Donald Trump鈥檚 presidency may have indirectly contributed to the quick establishment of the RCEP 鈥� now the world鈥檚 largest trading bloc. If this trade deal is to be the new face of the post-COVID-19 world, ASEAN and the EU will have an important role to play in the global balance of power.
After years of negotiations, on November 15, 2020, fifteen nations signed the Regional Comprehensive Economic Partnership (RCEP). Comprising of 10 Southeast Asian countries, as well as South Korea, China, Japan, Australia and New Zealand, the RCEP is now the world鈥檚 largest trading bloc, covering nearly a third of the global economy. The deal excludes the US, which, under Mr. Trump, withdrew from the rival Trans-Pacific Partnership (TPP) back in 2017. In 2019, India also withdrew from the RCEP deal, citing concerns of dumping of manufactured goods from China, as well as agricultural products from Australia and New Zealand.
What does this mean for the balance of economic power in the post COVID-19 world?
The significance of the RCEP agreement cannot be understated. In terms of size, this new trade bloc regulates a market bigger in size than the existing trade agreements between the US, Mexico and Canada or between the 27 EU member countries. Continued economic growth among its members, particularly China and Indonesia, has been projected to increase the combined GDP of the RCEP members to over US$100 trillion by 2050.
For some observers the absence of the US and India in RCEP raises concerns that China will become the sole dominant trade power within the trade bloc. Others' highlight the positive signal that RCEP sets after years of stagnant or decreasing international and multinational trade relations.
Fact is, that RCEP certainly carries the potential to lift millions more people out of poverty and establish prosperity in the region; the Peterson Institute for International Economics estimates the deal could increase global national income by $186 billion annually.
The other economic powerhouses, namely the US and the EU, will have to react.
Just at the eve of the RCEP signing, US Secretary of State Mike Pompeo, while touring five Asian nations, including Sri Lanka, India, Maldives, Vietnam and Indonesia, reaffirmed his country鈥檚 extension of Indonesia鈥檚 inclusion in the US鈥檚 Generalized System of Preferences (GSP).
The German government, heading the largest economy of the EU, announced its new Indo-Pacific policy guidelines earlier in October. The document emphasizes the intention to increase cooperation with like-minded countries in the region and singles out the Southeast Asia bloc ASEAN as well as India and Australia as the country鈥檚 future cooperation partners to be focused on. It is a clear signal that Berlin and, by the extension of its current EU Council Presidency, the EU are able and willing partners in the effort to maintain rules-based open markets and free trade.
It is notable that, at the Asia-Pacific Conference of German Businesses (APK) Digital 2020 held on October 19, the Indonesian Coordinating Minister of Maritime Affairs and Investment, Luhut B. Pandjaitan, as well as the Indonesian Coordinating Minister of Industry, Airlangga Hartarto, both welcomed the Indo-Pacific guidelines as an affirmation of Berlin and Jakarta鈥檚 shared interest in peace and security.
The next concrete opportunity in moving forward is the ongoing negotiation of the Comprehensive Economic Partnership Agreement (CEPA) between Indonesia and the EU. Concluding this process will show if both sides are really willing to take the cooperation to the next level.