The Role and New Issues of RCEP in the Promotion of East Asian Regional Cooperat

At the fourth Regional Comprehensive Economic Partnership (RCEP)leaders’ meeting on November 15, 2020, its 15 member countries,including 10 from the Association of Southeast Asian Nations(ASEAN) plus China, Japan, South Korea, Australia and New Zealand,officially signed the agreement on the RCEP. On January 1, 2022, the RCEP officially took effect for 10 countries that had submitted instruments of ratification, including Brunei, Cambodia, Laos, Singapore, Thailand,Vietnam, China, Japan, New Zealand, and Australia, followed by South Korea on February 1 and Malaysia on March 18. In the next stage, a more accurate comprehension of the RCEP, which serves better implementation of the agreement for greater regional economic integration, will greatly contribute to the restructuring of regional industrial and value chains and macroeconomic development of regional countries, and bring more policy benefits for businesses at the micro level.

RCEP Lays Foundation for Regional Sustainable Development

With East Asia as the most dynamic region having the greatest potential for the world economy today and in the future, the RCEP is integrating systemically important economies in the region, enabling them to overcome shortcomings of conventional “ASEAN+1” free trade agreements (FTAs), and for the first time remove the obstacles for industrial, value and supply chains within the region. This has laid a solid foundation for a unified regional market and for creating more economic benefits than previous “ASEAN+1”FTAs.

Improving regional trade and investment liberalization

As a modern, comprehensive, high-quality and reciprocal agreement,the RCEP not only involves traditional provisions such as trade in goods,trade in services, and investment, but also includes chapters on intellectual property, e-commerce, competition, small and medium-sized enterprises(SMEs), government procurement, and economic and technological cooperation. In terms of tariff concessions for trade in goods, the 15 member states have adopted the approach of “bilateral bids in pairs” and formed either “unified tariff concessions” (among Australia, New Zealand, Brunei,Cambodia, Laos, Malaysia, Myanmar, Singapore) or “country-specific tariff concessions” (among the seven other member states). These concessions are put together on a composite tariff reduction schedule. Generally, the member states pledge to gradually realize zero-tariff imports on 90% of tariff items over a transition of about 20 years. Tariffs on most products will be phased out from the agreement’s year of entry into force and over the next ten years.Agricultural products considered sensitive will also have gradually reduced tariffs. Among the various member states, China’s agricultural product liberalization level for other member states has basically achieved 92%.The figure is 96-99% for Australia and New Zealand, 91-93% for ASEAN members including Indonesia, Vietnam and Malaysia, around 60% for the least developed ASEAN countries such as Myanmar and Laos, and about 60% for Japan and South Korea.1Peng Yao, “RCEP Opens a New Chapter for Agricultural Cooperation in the Asia-Pacific,” Farmers’Daily, December 23, 2020.Therefore, 90% of agricultural products in most member countries will eventually have zero tariffs except Japan, South Korea and very few least developed countries. In terms of trade liberalization,there is a certain gap between the RCEP and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and other high-standard agreements. For example, the CPTPP requires members to eventually achieve zero tariffs on 95-99% of trade in goods. However,one must not ignore the fact that there are already 27 FTAs among RCEP members in this region, and most manufactured goods already have tariff reductions. Apart from unified tariff reductions among the 15 member states, more importantly, the RCEP has created an integrated tariff reduction catalog to help develop the level of regional trade in goods.

In addition to trade in goods, the RCEP has made high-level liberalization commitments in regional trade in services and investment.As a matter of fact, RCEP members have not only pledged to open up the above-mentioned areas beyond the existing “ASEAN+1” FTA commitments,but also to have greater transparency in market access policies by adopting a “ratchet mechanism” to prevent the level of liberalization from regressing and provide an important institutional guarantee for businesses in the region that are engaging in services trade and investment. For example, in terms of market access for trade in services, RCEP member countries have pledged a higher rate of opening-up than that in their respective “ASEAN+1” FTAs,intending to fully meet their negative list commitments within six years after the RCEP takes effect. China, for example, beyond its commitments in approximately 100 different subsectors for its WTO accession, has through the RCEP added commitments in 22 more sub-sectors such as R&D, management consulting, manufacturing-related services and air transportation, and increased the level of openness in 37 others including legal services, finance, construction and shipping. The level of China’s openness in these sub-sectors has reached the highest level among its commitments in other existing FTAs. Other RCEP members have also made high-level commitments in a number of sub-sectors of China’s concern, such as construction, real estate, healthcare, finance and transport.2“Interpretation of the RCEP Agreement by the Department of International Affairs, China’s Ministry of Commerce,” November 16, 2020, http://fta.mofcom.gov.cn/article/rcep/rcepjd/202011/43619_1.html.In terms of investment access, the 15 RCEP member countries have all made high-level liberalization commitments to investment access in the five industrial sectors of manufacturing, agriculture, forestry, fishery and mining.

