RCEP will deliver a strong impulse to greater liberalization in the world economy in the coming years, with US and China increasingly likely to compete in advancing their models of mega-regional integration projects. Globalization is coming back and this time it is back on a mega-regional scale, writes Yaroslav Lissovolik, Programme Director of the Valdai Discussion Club.
The emergence of the Regional Comprehensive Economic Partnership (RCEP) during the most acute crisis in many decades is a crucial “demonstration effect” of the importance of regionalism in countering protectionism and economic downturn. The newly formed regional integration bloc is the largest regional integration project in the world accounting for nearly 30% of global GDP. Much more important however is the qualitative effect that the creation of RCEP may impart on the evolution of the global economy, most notably the patterns of competition among mega-regional blocs.
RCEP will deliver a strong impulse to greater liberalization in the world economy in the coming years, with US and China increasingly likely to compete in advancing their models of mega-regional integration projects. Globalization is coming back and this time it is back on a mega-regional scale, writes Yaroslav Lissovolik, Programme Director of the Valdai Discussion Club.
The emergence of the Regional Comprehensive Economic Partnership (RCEP) during the most acute crisis in many decades is a crucial “demonstration effect” of the importance of regionalism in countering protectionism and economic downturn. The newly formed regional integration bloc is the largest regional integration project in the world accounting for nearly 30% of global GDP. Much more important however is the qualitative effect that the creation of RCEP may impart on the evolution of the global economy, most notably the patterns of competition among mega-regional blocs.
One of the most obvious implications of the launching of the RCEP mega-project is a further advancement of Asia Pacific as the focal point of liberalization, trade and growth in the global economy. It will further propel China to an accelerated catch-up play vis-à-vis the US — if current growth trends in the US and China persist in the coming 3-4 years, China could overtake the US in terms of the absolute level of GDP on the basis of market exchange rates by 2024-2025. The role of China and Pacific Asia as a major source of demand and as a crucial market for suppliers across the globe will progressively rise in the coming years.
The creation of RCEP also renders China a key player in the evolution of regionalism in the world economy. Previously China’s arsenal of trade alliances was focused more on creating a plethora of bilateral agreements on connectivity under the umbrella of the BRI as well as a number of FTAs. The Shanghai Cooperation Organization (SCO) while an important part of the array of alliances is yet to advance in terms of its economic ambition. In effect RCEP becomes the key regional alliance for China in further expanding its circle of friends and allies at the level of bilateral and regional accords as well as in international institutions.
The scale of the mega-regional bloc in effect allows for setting ambitious goals for its members not only in terms of attracting trade and investment flows, but setting an agenda for a new vision of a revitalized post-pandemic globalization effort. Indeed, the pattern of economic integration offered by RCEP is different from other mega-regional blocs — in effect it offers a more inclusive and open paradigm of economic integration compared to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or the original version of TPP. Furthermore, RCEP given its scale may take on the leading role in establishing a global coordination platform for regional integration arrangements, something that has been lacking in the global economic architecture and the global economy’s response to the current crisis.
For Russia and the Eurasian Economic Union, the creation of RCEP is both a challenge and an opportunity. It is a challenge because staying outside of such a mega-bloc involves losses in terms of trade diversion and possibly investment flows. The good news, however, is that given the inclusive and open-ended nature of RCEP, there may be a whole range of areas, where Russia and its partners from the Eurasian Economic Union could cooperate with RCEP, including in such key areas as connectivity, investment, e-commerce, etc. As RCEP develops into a full-fledged mega-bloc its gravity pull may attract not only Russia, but also the EU. This in turn may broaden the scope for Russia and the Eurasian Economic Union to intermediate the intensifying economic interaction between the EU and the Asian Pacific.
In the end, RCEP will deliver a strong impulse to greater liberalization in the world economy in the coming years, with US and China increasingly likely to compete in advancing their models of mega-regional integration projects. The US could well respond by joining TPP as well as re-launching the creation of the Trans-Atlantic alliance with the EU. All this in turn is likely to further strengthen the role of regionalism in the global economy as it recovers from one of the most severe crises throughout the past century. Globalization is coming back and this time it is back on a mega-regional scale.
Source: Valdai. Discussion club
