The signing of the Regional Comprehensive Economic Partnership (RCEP) by 15 Asia-Pacific nations on November 15 can be seen as not only a triumph of China’s multilateral economic diplomacy but also having implications for the external economic relations of Hong Kong, Macau and Taiwan.
After eight years of negotiations that started from November 2012, 15 Asia-Pacific states signed the landmark trade agreement with the absence from the US and India. Leaders from the People’s Republic of China (PRC), Australia, New Zealand, Japan, South Korea and 10 members of the Association of Southeast Asian Nations (ASEAN) witnessed the signing of the agreement through a videoconference on November 15, a move that signaled the liberalization of trade and investment across the Asia-Pacific region by lowering tariffs gradually and collaborating in the areas of trade, investment, services, small and medium enterprises, competition policy, e-commerce and government procurement. It is estimated that the 15 Asian states account for about 30 percent of the global population and 28 percent of the global trade. Hence, the potential for mutual economic benefits and profits will be tremendous, especially as foreign direct investment was reportedly increasing in the RCEP group in the last decade until 2019.
The US under the presidency of Donald Trump abandoned its traditionally economic multilateralism and withdrew from the Trans-Pacific Partnership (TPP) in 2017, consolidating the American self-protectionism. Seizing the opportunity of American withdrawal from economic blocs in Asia, the PRC has been strengthening its multilateral economic diplomacy. India withdrew from talks over RCEP in 2019 because of its concern about trade deficits with the PRC.
The RCEP has important implications for the Asian regional political economy. At a time when Sino-US relations are at its all time low, the signing of RCEP does signal China’s determination to maintain its liberal approach to dealing with multilateral economic diplomacy, projecting an image of a peaceful and pragmatic PRC. Although many Asian states have seen the PRC as militarily aggressive and diplomatically nationalistic, the signing of RCEP by China has shown that the PRC leaders are committed to maintaining a liberalized regional economic order. As Premier Li Keqiang stated openly on November 15, as 90 percent of the products in the RCEP bloc would have “zero tariffs,” the agreement represented a “victory of multilateralism and free trade.” Most importantly, if Covid-19 can later be contained and gradually weakens, the RCEP will likely become an economic powerhouse providing an impetus for the signatory states to recover and revive their economies.
It is noteworthy that the economic and military ally of the US, namely Japan, has signed the RCEP, signaling the triumph of economic pragmatism and liberalization in Asia. It is hoped that multilateral trade and transnational economic cooperation can and will minimize mutual distrusts between Japan and China in their military relations. Two countries belonging to the “Five Eyes,” namely Australia and New Zealand, also joined the RCEP. Similarly, some Southeast Asian states which are worrying about the PRC’s military assertiveness in South China Sea participate in the landmark agreement. As such, the RCEP was reached at a critical time when the PRC was seen by many countries in the world as too militarily, nationalistically, and diplomatically assertive.
The signing of the RCEP has immediate economic implications for Hong Kong, Macau and Taiwan.
The PRC’s Department of Commerce explicitly supports the idea that Hong Kong should join the RCEP as soon as possible. In the recent years, the Hong Kong Special Administrative Region (HKSAR) has signed free trade agreements with the ASEAN, Australia and New Zealand. The HKSAR government’s Secretary for Commerce and Economic Development, Edward Yau, said on November 19 that Hong Kong is eager to join the RCEP. Similarly, local economic elites from the Hong Kong Federation of Industries and the Association of Small and Medium Enterprises expressed their support for the HKSAR to join the economic bloc. These economic elites hope that the RCEP would provide a comprehensive logistics supply chain to Hong Kong’s products, facilitating multilateral trade and reducing trade barriers in the long run. In fact, some Hong Kong manufacturers have already relocated their industries to many countries in Southeast Asia, hoping to reap the benefits of the RCEP that covers areas like e-commerce, services, and intellectual property rights. The chairman of the Hong Kong Economic and Trade Association, Lee Sau-hung, said: “Hong Kong has no tariff” and “by joining the RCEP, the situation will be more fair” because Hong Kong loses out in its economic dealings with states having tariffs.
However, Bai Ming, a researcher at the PRC’s Department of Commerce, cautioned Hong Kong’s difficulties of joining the RCEP. He remarked that the RCEP normally does not admit any new member. However, since Hong Kong signed the free trade agreement with ASEAN in 2017, this might create “a favorable condition” for Hong Kong to try joining the RCEP.
If so, Macau may also encounter some obstacles even if the Macau Special Administrative Region (MSAR) is keen to grasp this golden opportunity. Interestingly, neither the Macau media nor the Macau government leaders have revealed their intentions and interest in joining the RCEP. At a time when the central government encourages the MSAR to diversify its economy, the Macau economic elites should perhaps study the idea of joining the RCEP. Perhaps the Macau economic elites have looked to mainland China’s huge market through the Closer Economic Partnership Arrangement that was signed in November 2019. Moreover, the MSAR has looked to the Portuguese-speaking countries in a bid to foster closer economic relations. Even so, the room for Macau under the PRC’s guidance and support to expand its external economic space in Asia persists.
The reactions from the Republic of China (ROC) in Taiwan are worth noting. Pro-Beijing dailies in Hong Kong on November 17 quickly criticized Taiwan as “economically marginalized” and “ignoring the RCEP.” They also criticized the Taiwan government led by the Democratic Progressive Party (DPP) as rejecting the 1992 consensus, which was reached by the PRC’s Chinese Communist Party and Taiwan’s Nationalist Party on the principle of “one China.” One pro-PRC daily in Hong Kong said that the RCEP would severely affect Taiwan’s industries, especially the plastic, steel, textile, and mechanical tools industries. A former leader of the Nationalist Party in Taiwan, Ma Ying-jeou, criticized the DPP for “misleading” the public by saying that the PRC government linked any trade agreement with politics. Ma added that the DPP President Tsai Ing-wen had said in 2016 that her government would aim at joining the RCEP, and that the Sunflower Movement in 2014 had blocked the government led by the Nationalist Party to sign the Cross-Strait Service Trade Agreement.
In response, Tsai Ing-wen said on November 16 that Taiwan had already forged closer economic partnerships with many Southeast Asian nations through its exports and Go-South policy, and that 70 percent of the RCEP states in fact had zero tariffs. She insisted that the impacts of RCEP on Taiwan’s affected industries, such as mechanical tools, steel, textile, and plastic, would be limited. Tsai confidently asserted that Taiwan is grasping the available space to expand its economic space in the world. The ROC Minister of Economic Affairs, Wang Mei-hua, said on November 16 that if Taiwan wants to join the RCEP, the PRC would likely use the 1992 consensus as a precondition. She also revealed that Taiwan would adopt a “low-profile approach” to seeking the possibilities to join other economic blocs, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a rival trade bloc of eleven countries, including Canada, Australia, New Zealand, Japan, Mexico, Chile and Peru. Obviously, while the PRC is expanding its economic multilateralism, Taiwan is constantly looking for the available international space to expand its economic cooperation with other countries.
In conclusion, the RCEP is undoubtedly a triumph of economic liberalization in the regional political economy of Asia and China. The PRC’s efforts at strengthening its multilateral economic diplomacy has been identified by Hong Kong’s economic elites as a golden opportunity to expand the HKSAR’s external economic relations. However, Macau’s economic elites have appeared to take some time to study the prospects and possibility of joining the RCEP. Taiwan, however, adopts an approach of grasping the available international space to expand its economic relations with various countries in the world. The three places in Greater China – Hong Kong, Macau, and Taiwan – clearly have very different reactions to China’s determination to demonstrate its economic multilateralism.