Promoting a regionally integrated market

As early as 2012, the Guiding Principles and Objectives for Negotiating the RCEP was published to improve the transparency of member countries’trade and investment relations and optimize regional and global supply chains through facilitation measures. At present, the RCEP is adopting measures to improve the level of intra-regional trade and investment facilitation, reduce trade costs, and promote the formation of a regionally integrated market by integrating and optimizing rules of origin as well as trade and investment facilitation measures.

In terms of rules of origin, with Asia being the focus of multiple FTAs in the world, a large number of agreements have been concluded among economies in the region, but the intertwined and overlapping tariff concession arrangements and rules of origin have caused a serious“spaghetti bowl effect.” The RCEP, in theory, helps to reduce this effect,which is caused by multiple FTAs in the region, by integrating the tariff reduction arrangements and rules of origin in the four “ASEAN+1” FTAs.In terms of specific rules of origin, in view of past practices, single or strict rules are not conducive to businesses trying to use FTAs. Drawing on successful experience of the renewed China–ASEAN FTA, the RCEP has greatly enlarged the scope of application of the optional rules of origin,allowing businesses to choose between the Regional Value Content (RVC)standard and the Change in Tariff Classification (CTC) standard, thus enhancing the facilitation and flexibility of the rules of origin.3Shen Minghui and Li Tianguo, “RCEP: Progress, Impact and Prospect,” Northeast Asia Forum, No.3,2020, p.104.At the same time, the regional cumulation principle of origin is introduced to the RCEP, specifying that “goods and materials which comply with the origin requirements, and which are used in another Party as materials in the production of another good or material, shall be considered as originating in the Party where working or processing of the finished good or material has taken place,” and that “this review will consider the extension of the application of cumulation to all production undertaken and value added to a good within the Parties.” This allows the origin value components of products to be accumulated within the 15 RCEP member countries, and the value components from any member can be accumulated, which will significantly improve the utilization level of RCEP preferential tariffs. It must be noted that the RCEP has enriched the types of certificates of origin,allowing not only traditional certificates issued by officially authorized institutions, but also declarations of origin issued by approved exporters and declarations of origin issued by exporters or producers. The self-declared certificate of origin not only responds to the need of businesses,4Zhang Yunling, Shen Minghui and Liu Dewei, “Impact of FTA on Business Activities—Based on Questionnaire,” Journal of Contemporary Asia-Pacific Studies, No.1, 2010, p.26.but also helps reduce customs clearance time and trade costs.

Other trade and investment facilitation measures are reflected in the relevant articles of Chapter 4 (Customs Procedures and Trade Facilitation),Chapter 5 (Sanitary and Phytosanitary Measures), Chapter 6 (Standards,Technical Regulations and Conformity Assessment Procedures), Chapter 8 (Trade in Services), and Chapter 10 (Investment) of the agreement. To give a few examples, the RCEP not only strengthens the requirements for consistency and transparency in customs procedures, but also improves customs clearance efficiency by simplifying customs procedures and providing for pre-arrival processing and advance rulings. Where possible,perishable goods are to be released within six hours of arrival; authorized economic operators (AEOs) are provided additional trade facilitation measures related to import, export, or transit formalities and procedures.The RCEP encourages member countries to strengthen cooperation on standards, technical regulations, and conformity assessment procedures, and at the same time urges all parties to reduce unnecessary technical barriers to trade in these areas. In terms of investment, member countries are encouraged to simplify investment applications and approval procedures,establish investment facilitation measures such as one-stop investment service centers, and expand temporary entry of natural persons for installation and service personnel and their accompanying spouses and families. From an objective point of view, the level of RCEP trade and investment facilitation basically exceeds the level of commitments in the existing FTAs signed and implemented by member states. It improves the efficiency of intra-regional trade and investment, reduces trade costs, and helps promote regional development and an integrated market.

