Currently, the Regional Comprehensive Economic Partnership (RCEP) is the world’s largest free trade agreement (FTA) outside of the World Trade Organization (WTO). It is composed of the ten member states of the Association of Southeast Asian Nations (ASEAN) representing Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam as well as ASEAN’s five FTA partners covering Australia, China, Japan, New Zealand and Republic of Korea.
As such, RCEP is viewed be much larger economically and demographically than the European Economic Community (EEC) of the European Union (EU) known to be the trailblazer of regional economic integration in the aftermath of World War II. But now in the post-pandemic world, RCEP has overtaken EEC in terms of population coverage and contribution to the global Gross Domestic Product (GDP).
The World Bank affirms that RCEP encompasses a huge market of 2.31 billion people representing one-third of the global population. (1) Economic activities among RCEP members can contribute to almost US$ 26 trillion or 30 percent of the global GDP compared with the EU contributing only less than 20 percent of the global GDP. The RCEP contribution to global trade in goods and services can even reach around US$13 trillion or 31 percent of global foreign direct investment flows. Thus, the RCEP is a very powerful enabler of global economic shift to the Asia Pacific region, which is currently at the epicenter of regional economic integration in the world.
There is no doubt that the RCEP will benefit its member states. The Philippine Senate ratified the RCEP on 21 February 2023 with the enormous expectation that this regional economic arrangement can contribute to the country’s aspiration for economic prosperity as it recovers from the harsh effects of the COVID-19 pandemic.
According to Philippine Institute for Development Studies (PIDS), a state-run think-tank, the Philippines GDP would increase by 2 percent through its active participation in the RCEP. (2) The Asian Development Bank (ADB), on the other hand, reveals that the RCEP can increase the Philippines’ export by 3.7 percent by 2030 while the Geneva-based International Trade Center discloses that the country has an estimated US$27.8 billion of unrealized export potential to RCEP countries over the next five years. (3)
Though the RCEP offers many economic opportunities for its current members, the World Bank underscores that “spillover effects from RCEP also have the potential to offer benefits for participating and non-participating countries.” (4) Hence, the RCEP can also serve as the key driver of post-pandemic global economic recovery that can benefit the people of the world.
To ensure the attainment of these economic expectations from the RCEP, it is very essential to pay attention to two major issues: supply chain stability and regional security.
There is a view that supply chain stability refers to “the ability for a supply chain to achieve key performance targets on a consistent basis.” (5) It aims to measure “how well a supply chain deals with the ups and downs of market volatility”. (6) Thus, supply chain stability rests heavily on the efficiency and effectiveness of supply chain management, an intricate process of “how raw material becomes a finished product and is moved to the end-user through a network of people and businesses”. (7)
If we do not pay serious attention to supply chain stability, this can disrupt the achievement of the RCEP’s many economic objectives not only for the region but also for the whole world. Regional security and geopolitical issues can also affect the achievement of RCEP noble objectives to pursue regional economic integration. Regional security is inextricably linked with supply chain stability.
One crucial issue is the ongoing major power rivalry between China and the US. The current state and future direction of China-US relations will define not only the security of the RCEP region but also of the international community. The US is currently concerned with the growing economic influence of China in the Asia Pacific region because of the tremendous potential of the RCEP to unleash regional economic prosperity. Hence, the US launched in May 2022 its own brand of regional economic integration through the Indo-Pacific Economic Framework for Prosperity (IPEF).
The main purpose of the IPEF is to strengthen US ties with countries in the Indo-Pacific region in order to respond to China’s growing influence in the region. Interestingly, IPEF participants overlap with countries in the RCEP region. Led by the US, the IPEF region includes Australia, Brunei, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. The IPEF represents 40 percent of the global GDP, which is said to be larger than the RCEP.
Apparently, the RCEP and the IPEF mirror the unnecessary but seemingly inevitable China-US major power competition. If the competition develops to be healthy and peaceful, that is good for regional and even international security. But if the competition deteriorates into a military conflict, the situation can disrupt not only the RCEP but also the IPEF arrangements for regional economic integration. It is therefore in the interest of the RCEP members to see China and the US establishing a more peaceful and more cooperative model of great power relationships.
Another regional security issue that can affect the RCEP is the situation in the Taiwan Strait. Maintenance of peace in the Taiwan Strait is very important for supply chain stability in the RCEP region. Prolonged security tensions in the Taiwan Strait can heavily disrupt trade and other commercial activities in the region and beyond. Thus, participating RCEP countries need to adopt a reliable regional security agenda that can advance conflict avoidance and preventive diplomacy in the Taiwan Strait. The RCEP countries can support existing efforts of China and Taiwan towards peaceful resolutions of their ongoing conflicts.
