By Professor Masahiko Hosokawa of Meisei University
China sees Japan as a “virtual U.S.”
Because RCEP is an economic partnership agreement, it is also important that it set rules for trade and investment in addition to eliminating tariffs. One of the aims is to correct China’s unfair trade and investment practices. China strongly opposes this because it means a change to China’s policy.
The TPP negotiations proceeded under the leadership of the U.S. with Vietnam and other countries as “virtual Chinas” because their regimes are similar to PRC’s. The TPP rules were created in this way, with China in mind.
In contrast, in RCEP, China sees Japan as a “virtual U.S.”
In the confrontation between the U.S. and China, China has been engaged in tough negotiations with the U.S., with each country threatening retaliatory tariffs. As a result, the two countries finally reached a compromise and signed a bilateral agreement in January this year. For China, concessions beyond this are unlikely. The rules included in RCEP, which prohibit forcing foreign companies to transfer technology, are also concessions that China has already made to the U.S.
With China in mind, the TPP also included regulations against the preferential treatment of state-owned enterprises. But China did not concede this point to the U.S., so it was natural that Beijing rejected it in RCEP.
E-commerce rule-making in RCEP was also an attempt to correct China’s policies. Again, China accepted two of the three rules included in the TPP: (1) Commitment to free data transfer across borders and (2) prohibition on requiring companies to locate their servers in a member country with an eye to enclosing data. This is largely due to the hard work of Japan’s Cabinet ministers. However, China is adamantly opposed to the ban on demanding the disclosure of source codes, which are the blueprint of software.
This time, China wanted to conclude RCEP at all costs. Amid the U.S.-China conflict, it is worthwhile for China to be part of “a framework in Asia without the U.S.” That is what China wants now more than it wanted eight years ago when negotiations started.
This is evident in the media coverage in China, which is full of spiteful remarks against the U.S. Emphasizing that RCEP is an Asia-only framework, Premier Li Keqiang touts the achievement as a “victory for multilateralism and free trade.”
Furthermore, it is also in line with China’s strategic goals. With China’s huge market, Chinese leader Xi Jinping himself stressed at domestic meetings that RCEP will allow China to increase its ability to retaliate or threaten by making its partners more dependent on China.
But that does not mean that China will lead RCEP. The joint summit statement clearly states that RCEP was “initiated by ASEAN” and emphasizes “the centrality of ASEAN.” China’s remarks also lavish in praising ASEAN. It should not be forgotten that ASEAN is the core of this multilateral agreement. (Abridged)