Improving environment for regional comprehensive development

As economic globalization develops, traditional trade is shifting to trade along value chains, but uncertainties concerning domestic regulations and policies in developing countries have increasingly become obstacles to value chain trade.5Gao Jiang and Sheng Bin, “Economics of the Evolution of International Trading Rules: From Market Entry to Integration of Regulations,” International Economics and Trade Research, No.5, 2019, pp.12-13.To this end, it is important for the RCEP to guide national governments to establish market operation systems with institutional norms and legal guarantees through regional economic integration mechanisms, to enhance value chain trade within the region.6Zhang Yunling, “Asia-Pacific Regional Relations and Mechanisms in Transition,” Foreign Affairs Review, No.3, 2018, p.5.The RCEP has high-standard regulations on e-commerce, intellectual property, competition policy, and other behind-the-border measures. For example, the RCEP continues to promote paperless trade, electronic authentication and electronic signatures,protection of online personal information, and tariff-free electronic transmissions. There are also specific bans on localization of computing facilities as a prerequisite for foreign investment as well as the prohibition of cross-border electronic transmission of corporate information. This is the first time that the Asia-Pacific has come to an agreement on high-standard e-commerce rules. The RCEP chapter on intellectual property includes 83 articles, making it the most informative and sophisticated chapter in the agreement, and the most comprehensive plurilateral set of rules to date on intellectual property in which developing countries in the Asia-Pacific region are participating. They cover copyrights, trademarks, geographical indications, patents, industrial designs, genetic resources, traditional knowledge and folklore, countering unfair competition, intellectual property enforcement, transparency, technical assistance, and other major intellectual property issues and new developments, to provide effective institutional guarantees for promoting innovation and development in the region. In addition, the RCEP carries out a relatively comprehensive regulation of competition policy, involving competition legislation, law enforcement cooperation, consumer protection, etc., with special emphasis on regulated law enforcement to lay an institutional foundation for creating a better environment for regional trade and investment.

Directions to Upgrade and Improve RCEP

In theory, the RCEP may enhance regional economic integration and promote regional economic development. However, its actual effectiveness in practice, especially the “sense of gain” of policy dividends for microenterprises, will depend to a considerable extent on the speed and extent of its implementation as well as its further upgrades and improvements in the future.

Enhancing trade and investment liberalization and facilitation

Although the RCEP has successfully achieved a balance between inclusiveness and high quality in various ways, some researchers may argue that its trade and investment liberalization is limited compared to the CPTPP.7Peter A. Petri and Michael G. Plummer, “East Asia Decouples from the United States: Trade War,COVID-19, and East Asia’s New Trade Blocs,” PIIE Working Paper 20-9, 2020, pp.6-9.Compared with the CPTPP agreement, the 20-chapter RCEP has not established chapters on state-owned enterprises, monopolies,environment, regulatory consistency, and transparency. Especially in some important chapters, there is also room for improvement. For example,the RCEP e-commerce chapter does neither address the treatment of digital products, source code, the location of cross-border data flows and computing facilities in financial services, nor anti-competitive practices,online dispute resolution and other matters related to the development and use of e-commerce. Rather, these areas are referred to future e-commerce dialogues. The RCEP chapter on government procurement does not clearly address commitments on market access, but a review clause is added to reserve space for further improvement of this chapter. It must be noted that the above-mentioned areas are basically behind-the-border measures, and the purpose of negotiating such rules is to achieve a mutually agreed minimum standards or practices through the coordination and integration of domestic regulations for fair competition.8Sheng Bin, “Meeting Opportunities and Challenges of New International Trade and Investment Rules,”Intertrade, No.2, 2014, p.7.As the in-depth development of global value chains is presently leading to major changes in global and regional trade and investment patterns, a reform of the trade governance system is overdue, while new rules of international trade based on global value chains are reflected mainly through behind-the-border measures. As the next phase of RCEP enforcement unfolds and intra-regional value chain trade develops, it is necessary for member countries to negotiate on the upgrading of these behind-the-border issues in a timely manner to better maintain the development of global value chains in the region.

