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The Indonesian Origins Of the Regional Comprehensive Economic Partnership (RCEP)

There were three factors that motivated the country to take this ambitious beyond-Southeast Asia initiative. All of them were relevant to the notion that mere free trade was by no means sufficient.

By Marty Natalegawa

Arguably one of ASEAN’s recent most ambitious beyond the region undertakings has been the Regional Comprehensive Economic Partnership (RCEP) initiative launched at the 19th ASEAN Summit in Bali, Indonesia in 2011 (“ASEAN Framework for Regional Comprehensive Economic Partnership”) When completed RCEP will encompass all the ASEAN member states and the six countries with whom ASEAN has free trade agreements, namely Australia, China, India, Japan, New Zealand and the Republic of Korea, encompassing a combined GDP of some USD 17 trillion, 40 percent of world trade, and more than three billion people. 

Although often subsequently viewed from the prism of US-China rivalry – until the advent of President Trump, the United States with its Trans Pacific Partnership (TPP) initiative and China purportedly behind the RCEP (which excludes the United States) – this perspective ignores the reality of ASEAN’s principal role. 

Indonesia was motivated by a number of factors in launching the RCEP initiative in 2011. The first of these was a strictly internal dynamic within Indonesia itself. As chair of ASEAN in 2011, there were hopes and expectations among Indonesian policymakers that the country would be able to launch a new beyond-Southeast Asia initiative in the economic domain, much like it had done in the geopolitical domain through the further expansion of the EAS (to include the Russian Federation and the United States) and the adoption of what became known as the EAS Bali Principles – with its provision for a TAC-like commitment to the non-use of force, this time among the EAS countries. 

The outcome of this motivation is the RCEP initiative, which aims to comprehensively “connect” the series of “bilateral” free trade agreements between ASEAN and its dialogue partners, namely the ASEAN-China Free Trade Agreement (ACFTA), the ASEAN-Korea Free Trade Agreement (AKFTA), the ASEAN-Japan Comprehensive Economic Partnership (AJCEP), the ASEAN-India Free Trade Agreement (AIFTA), and the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA). The RCEP was envisioned as the natural progression of, and to build upon, ASEAN’s free trade agreements and processes.

The second was the motivation in Indonesia to bring about a more inclusive regional economic cooperation agenda than free trade alone. Indonesia has been keen to ensure that regional economic cooperation extends beyond the promotion of free trade, to also include fair trade and the promotion of investment and economic capacity-building. Herein lies the importance of the concept “comprehensive” economic partnership, beyond simply free trade agreements.

And third, there was a growing recognition that, much like in the geopolitical domain, the geoeconomics of the region were undergoing fundamental shifts. Thus, for example, the growing influence and size of the economies of China, India and ASEAN (are) a reminder of the need for the region’s economic architecture to adapt accordingly. 

In particular, the region was witnessing an increasingly congested regional economic architecture-building, including the aforementioned TPP, the Free Trade Area of the Asia Pacific (FTAAP) within APEC, and the ever-growing network of bilateral and inter-regional free trade agreements. This was a subject that APEC foreign ministers discussed intensively during Indonesia’s chairmanship of APEC in 2012. In this connection, I have deemed it critical that ASEAN reassert its driving-seat and leadership role in the fast-changing geoeconomic landscape. 

Importantly, however, ASEAN leadership should not be seen as an end in itself. Rather, it must be for the purpose of securing certain types of outcomes. First, to ensure that the evolving regional economic architecture is relevant and supportive of the ASEAN Economic Community. This to essentially to underscore that the ASEAN Economic Community must constitute the foundation for other region-wide economic undertakings…

And second, to ensure positive synergy and effective complementarity between the region’s geopolitical and geoeconomic dynamics. In the absence of concerted and proactive ASEAN efforts, I have been concerned over two possible scenarios.

First, the evolution of regional political-strategic architecture on the one hand and economic architecture on the other, which are disconnected from one another – though essentially in benign neglected of each other – can have unintended debilitating repercussions on the effectiveness of their respective efforts.

Second, and the worse of the two, where geopolitics overwhelms geoeconomic considerations. Examples abound of bilateral relationships marked by considerable economic interaction, and mutual interest even, yet dominated and consumed by a political-strategic divide. This has been the case so far as the relationship between the three Northeast Asian countries – China, Japan and the Republic of Korea – are concerned: deep economic engagement coexisting and, impaired even, by testy political-strategic dynamics. It has been my overriding concern to ensure that commerce and the wider economic interactions serve to bring the region closer together.

Geopolitics has also coloured perceptions of recent region-wide economic architectures, including the aforementioned TPP, as well as the AIIB and the OBOR initiative, that have been variously viewed from the prism of US-China competitive dynamics.

The subsequent downturn in the fate of the much-anticipated TPP as a result of change in U.S. policy following the election of President Trump – subsequently renamed Comprehensive and Progressive Agreement for the Trans Pacific Partnership – is a reminder of the inherent risk to ASEAN member states of simply joining the initiatives of others, over which ASEAN has little control. By contrast, the RCEP, an effort initiated and led by ASEAN, continues.

Editor’s Note: The above article is an excerpt from the book, “Does ASEAN Matter? A View from Within,” reprinted here with permission of the author. In this excerpt, India is prominently mentioned as part of the RCEP initiative because at the time the book was being written, India was very much engaged in the negotiations toward the RCEP, but it pulled out before talks could be concluded due to concerns about the weaknesses of its domestic market. The door remains wide open for India’s possible return to the Partnership.

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