives play second fiddle

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The Jakarta Post - 1 July 2019

RCEP and Indo-Pacific initiatives play second fiddle
By Linda Yanti Sulistiawati and David K. Linnan

At the ASEAN Summit on June 20 to 23, President Joko “Jokowi” Widodo tried to draw the attention of his fellow regional grouping member countries to two key matters: completion of negotiations over the Regional Comprehensive Economic Partnership (RCEP) and acceleration of negotiations on the “Indo-Pacific” as an Indonesian cooperation initiative to be adopted by the group (The Jakarta Post, June 20).

Why are they important for Indonesia and, especially, ASEAN?

Behind all of this lies a tangled web of politics and economics that existed even before the trade dispute between China and the United States. The Doha Development Round of the World Trade Organization as the keystone for a multilateral trading system has remained unfinished after more than 15 years. Meanwhile, the so-called trade war has been going on for two years.

The RCEP as a superregional free trade agreement (an FTA permissible under Article XXIV of the General Agreement on Tariffs and Trade, but outside traditional ideas about multilateral trade) formally aimed to broaden ASEAN’s engagement with its individual FTA partners, namely Australia, China, India, Japan, South Korea and New Zealand.

As a superregional FTA, the RCEP is intended to deliver benefits through potential improvements in market access, more coherent trade facilitation and regulatory rules and cooperation. Six years into RCEP negotiations, President Jokowi said he is still convinced that ASEAN would be able to withstand the adverse impacts of the US-China trade war if the group is united under the RCEP.

The RCEP is typically understood to represent China’s answer to the Trans Pacific Partnership (TPP) that was actively pursued by the US during the administration of then-president Barrack Obama. It represents a Chinese choice for economic diplomacy over the US’ more rules-based trade liberalization efforts. After the TPP died early in the President Donald Trump’s administration, the RCEP moved to the fore in Asia-Pacific region, as a superregional economic partnership in the form of an FTA within the Indo-Pacific region.

The RCEP focuses on economic issues, while Indonesia’s Indo-Pacific initiative for cooperation concentrates more on geopolitical issues. The Indo-Pacific concept was developed in recognition of the need for ASEAN to respond with a united front to emerging regional issues, thereby preserving ASEAN’s centrality.

There is a subtle difference between the concepts of the “Asia-Pacific” and the “Indo-Pacific”, which literally shifts the focus from Northeast Asia to Southeast Asia and even goes as far as the Indian Ocean. Rather than letting other parties dictate the direction of Asia as a whole, ASEAN in the geographic center of the Indo-Pacific seeks to maintain its centrality by articulating a road map for political cooperation in the region.

Jokowi further said that the concept would provide ASEAN a new direction for cooperation with its partners. Through this concept, the President expressed optimism that ASEAN unity and centrality would remain intact.

The underlying issue facing both with the RCEP and Indo-Pacific initiatives is the crossover between politics and economics. In this regard, we need to be cautious about several issues.

First, Indonesia and ASEAN should anticipate whether they can achieve the political recognition of being central to the region at the level of diplomacy, of being a shining beacon in the Indo-Pacific, or if they should pursue a less noble-sounding economic success.

Both approaches seem great in the current political climate, but the world is changing at an increasing speed (even China is now automating its factories).

There will be challenges involving economic and technological advances, over the FTA versus a multilateral trading system, etc., facing ASEAN.

Traditional exports of goods-led development (from athletic shoes to crude palm oil) provided developing countries an economic stake in the multilateral trading system. However, what of a prospective world of artificial intelligence (AI), more highly automated factories (fewer jobs for ordinary people) and expanding services (which tend to advantage the highly educated in employment)?

The RCEP might seem like a good partnership for the next decade to expand trade in goods, but two decades from now the economic landscape is probably going to look very different. Considerations like climate change, carbon taxation, etc. aside, the internet and the digital economy are hardly 20 years old, while the “sharing economy” (such as Go-Jek, etc.) is scarcely five years old. How many successful companies are now re running their mid-1990s business plans to the exclusion of intervening structural economic changes?

Second, there remain major problems in the South China Sea between China and several ASEAN members. China maintains its approach of bilateral discussion with each disputing country, rather than conforming to international law and multilateral agreements (such as the United Nations Convention on the Law of the Sea) or arbitration awards. So Indo-Pacific efforts should be understood against the background of what has been or is happening in dealing with China on the South China Sea issues.

Depending upon one’s perspective, the RCEP’s focus on economic diplomacy as opposed to the rules-based approaches pursued by the TPP 11 (meaning the TPP as concluded without the US) may illuminate the future
direction also under the RCEP.

Third, there may be some confusion in terms of implementation of the Indo-Pacific initiative versus ASEAN’s traditional approach to a rule-based order. Indonesia’s suggested Indo-Pacific concept is based on the principles of being “open, transparent and inclusive, promoting the habit of dialogue, promoting cooperation and friendship and upholding international law, while ASEAN will be the centrality of Indo-Pacific region”.

ASEAN insists on the “ASEAN way” of rule-based order, which, however, in practice generally means resolving issues while respecting the cultural norms of Southeast Asia. There is a strategic emphasis on compromise, consensus and consultation in the informal decision-making process, which naturally prioritizes a consensus-based, non-confrontational way of addressing problems.

The Indo-Pacific initiative might lean toward transparency and international law, but ASEAN traditionally has used other strategies to resolve disputes. So is it more a reaction to the unfinished South China Sea business, or changes to the “ASEAN way”?

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