On the other hand, there is a long transition period for the actual entry into force of many important RCEP rules. For example, in terms of trade in goods, in addition to differentiated tax reduction arrangements and transition periods, in accordance with Article 3.4 (2), the application of the cumulation system must still undergo a complete review by all the member states five years from the entry into force of the agreement,which will consider the extension of the application of cumulation to all production undertaken and value added to a good within the parties to the agreement. For the self-certification of origin, it is stipulated that 12 countries including Australia, Brunei, China, Indonesia, Japan and South Korea, shall allow exporters or manufacturers to issue declarations of origin no later than 10 years after the agreement comes into effect,while Myanmar, Cambodia, and Laos enjoy a 20-year transition period.In terms of trade in services, eight member countries including New Zealand, China, Thailand, Vietnam, the Philippines, Cambodia, Laos,and Myanmar have adopted positive list commitments in opening market for trade in services. In accordance with Article 8.12, Cambodia, Laos and Myanmar will submit a negative list commitment form within 12 years after the RCEP agreement’s entry into force and complete the positive-tonegative list conversion in trade in services no later than in 15 years after the agreement’s entry into force. Other countries will submit the negative list within three years and complete the positive-to-negative list conversion within six years. In the chapter on investment, in accordance with Article 10.18, the investor-state dispute settlement mechanism and the application of expropriation to taxation measures that constitute expropriation will be discussed no later than two years after the agreement’s entry into force,and the discussions shall be concluded within three years after they begin.In accordance with Article 11.79, member countries including Cambodia,Laos, Malaysia, Myanmar, the Philippines, Thailand, and Vietnam that have fully implemented Article 11.9 on multilateral agreements and Article 11.19 on sound signs, will have a transition period of 3-15 years. The transition period or phased implementation of varying degrees, although maintaining regional diversity to a large extent, will delay some policy dividends as well as the realization of unified regional trade rules and reduced trade costs.Therefore, in implementing the RCEP’s next stage, these areas must be reviewed in a timely manner, and the transition should be accelerated in different areas according to the situation, so that the corresponding policy dividends will be enjoyed by enterprises as soon as possible.

Better benefiting the developing member countries

Global value chains play an important role both globally as well as in Asia. As a matter of fact, more than two-thirds of world trade takes place through global value chains. The production of these traded products crosses borders at least once, or even multiple times, before their final assembly. This form of trade with numerous border-crossing voyages has become an important impetus for regional trade and the growth of many economies.9Global Value Chain Development Report 2019: Technological Innovation, Supply Chain Trade and Workers under Globalization, University of International Business and Economics Press, 2019, p.1.Using the Asian Development Bank (ADB)’s measurement based on the input-output data from many regions, Asian economies’participation in regional value chains increased from 46.6% in 2000 to 48.9% in 2018, and participation in complex regional value chains also increased from 23.4% in 2000 to 26.2% in 2018. Overall, the regional value chain participation rate in the 15 RCEP member countries was about 46.8% and the participation rate in complex regional value chains was 15.8% in 2018,10Jong Woo Kang, “RCEP Is a Gargantuan Trade Deal but Will Economies Be Able to Make the Most of It?” November 8, 2021, https://aric.adb.org/blog/rcep-is-a-gargantuan-trade-deal-but-will-economies-beable-to-make-the-most-of-it.both lower than the regionwide level. This means that 46.8% of trade among RCEP members involves different production stages in two or more economies, and 15.8% of their trade entails intermediate goods that are traded across borders two or more times. It can be concluded that, as an important part of the East Asian production network, the RCEP member countries’ participation in regional value chains is still lower than the Asian average and needs to be improved.

To be specific, value chain participation differs greatly between economies. The ADB has measured Asian economies’ participation in regional value chains and complex regional value chains separately. Brunei,Australia, Indonesia and Laos, as important suppliers of natural resources,have a higher degree of connection with other economies in the region,which is not only higher than the overall regional average of about 50%,but also higher than other Asian economies. Malaysia, Singapore and Vietnam have the highest participation rates on complex regional value chains, followed by South Korea and Japan, which are also higher than the Asian average of about 26%.11ADB, “Asian Economic Integration Report 2019/2020 Demographic Change, Productivity, and the Role of Technology,” November 2019, pp.10-12.In fact, RCEP economies such as Malaysia,Singapore, Japan, South Korea and Vietnam have deeply participated in the international division of labor in electronics, optical equipment,and transportation equipment in East Asian production networks, and semi-finished products of related industries are involved in several crossborder trades in the region, thereby increasing added value and helping each economy to benefit from the trade. However, for other RCEP member countries such as Laos, Cambodia, Indonesia and Thailand, their participation in complex regional value chains is lower than the Asian average, indicating that these economies have not fully participated in the international division of labor in East Asian production networks.

At present, the regional value chain linkages between RCEP member countries are weak, and their integration limited. Compared with the Asian average, there is room for improvement for RCEP member countries including Laos, Cambodia, and Indonesia to participate more in regional value chain trade, and especially complex regional value chain trade.Although participation of developing member countries in the division of labor along value chains depends mainly on their natural endowments,particularly their position in the international division of labor, which will not be easy to change in a short period of time, the RCEP helps facilitate the flow of production factors in the region and provides business sectors with a more convenient, transparent and free investment environment. It may improve the business environment of developing member countries,especially as a domestic and regional platform for the transformation of value chain structures, which helps least developed countries in ASEAN such as Cambodia to participate better in the division of labor on value chains.12Shandre Mugan Thangavelu, Shujiro Urata, and Dionisius A. Narjoko, “Impacts of the Regional Comprehensive Economic Partnership on ASEAN and ASEAN Least Developed Countries in the Postpandemic Recovery,” ERIA Policy Brief, No.1, 2021.Therefore, considering the important role of global and regional value chain trade in driving economic development, the deepening and development of regional production networks will be affected to a certain extent by the speed and efficiency of the implementation of RCEP’s measures on trade and investment liberalization and facilitation measures concerning market access,simplification of rules of origin, and rules of origin cumulation.