The situation in the South China Sea (SCS) can also affect the RCEP process. All parties in the SCS are members of the RCEP. Other RCEP members are stakeholders and user states in the SCS. Thus, the RCEP needs peace and stability in the SCS because this body of water is one of the world’s maritime superhighways carrying one-third of global shipping.
The economic prosperity of the RCEP region is closely tied to the SCS. The economic security of the RCEP depends on the security of the SCS. Thus, the RCEP can provide the economic approach to peacefully manage the SCS disputes by supporting efforts towards functional cooperation as mandated by the 1982 United Nations Convention on the Law of the Sea and reaffirmed by the 2002 Declaration on the Conduct of Parties in the SCS as well as in the ongoing negotiation for the conclusion of the Code of Conduct in the SCS.
The RCEP also needs to pay closer attention on the situation in the Korean Peninsula. Tensions in this region have impacts on global supply chain affecting the RCEP economic activities. Deterioration of the security situation in the Korean Peninsula has the huge potential of creating a supply chain disaster. Thus, the RCEP needs to pursue a regional approach that can contribute to the de-escalation of conflicts in the Korean Peninsula.
It is also imperative for the RCEP members to address the persistent threat of international terrorism and transnational crimes besetting the region. The 2023 Global Terrorism Index have identified most of the RCEP countries in the list of nations most impacted by terrorism. The Stockholm International Peace Institute has also revealed that all countries in the RCEP region are also affected by transnational organized crimes, which pose threats to global public goods and supply chain stability. Threats of maritime piracy, smuggling and trafficking of humans, drugs and illegal weapons as well as proliferation of cybercrimes in the digital age/e-commerce are just some of the transnational crimes that can undermine the economic goals of the RCEP. Thus, it is very essential for the RCEP to develop a regional strategy to combat international terrorism and transnational crimes.
Most importantly, the RCEP has to sustain its efforts to address the threat of the pandemic. The COVID-19 pandemic has demonstrated that the spread of infectious diseases can truly disrupt major economic activities and harm the lives of many people. The RCEP can prevent another pandemic to occur by ensuring the economies of its members to bounce back so they can invest more on health and total well-being of their people.
Finally, the RCEP needs to incorporate in its agenda to reduce global poverty by implementing the Sustainable Development Goals (SDGs). The RCEP should facilitate the harmonization of the SDG’s three core elements to achieve its goals: economic growth, social inclusion, and environmental protection. There is no need for the RCEP to reinvent the wheel on this matter. The RCEP just needs to keep the wheel rolling through free trade facilitation, investment provision, and economic connectivity of members and even non-members.
In conclusion, the RCEP is a game changer as it presents another model of regional economic integration that can promote the shared prosperity not only of its members but non-members as well. To realize its many lofty goals, members need to pay attention to supply chain stability and regional security issues. There is no doubt that confronting these issues is easier said than done. But through the decisive and collective efforts of its members, the RCEP can surmount all these challenges as it pursues its goal of regional economic integration in the post-pandemic world.
* Delivered at the 2023 RCEP Media and Think Tank Forum organized by the China Institute for Reform and Development (CIRD) held in Haikou, Hainan, China on 21 May 2023. The author is grateful to Dr. Chi Fulin, CIRD President, for the kind invitation.
Rommel C. Banlaoi is President, Philippines-China Friendship Society and Chairman of the Advisory Board, China Studies Center, New Era University, the Philippines.
- Siddharth Chatterjee, UN Resident Coordinator in China, Remarks delivered at the 2022 High-level Forum for RCEP Economic and Trade Cooperation (28 July 2022) at https://v.qq.com/x/page/t33495b0q4b.html.
- ASEAN Briefing, “Philippines Ratifies RCEP Agreement: Opportunities for Businesses” (22 March 2023) at https://www.aseanbriefing.com/news/philippines-ratifies-rcep-agreement-opportunities-for-businesses/#:~:text=The%20Philippines%20Senate%20officially%20ratified,conclude%20this%20free%20trade%20agreement.
- Siddharth Chatterjee, op cit.
- “Seeking Supply Chain Stability in an Era of Volatility” (September 2022) at https://www.ascm.org/making-an-impact/research/supply-chain-stability-index/sept-2022-p01/#:~:text=ii%20Stability%20is%20defined%20as,and%20downs%20of%20market%20volatility..
- “Tips for Maintaining Supply Chain Stability” at https://polysource.net/tips-for-maintaining-supply-chain-stability/ (17 May 2023).
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