As global trade continues to face waves of uncertainty amidst the pandemic and ongoing geopolitical tensions, not least the unresolved trade war between the United States and China, the future of EU-Asia relations is going to be heavily impacted by the most recent development in the Asia-Pacific. The Regional Comprehensive Economic Partnership (RCEP) signed last November is a symbol of a pan-Asian trade network, inspired by the belief that greater market openness will lead to greater economic prosperity. With RCEP, intra-Asian trade, which is already larger than Asia's trade with North America and Europe combined, will continue to be a growth engine for the global economy - accelerating the eastward shift in the centre of gravity of world growth. This will likely exert a significant impact on Asian relations with Europe as well, as the two are now linked with one another by the most intense trade relation in the world.
RCEP is set to be a major catalyst for post-pandemic recovery across Asia. In fact, for Asia-Pacific businesses, RCEP effectively creates an unprecedented framework for pan-Asian trade, as it covers large and growing segments of the global population, involving both emerging markets and developed economies, while also setting trade standards across the region in areas such as intellectual property and labour rights.
One of the areas where the agreement will have the most effect is likely to be e-commerce. Indeed, many of the world’s largest super apps - online or mobile platforms that combine multiple services into a single app - are based in RCEP countries, including Chinese platforms WeChat and Alipay, Japan’s Line, South Korea's Kakao Talk, Indonesia’s Gojek and Singapore-based Grab. Spurred by the pandemic, many digital providers are looking to expand their footprint in the region by moving into new markets - a process that should be facilitated by the RCEP. In fact, according to an in-depth study by CIGI, the RCEP countries (with the exception of Cambodia, Indonesia, the Philippines and Vietnam), are also part of the World Trade Organization’s (WTO) Joint Statement Initiative (JSI) on e-commerce, which aims to negotiate a plurilateral agreement on the “commercial aspects of e-commerce” as economic transactions increasingly take place in digital form.
There is a chapter in RCEP on e-commerce (Chapter 12), which is a good indicator of the kind of agreement (if any) we can expect from the JSI. This chapter shows what China, who aims to become the dominant member state of the RCEP, is willing to accept in terms of provisions on electronic/digital trade. The language of the RCEP is such that it allows member states to impose whatever domestic regulatory restrictions they wish, as long as they are applied in a non-discriminatory manner (i.e., applied equally to domestic and foreign companies). But even with regard to non-discrimination provisions, a member state could get away with discriminating against specific foreign companies, since the dispute resolution mechanism of the RCEP does not apply to Chapter 12. The e-commerce issue had been regulated very differently in the TPP and now in the new CPTPP, whatever it will become. As it is unlikely that any impetus will be impressed on the CPTPP any soon, due to the severe competition that comes from RCEP, one should expect that e-commerce in Asia-Pacific will follow the rules that will prevail in RCEP. As China is by far the largest market for e-commerce, the most likely scenario is that cross-border e-commerce in the Asia-Pacific will be regulated as in China’s domestic market. Moreover, the scope for the international use of the renminbi, in particular the new e-CNY, in cross border trade, will largely increase, especially within ASEAN. Japan, the first country to insist that global rules for e-commerce should be adopted already some years ago, might be forced to lower its ambitions to regional rules, largely dominated by China. This will boost regional integration even further, and impact Asian trade with Europe.
The EU has a growing trade connection with RCEP signatories. China, Japan and South Korea are not the only ones among the EU’s top ten trading partners. In addition, the EU has signed FTAs with four signatories and is negotiating with five others. The EU-China Comprehensive Investment Agreement was concluded on 30 December 2020. According to Eurostat 2019 trade data, in value (euro) terms, RCEP signatories globally account for one fifth of the EU's total extra-EU exports and 31% of the EU’s total extra-EU imports. In volume terms, RCEP member states account for 12% of total extra-EU export volume (kg) and 7% of total extra-EU import volume. In both imports and exports, machinery products and automotive goods are among the top five commodity categories. In 2019, these two categories accounted for 44% of the total value and 7% of the total volumes of EU exports to RCEP countries, and 53% of the value of its imports and 18% of the volumes.
On the one hand, European companies with well-established intra-Asian supply chains or Asian subsidiaries can benefit from reduced costs under the harmonized rule of origin and reduced tariffs between RCEP countries. This is particularly the case for European industries with well-established supply chains in Asia, such as the automotive, electronic machinery and textile sectors. For example, in 2019, 69% of Adidas' suppliers were located in the Asia-Pacific region. However, the Peterson Institute of International Economy forecasts that the EU will globally record a modest gain of around 0.1% from RCEP by 2030. On the other hand, EU manufactures may have a higher risk of losing competitiveness in sectors with well-established intra-Asian supply chains in the RCEP market. This will most likely be the case, e-commerce will expand within RCEP countries but not between RCEP and third countries due to segmented regulatory frameworks. In order to build strong and sound EU-Asia relations, there is an urgent need to cooperate to define the new rules of digital trade, which will become the largest share of world trade very soon.