Utilizing FTAs more efficiently

Since the beginning of the new century, Asian economies have been leading the global rush for the negotiation and completion of FTAs.However, according to historical data, the utilization of FTA preferential tariffs in Asia is generally low when compared with the North American Free Trade Area. This indicates that the full policy effects of the Asian FTAs have not yet achieved their proper due, and businesses still can have more to gain from tariff reductions in the FTAs. For example, according to a multi-national survey in 2010 that involved 841 enterprises from Japan,South Korea, China, Singapore, Thailand and the Philippines, roughly 28%(237) had used preferential tariffs provided for in FTAs.13Masahiro Kawai and Ganeshan Wignaraja, Asia’s Free Trade Agreements: How Is Business Responding? Edward Elgar Publishing, 2011.The research based on certificates of origin data issued by the China Entry-Exit Inspection and Quarantine Association and the China Council for the Promotion of International Trade shows that, except for the China–Singapore FTA, overall utilization of preferential tariffs from FTAs signed by China is lower than 60%, and the export utilization of the much earlier China–ASEAN FTA was only 46%.14Han Jian, Yue Wen and Liu Shuo, “Heterogeneous Enterprises, Utilization Cost and FTA Utilization,”Journal of Economic Research, No.11, 2018, pp.165-181.A Japan External Trade Organization (JETRO) report also shows that in the 2018 fiscal year, the proportion of Japanese companies exporting to ASEAN countries that used FTAs was about 48.2%; the highest FTA utilization rate, 49.0%, was found with exports to Thailand,while the lowest FTA utilization rate, 30.0%, was found with exports to the Philippines.15Japan External Trade Organization, “JETRO Global Trade and Investment Report 2019,” July 30,2019, p.50.In 2018, Philippine businesses’ utilization rate of the Philippines–Japan FTA for imports was 16.6%; the utilization rate of the South Korea–ASEAN FTA for imports was 31.2%, and those of the India–ASEAN FTA, the Australia–New Zealand–ASEAN FTA, and the China–ASEAN FTA were 35.0%, 54.1%, and 62.7% respectively.16Francis Mark A. Quimba, Maureen Ane D. Rosellon, and Sylwyn C. Calizo Jr, “FTA Utilization of Philippine Imports,” PIDS Discussion Paper Series No.2020-5, November 2020, p.21.

In practice, there are many factors that affect FTA utilization. From the benefits angle, these include the degree of tariff reduction in the FTAs and the existence of alternative options from other preferential agreement arrangements; from the costs angle, these include the cost of obtaining the certificate of origin (it may be too time-consuming and too costly),the cost of compliance (it may be difficult to provide proof of origin), the customs’ subjective judgment on product origin, businesses’ lack of relevant FTA information, redundant rules of origin, etc.17Zhang Yunling, Shen Minghui and Liu Dewei, “Impact of FTA on Business Activities—Based on Questionnaire,” Journal of Contemporary Asia-Pacific Studies, No.1, 2010, pp.12-13.In recent years, the governments or related institutions of East Asian economies have stepped up efforts to publicize and promote FTAs. FTA awareness has greatly improved among Asian companies, and some economies are already providing certificates of origin promptly and free of charge. However, the RCEP may still face the challenge of under-utilization in its implementation phase.

First, tariff reduction of one product may vary in different FTAs, and companies tend to use FTAs which give larger tariff reductions. For example,studies have shown that tariff reduction in the China–South Korea FTA is greater than that in the RCEP, except for optical and measuring instruments and miscellaneous products, while in the China–ASEAN FTA plant and herbal products, food, beverages and tobacco enjoy significantly larger tax cuts than in the RCEP.18Han Jian, Yang Kai and Zou Ruirui, “A Study of Using Rule of Origin of RCEP Agreement in FTA Upgrading Strategy,” Intertrade, No.3, 2021, pp.70-71.Other conditions being the same, a company will naturally turn to China–South Korea or China–ASEAN FTAs rather than use the RCEP’s tariff preferential policies in bilateral trade.

