RCEP: How will this trade agreement shape the future of multilateralism?

Amidst rising protectionism and retaliatory trade measures around the world, the future of multilateralism appears uncertain, if not troubled. The once entrenched academic view that trade and globalization have had a positive impact on all parties has been strongly challenged in recent years, leading to narratives about the end of globalization as we know it and a shift to trade policy goals that prioritize economic security and protectionism.

Trade tensions between the US and China have led to the US doubling duties on Chinese goods to 20%; China has responded by imposing 15% tariffs on US goods. The US also announced a round of tariffs on neighbouring countries such as Mexico and Canada. This includes 25% tariffs on imports from Mexico and Canada, as well as 25% tariffs on all steel and aluminium imports. Subsequently, Canada and the EU imposed retaliative steel and aluminium tariffs against the US. More potentially damaging trade measures from affected countries are expected.

Over the past decade, the US has retreated from multilateral trade agreements like the Trans-Pacific Partnership (TPP), and various other economic and multilateral treaties and institutions. Though it has initiated or facilitated IPEF, AUKUS etc., these are sometimes seen as political pacts, not as working towards a standard form of trade agreement.

The Regional Comprehensive Economic Partnership (RCEP) is the world’s largest free trade agreement, uniting 15 economies, including China, Japan, South Korea, and members of The Association of Southeast Asian Nations (ASEAN). It is emerging as a beacon of hope for the future of multilateralism. Led by regional middle powers like ASEAN, an organization that advocates for consensus-driven and non-interference policies, RCEP could potentially redefine the framework of trade liberalisation, instilling a sense of optimism in the face of rising protectionism.

This year marks the third year since RCEP’s implementation. Intra-ASEAN trade increased by more than 7% in 2024 after a decline in 2023. Overall regional trade has also strengthened. At this trajectory, RCEP has the potential to uplift 27 million additional people to middle-class status by 2035; its effect is expected to grow incrementally for the next 10 to 15 years, by which point 90% of the goods within the agreement will achieve zero tariffs. It is set to foster the cross-border exchange of talent, knowledge, and capital between developing and developed Asia, offering hope for improved global relations.

While Europeans are concerned about sudden increases in US tariffs, the greatest apprehension among Western powers remains the rise of China; its dominance in global supply chains, its maritime expansion, and its increasing assertiveness in international affairs.

The invocation of China+1 strategy, adopted by countries like Japan and Australia, has emerged as a pivotal approach to diversifying global supply chains and strengthening economic ties with Vietnam and Malaysia; Australia is actively seeking to reduce its trade dependence on China, and turn to ASEAN. This strategy reflects a broader trend as nations aim to mitigate risks associated with over-reliance on a single market, particularly in light of geopolitical tensions and supply chain disruptions.

RCEP serves as a foundation for economic integration in the East Asia region, bringing together countries with diverse political systems – ranging from Indonesia to Cambodia. This inclusivity underscores its strength as a platform for cooperation despite political differences. RCEP has also demonstrated its potential to extend influence beyond the region, as countries like Chile and Sri Lanka apply to join.

This expansion reinforces RCEP's role as a stabilising force against rising protectionism and underscores the importance of intra-regional trade, which has grown significantly under the agreement. While RCEP does not achieve the high standards of trade liberalisation seen in agreements like the CPTPP or USMCA, it represents a pragmatic and resilient approach to multilateralism in an era of global uncertainty.

As the largest economy in the bloc, China sees RCEP as a way to strengthen its economic influence in the region and promote its vision of a multipolar world order. Yet, to enhance RCEP’s applicability, and make it a trade model to emulate, middle powers such as ASEAN should take the lead as opposed to the big powers – given the Sino-US tensions and simmering scepticism towards globalization and multilateral institutions, fuelled by nationalism and populism.

ASEAN, with its consensus-driven approach, is a pivotal force for fostering dialogue and cooperation among its member states. This decision-making model, while it may slow collective action, is instrumental for enabling countries with varying political systems and values to participate in joint initiatives. The use of informal diplomacy, such as closed-door bilateral meetings, further facilitates dispute resolution without resorting to formal legal mechanisms. RCEP and ASEAN underscore the value of collaboration over confrontation.

In an era when nationalism and political headwinds challenge the principles of free trade, RCEP presents a forward-looking model of regional cooperation. It underscores the importance of middle powers in shaping the next phase of globalization, balancing economic integration with political diversity.

RCEP provides a pragmatic framework for regional cooperation. It is a testament to the resilience of multilateralism, and a forward-looking approach that can unite countries behind frameworks that benefit all parties, even in a fragmented world.