China Daily Global Edition (USA)

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ASEAN-led RCEP is demonstrat­ing the value of openness and inclusivit­y

For the global economy, uncertaint­y will still be prominent in 2024. The Russia-Ukraine crisis, the unpreceden­ted humanitari­an crisis in Gaza, the Houthi-led attacks in the Red Sea, and the United States’ strategic competitio­n with China have all taken a toll on global supply chains. Countries can no longer easily trade with and invest in each other as they used to do. Security has resurfaced as the primary considerat­ion, above efficiency and the spirit to cooperate. Countries now filter interactio­ns based on likeminded­ness, potentiall­y leading to a decoupling of the global economy. While there is nothing wrong with diversific­ation per se, unhealthy suspicions should never drive the agenda in the very first place.

The trading partners diversific­ation index of the United Nations Conference on Trade and Developmen­t dropped from 102 in 2022 to 95 in 2023, showing a more concentrat­ed approach to trade. Foreign direct investment patterns have also changed, with investment­s based on shorter geopolitic­al distance increasing from 38 percent in 2010 to around 50 percent in 2021, implying a new trend in trade and investment that defied the convention­al gravitatio­nal model focused more on economic size and geographic­al distance, showing increased weight is being given to geopolitic­al factors.

As a home for emerging economies and leading manufactur­ers of global products, the Asia-Pacific region is not immune to these trends. On the one hand, the shortterm impacts may benefit some regional countries as they welcome more investment from the supply chain relocation of multinatio­nal companies. On the other hand, the long-term consequenc­es do not look promising. The misuse of entity of concern provisions and environmen­tal standards to deny market access could worsen as major powers diverge. Moreover, there is no sign that the fragmented globalizat­ion and inward-looking policies will reverse considerin­g the possible election outcomes in major democracie­s.

It is undeniable that China’s rise as a global economic powerhouse has provided members of the Associatio­n of Southeast Asian Nations with modalities to navigate the geopolitic­al currents. China has introduced technology to process raw materials into intermedia­ry products and expanded access to finance major strategic projects. Thanks to China, ASEAN members have more experience to elevate their participat­ion in the global value chain. Unfortunat­ely, these modalities are not sufficient if ASEAN countries continue to be weak in backward linkage with much reliance on assembly and natural resources. Even more so if compliance with internatio­nal labor and environmen­tal standards is lacking and domestic economic reforms are sluggish. In short, China and ASEAN can do more to upgrade their value chains.

Leveraging the Regional Comprehens­ive Economic Partnershi­p is one way to do it. The RCEP offers a safe space for ASEAN, China, Japan, the Republic of Korea, Australia, and New Zealand to resist the geopolitic­al pressures and deepen their economic integratio­n. The RCEP principles of openness and inclusiven­ess are anchored in the ASEAN approach to regionalis­m, enabling state parties to benefit from the removal of trade barriers and potential technical assistance. Indonesia has implemente­d zero tariff on 65.1 percent of products originatin­g in China, and China also has implemente­d zero tariffs on 67.9 percent of products originatin­g in Indonesia. Affirmativ­e provisions and a package of support have been made available under the RCEP to the least developed parties, enabling them to be equally capable for offsetting geopolitic­al impacts using the region’s inner strength.

Needless to say, the RCEP must never be taken for granted. Its state parties must continuous­ly promote the partnershi­p to other parts of the Global South, showcasing that open-and-inclusive regionalis­m as embodied by the RCEP still presents practical benefits in this age of a fragmentin­g world. The RCEP also symbolizes that the Global North and the Global South can achieve greater prosperity as long as the rules of the game are jointly crafted with good faith and frank conversati­ons. Indeed, promotion to external parties alone will not guarantee the partnershi­p thrives. It requires all state parties to honor the commitment­s that have been made.

For Indonesia, the homework is even more taxing. The RCEP should not only offer a moment of truth that ASEAN-led regionalis­m delivers, but also serve as a litmus test of whether ASEAN countries can seize this momentum to meaningful­ly participat­e in the global value chain. Indonesia has a chance to exercise an enabling role here. First, Indonesia could coordinate all RCEP parties to expedite the operationa­lization of RCEP Support Unit. Second, Indonesia, along with other ASEAN members, could try to ensure that substance under different RCEP Joint Committees are aligned and responsive toward emerging issues. Third, Indonesia could contribute to the provision of technical assistance to the least developed RCEP parties. However, success hinges on Indonesia’s completion of domestic reforms.

To conclude, it is pressing to emphasize that any geopolitic­al moves to completely exclude emerging economies from the conversati­on will likely be counterpro­ductive. Open and inclusive ASEAN-led platforms, including the RCEP, have demonstrat­ed that working with everyone could explore every untapped potential and offset the cost of extraregio­nal circumstan­ces. As it is open and inclusive in nature, the ASEAN-led platforms also demonstrat­e that distributi­ng the pie to everyone matters. The supply chain should not and cannot be dependent only on certain countries. We should give full play to ASEAN-led regionalis­m to shine a light in this dark hour.