Second, compliance cost is an important factor affecting FTA utilization. In theory, the cost of complying single or strict rules of origin is higher than that of selective rules of origin. Although the proportion of RCEP selective rules of origin is 65.8%,19Ibid., pp.67-68.which is higher than that of China–ASEAN and India-ASEAN FTAs, it is still lower than that of Japan–ASEAN (73.6%), South Korea–ASEAN (88.5%) and Australia–New Zealand–ASEAN (85.2%) FTAs.20Yoshifumi Fukunaga and Ikumo Isono, “Taking ASEAN+1 FTAs towards the RCEP: A Mapping Study,” ERIA Discussion Paper Series, January 2013.This may encourage companies to take advantage of the above FTAs for some products. Meanwhile, Japan,Singapore and other economies have joined FTAs such as the CPTPP, in which businesses may have obtained certificates of origin by self-declaration.The first-mover advantage of the CPTPP may lead some companies to abandon the RCEP.

Third, outstanding barriers may continue to impair RCEP utilization.Besides the lack of publicity and information on FTAs, there are other dilemmas caused by the lack of governance capacity among administrative agencies, such as the complicated procedures and low efficiency of handling certificates of origin by issuing agencies and the subjectivity of customs’judgment on product origins. International cooperation is very necessary in this regard. Different stages of economic development, incompatible issuance and certification systems or requirements, gaps in infrastructure development such as electronic offices or “single-window” will also affect the level of FTA utilization. For example, electronic certificates of origin are recognized in countries such as China, whereas some ASEAN economies only accept paper certificates, and enterprises have to go to the issuing agencies to obtain the documents. Therefore, as long as trading partners fall short of required standards, the FTA’s utilization level may be impaired.

Re-Examining Asian Regional Economic Integration

Looking back at the development of regional economic integration in Asia,which has been under the combined influence of multiple actors and internal and external factors, it has not been a smooth journey. The task of bringing the RCEP negotiations to a conclusion is far from an easy one.

The process of regional economic integration in Asia

As early as December 1990, then Malaysian Prime Minister Mahathir Mohamad raised the concept of an “East Asia Economic Group” (EAEG),hoping to unite East Asian economies to safeguard the interests of developing countries, especially regional small countries. Due to pressure from the United States, Japan did not explicitly voice its support for the idea, so that ASEAN could only turn the idea into the East Asia Economic Caucus(EAEC). However, the US still opposed the EAEC and then promoted Asia-Pacific cooperation with APEC as its main carrier to gradually replace the East Asian cooperation process. The Asian financial crisis in 1997 provided a new opportunity for East Asian cooperation. In December 1997, the first“ASEAN+3” informal leaders’ meeting was held as the start-up of East Asian cooperation mechanisms. In November 2000, then Chinese Premier Zhu Rongji launched the China–ASEAN FTA initiative, which received positive responses from ASEAN leaders. This move triggered a domino effect in the region followed by more “ASEAN+1” agreements with Japan, South Korea,Australia, New Zealand and India. The US also announced at the APEC summit in October 2002 that it would start free trade negotiations under its Enterprise for ASEAN Initiative based on bilateral talks.

With the rapid development of “ASEAN+1”, the idea of“ASEAN+3” once again became the focus of East Asian cooperation. In 2004, following the advice of the East Asia Vision Group (EAVG), the“ASEAN+3” leaders agreed to promote the East Asian Community through the East Asia Free Trade Area (EAFTA). An expert group submitted two feasibility reports in 2006 and 2009 respectively,introducing the vision of the East Asian regional trade framework.Meanwhile, Japan, in advancing its “Arc of Freedom and Prosperity,”proposed the initiative of Comprehensive Economic Partnership for East Asia (CEPEA), including Australia, India and other so-called democracies,to maintain US presence in East Asia and rein in China. In an interview with Japanese media at the end of 2004, then US Deputy Secretary of State Richard Armitage expressed US discontent with “ASEAN+3”21Richard Armitage, “Interview with Takao Hishinuma of Yomiuri Shimbun,” November 30, 2004,http://www.state.gov/s/d/former/armitage/remarks/39295.htm.and turned to the Asia-Pacific Free Trade Area to promote the process of Asia-Pacific cooperation. In 2009, the US joined the Trans-Pacific Partnership (TPP) in response to the East Asian cooperation process. The US participation and leadership in the TPP had a very significant impact on traditional East Asian cooperation. As Singapore, Brunei, Vietnam,Malaysia, and other ASEAN economies joined the TPP, the integrity of ASEAN encountered a huge threat. To safeguard ASEAN centrality and respond to the Asia-Pacific cooperation process under the TPP, ASEAN increased consultations with China and Japan and initiated the RCEP at the 18th ASEAN Economic Ministers Meeting in February 2011. In November 2012, East Asian leaders agreed to start RCEP negotiations.

