QUAD vs. RCEP: A Geo-economic Appraisal

The Quad Summit held on 12 March 2021 has been hailed as agenda-setting for Australia, India, Japan and the US towards the geopolitical challenges prevalent in the Indo-Pacific. While the Joint Press Release did not name China directly, it highlighted the “democratic values” of the Quad. The Joint Statement also reaffirmed the groupings “strong support for ASEAN’s unity and centrality as well as the ASEAN Outlook on the Indo-Pacific”.

Furthermore, the specific inclusion of East and South China Seas and the assertion that the Quad Members will “continue to prioritize the role of international law in the maritime domain, particularly as reflected in the United Nations Convention on the Law of the Sea (UNCLOS), and facilitate collaboration, including in maritime security, to meet challenges to the rules-based maritime order” in the above maritime spaces leaves very little to the imagination as to its import.

The Joint Statement also highlighted that the members of the grouping will combine their national capacities in “medical, scientific, financing, manufacturing and delivery, and development” which is an expression of their intention to build resilient supply chains and preclude coercion, again an apparent reference to China. Quad’s other issues of concern, apart from COVID19, are North Korea, climate change, cyber space, counter terrorism, quality infrastructure investments, etc., that the grouping wishes to prioritize and address.

There is clear articulation of support for ASEAN’s ‘unity, centrality and outlook ‘but it remains to be seen how the ASEAN perceives such an offer as also how the Quad would deliver on these. In this context, it would be worthwhile to take a look at few developments in Southeast Asia to arrive at some deductions.

ASEAN came together as a trading bloc in 1992 and over the last two and a half decades it has developed itself into a vibrant economic entity accounting for nearly 30 percent of global GDP. During this time, China emerged as the largest trading partner for the ASEAN, with EU, Japan and US next in that order. China commands a little over 15 percent of all ASEAN trade accounting for nearly US $ 134 billion and US $ 211 billion in exports and imports respectively. In comparison, Japan accounts for US$113/124 billion, the United States US$129/83billion and India is only US$ 39/19 billion of the ASEAN trade volume, respectively.

China’s investments in ASEAN are pegged at US$ 108 billion (2017) which is about one third of US ‘investments in the region at US$ 329 billion (2017). However, the nature of investments have a marked difference, with countries borrowing from China increasingly falling into a debt trap that they could ill afford to service. A telling pointer in this regard is the acquisition of the only port in Cambodia’s Koh Kong Province by a Chinese firm on a 99 year lease for US$3.8 billion. China’s support to Cambodia at UNSC on human rights violations case during Pol Pot Regime and Cambodia returning the favor by blocking an ASEAN statement on the Chinese affairs in South China Sea are important considerations for their bilateral engagement.

During the 1997 Asian economic crisis, there were numerous challenges for the ASEAN countries and these were further accentuated in 2008 at the time of the global financial crisis. For ASEAN States, the Chinese investments for infrastructure development under the Belt Road Initiative have been a boon, improving connectivity and promoting trade. In this scenario, Regional Comprehensive Economic Partnership (RCEP) was first floated by China in 2012. However, this partnership remained dormant in view of overwhelming American investments in the region, and the US led Trans-Pacific Partnership (TPP). US’ decision to withdraw from TPP in 2017 apparently created vacuum and was filled in by the RCEP. With at least four ASEAN countries as part of the TPP (Brunei, Singapore, Vietnam and Malaysia), apart from Australia and Japan, US’ decision created a potential situation in which even Japan would have got entangled in a trade war with the US.

Trump Administration’s stand on the TPP provided an opportunity in 2017for China to take lead through the RCEP with 15 members. In November 2020, the China led RCEP emerged as the worlds’ largest trading bloc with Japan, South Korea, Australia, New Zealand, and 10 ASEAN countries. It is noteworthy that Australia, at the height of Quad led Malabar naval exercises, hastened to join RCEP citing ‘room for individual member’s interests and priorities’. It now appears that China is well set to formalize the RCEP into a reality by 1st January 2022 and once that is done, China’s exports will rise by US$248 billion, with Japan seeing an extra US$128 billion and South Korea US$63 billion,.

The material gains RCEP is holding out to national economies of its members is more compelling for the ASEAN members that have disputes with China in South China Sea. Outside the ASEAN, Japan, South Korea and Australia joining the framework only demonstrates the compulsions of economics vis-a-vis notions of compliance with free and open Indo-Pacific order.

Under such conditions, the ability of the Quad to achieve its stated objectives will depend on its ability to offset the advantages of RCEP. ASEAN’s capacity to keep its flock together focused on the geopolitical challenges that China is purportedly posing in the Indo-Pacific, overriding the temptations of market economics, will also be crucial to the success of Quad.

Dr R Srinivasan is an independent researcher and publisher cum Editor-in-Chief of Electronic Journal of Social and Strategic Studies.

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