Beijing will build a China-centric world economy

Written by The Frontier Post

Dmitry Kosyrev

If things continue like this, Beijing will build a China-centric world economy, and the US will be overthrown from its current leading position in international affairs in general. This is the main message of a letter from 15 Republican senators to US President Joe Biden, with a panic appeal: urgently begin trade negotiations with our partners in Asia.
Yes, it seems to be only about Asia and – again, it seems to be – just something about an international trade agreement for 15 Asian countries, which has been launched this month. But the senators are right: such economic shifts, imperceptible to the general public, are changing the world in a creeping way, quietly, but in such a way that no bright events are capable of doing this. And then you look back – and it’s too late to rush about.
As for “only 15 countries” – in fact, we are talking about 2.3 billion people – 30% of the world’s population, 30% of world GDP, more than a quarter of world trade, 31% of foreign direct investment inflows. And at the center of this agreement is its initiator China, the second world economy and the first trading power in the world. It also includes Japan, South Korea, several smaller countries of the ASEAN group. And the great Pacific power, the United States, is not there. Because the project was Chinese from the very beginning, and this does not suit America.
We are talking about RCEP – it is also RCEP – Comprehensive Regional Economic Partnership. Simply put, it will not just make (very gradually) nearly all trade in the region duty-free. There are many other attractive subtleties there (for example, a single certificate of origin of goods, inside which there are many components made anywhere. This simplifies trade procedures. In general, customs is becoming archaic, now many small businesses across the region will be able to build any kind of logistics without any undue pain chains, as well as many other pleasant and long-awaited details, for example, the creation of a single online trading market for the entire region.
China is at the center of this system by virtue of both the size of its economy and the fact that it has been building logistics and other trade chains around the world for a long time, for example, with its Belt and Road project. And now Chinese economists are triumphantly watching how even the very fact of the imminent launch of RCEP revived both Chinese and regional business in advance.
Over the 11 months of last year, China’s foreign trade (in goods, not services) grew by 22% and is growing in double digits in all major markets of the country – with ASEAN, the European Union and the United States. And as a result of this or in conjunction with this, the economy is growing throughout the region. The region and China are once again becoming the engine of global growth.
The idea of various kinds of integration agreements in Asia is actually forty years old: this is such a region. It was discussed and tried to be implemented anywhere – through the APEC mechanism, as part of other initiatives. The most famous story here is with Barack Obama’s Trans-Pacific Partnership (TPP). Its meaning boils down to a historical quote by the same character: not China will dictate the rules of trade – we will.
So, even now China does not dictate the rules of world trade. This is the main difference between the current triumphant RCEP and the failed American idea of the TPP. This main lesson of “the case of two agreements” is interesting in that it shows what kind of behavior, rules and norms China brings to the world.
The TPP was for its participants, especially those from smaller states, a game of monstrous stakes. Gingerbread was promised to be incredibly sweet, but the whip could be incredibly painful. Namely: practically free access of goods to each other’s markets, including the US markets – yes. But at the same time, obeying the rules invented in the States for anything, such as working conditions or growing coconuts, being under constant control is clearly not. In addition, in terms of the “service sector” – and these are banks, the Internet, whatever – the terms of the agreement were such that transnational giants could easily absorb entire economies.
That story ended strangely – Donald Trump decided that America did not need such a TPP, and left it. It exists in a truncated form, its informal leader, it turns out, is Japan, and now China is negotiating to enter the ruins of the TPP too.
But the main thing in this story is that China did a wonderful thing: removed from the RCEP conditions all American-style binding, all these suffocating rules that Obama wanted to dictate to the world. Everything in RCEP is voluntary and peaceful. It turns out that it was possible.
There is such a veteran of Asian business journalism – Hong Kong Englishman Anthony Rowley, he wrote about the local economy back in the 70s. Now he suddenly made a short comment, where he explained very clearly what the lesson of the two trade agreements means. Of the American version, Rowley says: “It was supposed to be a partnership of equals, but with such a partnership, advanced economies could circle around less advanced ones.” And further: “Such trade agreements were made more as an economic weapon for more advanced economies to squeeze advantages out of developing nations vulnerable to exploitation.” And in the end, the agreements looked “like a potential tool for a new form of economic colonialism.” But RCEP, according to Rowley, has good chances, because there the movement towards integration is going on without pressure and in small steps – but you won’t get tangled in your own feet, as happened with the grandiose American project.
Returning to the senators’ letter, their excitement is understandable, but their proposal to urgently start trade negotiations in Asia looks somewhat childish. Partly because the lessons of the failure of the TPP and the success of the RCEP are clearly not learned. Recall that the TPP failed because it put pressure on partners and forced them, including with the help of carrots, to do what they did not want. Now what?
And now a new and complicated plot is developing with the fact that America wants to force Japan (a member of the RCEP) not to supply technologically sophisticated products to China. And this is again pressure and obligation, because for Japan this will mean losses and trouble. That is, the US thinks of the shape of the future world economy solely as a squabble between two camps, within one of which partners are forced to do what they do not really want. Habit is second nature.

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