Prospects for regional economic integration in Asia

Throughout the process of regional economic integration in Asia,there has been an imbalance between the influence of regional and extraregional countries.22Li Xiangyang, “‘The Missing Piece’ in Regional Economic Integration in Asia and Development Directions of the BRI,” Social Sciences in China, No.8, 2018, p.35.The far-reaching US impact on regional economic integration in Asia is undeniable, since the US and its alliance system dominate the security structure of the region, while it has also long been a major trading partner for Asian economies, providing a huge consumer market for Asian economic development. According to the ADB’s analysis of Asian trade in goods, the US has historically been the largest single consumer of final products produced in Asia, and its trade deficit can be understood as a contribution to the international community or as the guarantor of Asian economic development23Guo Dingping, Theory and Practice to Build an East Asian Community, Fudan University Press,pp.283-284.that helps overcome insufficient internal demand in the region. As a hegemonic power,the US bases its regional cooperation strategy on the philosophy of safeguarding its global interests against closed or exclusive regional economic integration, and preventing the emergence of any trade bloc whose economic size would be sufficient to challenge the United States. In practice, these strategic considerations are reflected in US indifference to ASEAN integration, warnings and vigilance about Japanese participation in East Asian cooperation, and even efforts to lead the TPP to respond to regional free trade agreements (“ASEAN+3” and “ASEAN+6”). The signing of the RCEP was less disrupted by the United States, largely because of the Trump administration’s disregard for multilateralism and the simmering situation of the 2020 US presidential election.24Chen Shaofeng, “Studying the Regional Comprehensive Economic Partnership from the Angle of East Asian Integration: Continuities and Breakthroughs,” The Journal of International Studies, No.3, 2021, p.26.

In the process of regional integration in Asia, Japan’s cooperation strategy can be understood as subordinate or reactive rather than an independent strategic behavior based fully on its own interests. Although Japan is one of the major economies in the region, there is no evidence of its leadership in East Asian cooperation.25Zhao Hongwei and Ye Lin, “China-Japan Relations in East Asian Regional Integration,” World Economics and Politics, No.9, 2010, p.36.During the first stage of East Asian cooperation in the 1990s, Japan, as a subordinate ally to the US in its foreign policy, was concerned that any deterioration in Japan-US relations would affect its trade with the US, and therefore it economically relied more on the APEC model of Asia-Pacific cooperation and its multilateral trading system instead of responding actively to the ASEAN-initiated model of East Asian cooperation. In the second stage of cooperation after the Asian financial crisis, when China rose as an emerging economy, Japan was deeply impressed by the joint efforts of China and ASEAN to promote East Asian cooperation. In spite of this, Japanese participation in regional cooperation was often just a responsive hedge rather than active construction. Here are a few examples: Japan did not initiate the Japan-ASEAN free trade negotiations until China–ASEAN free trade negotiations had already unfolded, and Japan entered into the “ASEAN+6” FTA initiative shortly after China expressed its support for the “ASEAN+3” initiative. Furthermore,before the completion of TPP negotiations and even before taking over the CPTPP in 2018, Japan never focused its trade negotiations on the RCEP.26Sun Li and Zhao Zehua, “Strategy Analysis on Japan Dominating the International Economic and Trade Rules Relying on Regional Economic Integration,” Contemporary Economy of Japan, No.1, 2021, p.88.Its subsequent increased engagement in RCEP negotiations can be explained by its intention to counterbalance pressure from the US-Japan bilateral trade agreement negotiations initiated by the Trump administration, to offset US trade protectionism and unilateralism.27Chang Sichun, “Evolution and Prospect of Japan’s Policy on the RCEP,” Journal of Northeast Asia Studies, No.3, 2020, p.54.

In the course of going forward towards Asian regional integration,Japan has always placed the importance of TPP/CPTPP above the RCEP,hoping for US return to the TPP/CPTPP after it announced withdrawal from the pact in 2017. A trade structure that includes the US can not only provide Japan with broader market access opportunities and economic benefits, but also help balance China’s strategic pressure and influence on Japan. Therefore, it may be more in line with Japan’s strategic interests to respond to China’s application to join the TPP/CPTPP after the US returns.In theory, the US may benefit from joining the RCEP or the CPTPP, but research shows that US participation in East Asian cooperation may cause its net imports to rise, as this kind of cooperation focuses more on free trade in goods, and therefore may cause an overall weakening of US economic wellbeing, which is obviously not an option for the US.28Wu Linyan and Li Zhongmin, “US Participation in East Asian Regional Cooperation and its Impact on China,” Journal of Finance and Trade Research, No.6, 2007, pp.69-70.Other research suggests that the US return to the CPTPP would currently not be easy as it must reconsider the trade terms for the environment, labor, and digital sectors, and align with the requirements of domestic politics. Given all this, any return of the US is rather unlikely during the first term of Biden’s presidency.29Jeffrey J. Schott, “China’s CPTPP Bid Puts Biden on the Spot,” September 23, 2021, https://www.piie.com/blogs/trade-and-investment-policy-watch/chinas-cptpp-bid-puts-biden-spot.Given its current focus on domestic affairs instead of seeking Trade Promotion Authority (TPA), the Biden administration will most likely not be engaged in negotiations for a comprehensive free trade agreement but instead focus on negotiating and signing a new framework agreement for trade and economic cooperation, such as the Indo-Pacific Economic Framework.30The White House, “Indo-Pacific Strategy of the United States,” February 11, 2022, https://www.whitehouse.gov/wp-content/uploads/2022/02/U.S.-Indo-Pacific-Strategy.pdf.Although the US has not disclosed the details of the Indo-Pacific Economic Framework, it has expressed its areas of concern, including digital trade,supply chain resilience, low-carbon and new energy, infrastructure, labor and environmental standards, trade facilitation, and transparency, which constitute a framework of multiple modules. The framework may take the form of multiple agreements or use a pattern similar to the US-EU Trade and Technology Council (TTC) to overcome the difficulties of package negotiations and allow negotiations on specific issues or modules. This arrangement differs significantly from the CPTPP in terms of issues and negotiation patterns. However, with the development of regional economic integration in Asia, especially the RCEP’s continued economic influence,the US will face increasing pressure to return to Asia economically, and the prospects and role of the Indo-Pacific Economic Framework remain to be seen. Along such a logic, in the medium term, the RCEP and the CPTPP will develop in parallel in the process of Asian regional economic integration,and their subsequent developments and changes depend to some extent on the adjustment of US regional cooperation strategy.

Conclusion

Relevant studies show that the RCEP may partially compensate for the negative impact of de-globalization on the world economy and promote the efficiency of Asian economies by better linking them in terms of technology, manufacturing, agriculture, natural resources, etc.31Peter A. Petri and Michael Plummer, “RCEP: A New Trade Agreement that Will Shape Global Economics and Politics,” November 16, 2020, https://www.brookings.edu/blog/order-from-chaos/2020/11/16/rcep-anew-trade-agreement-that-will-shape-global-economics-and-politics/.RCEP member countries must get their domestic policies prepared and strengthen international cooperation, especially in capacity building. For example, they must help less developed members build digital infrastructure to achieve data connectivity between the 15 states. They need to explore how to accelerate the agreement’s implementation in areas such as the rules of origin cumulation to ensure stable development of regional industrial and supply chains. They should initiate and upgrade negotiations in a timely manner to explore new international economic and trade rules and maintain the vitality of the RCEP. They must also actively enlarge membership on the premise of maintaining ASEAN centrality to give full play to the fundamental role of the RCEP in Asian regional economic integration.

As an important member of the RCEP, China attaches great importance to preparing for the implementation of the agreement. Before the agreement came into force, China had completed much preparatory work for the comprehensive and full implementation of RCEP obligations. In the next stage, China must take more active measures to unleash greater policy dividends of the RCEP agreement. China could make use of its domestic free trade pilot zones as a platform to test more than 200 soft obligations of the RCEP and then expand the experience nationwide. It can strengthen publicity efforts in the country and encourage companies to introduce their best practices and improve their awareness of the RCEP. It could also strengthen capacity building to improve services and reduce transaction costs of RCEP utilization. China may also refer to relevant provisions of the CPTPP and the Digital Economy Partnership Agreement (DEPA) to take the lead in exploring higher-standard economic and trade rules in domestic free trade pilot zones. Meanwhile, it can speed up the China–Japan–South Korea free trade negotiations in its free trade zone upgrading strategy,and lead future RCEP upgrade negotiations. Lastly, it can establish and improve the trade adjustment assistance mechanism, strengthen assistance and compensation for industries suffering losses from trade and provide vocational training for more individuals, to reduce the negative impact of trade and investment liberalization on the economy and society.