A possible change in America’s approach to globalisation and international trade was among the key themes that captured Asia’s attention around the time of the US Presidential election. After four years of uncertainty surrounding the United States’ commitment to the global trading system and to Asia, will Joe Biden’s election as president spell a change?
We spoke with Michael Plummer, who is director of the Paul H Nitze School of Advanced International Studies Europe and the Eni Professor of International Economics at Johns Hopkins University, and former editor-in-chief of the Journal of Asian Economics, about possible changes in United States’ trade policies vis-à-vis China, the dynamics of regional trading agreements and ASEAN centrality in the global marketplace.
Unravel: Do you see the Biden administration joining the CPTPP? If no, why? If yes, how will it impact the RCEP?
Michael Plummer: It is possible. There are a number of people in the new administration who supported the TPP from the Obama Administration, President Biden included. However, politically it will be difficult and does not seem to be an immediate priority, though that could change. My guess is that this is an issue that will be revisited during the second half of his administration, that is, after the mid-term elections in 2022.
If the United States were to join the CPTPP, it would make that agreement more attractive to other economies in the region and, hence, would likely lead to additional members to that group. What the effect would be on RCEP is unclear. Still, keep in mind that seven out of the existing eleven members of the CPTPP are already members of RCEP and it is easy to envision that RCEP could become more ambitious in terms of scope and membership. It is a “living agreement” and could do this rather easily if it chose to.
Unravel: Many believe that some key aspects of US trade and tech policy toward China will not see material change under the Biden administration. Would you agree?
Mr Plummer: Unfortunately, this seems to be the case, at least in the short-run. The only difference is that the United States will work more closely with its allies, especially the European Union, in confronting China on trade and tech policy.
Unravel: In his first major foreign policy address, President Biden mentioned China as a central challenge to America’s interests and values. Your thoughts?
Mr Plummer: There is a strong anti-China sentiment in the United States these days coming from both sides of the political spectrum. We saw the same phenomenon with Japan in the late 1980s, with the added factor that China is a communist country. It is predictable that this rhetoric will continue, though hopefully it will be more diplomatic than was the case during the Trump administration.
Unravel: Given China’s growing prominence in Southeast Asia, do you think the non-economic implications of India withdrawing from the RCEP are greater for ASEAN than the economic implications?
Mr Plummer: Most certainly. The economic implications of India’s participation in the RCEP were never estimated to be large for anyone, including India. In fact, in my June 2020 paper with Peter Petri, we predict that India itself will suffer a permanent loss of income relative to the baseline of $6 billion outside of the RCEP and gain $60 billion inside of the RCEP by 2030, not large numbers for an economy of $5.5 trillion in 2030. But interestingly almost all ASEAN countries actually lose more economically with India inside the RCEP compared to outside the RCEP.
Yet, Southeast Asia as well as Japan and others strongly supported India’s inclusion for its strategic importance as a “balance” to China. No doubt this is one reason why it is the only country that can join the RCEP expansion negotiations at will rather than wait 18 months.
Unravel: The RCEP has brought to the fore the concept of “ASEAN centrality”, since the process was driven by ASEAN. In your view, can ASEAN be the vanguard of globalisation? Indeed, is it already?
Mr Plummer: In my view, the significance of ASEAN in the regional and global marketplace is often underestimated. For example, one often reads in the media that the RCEP is “China-led” rather than ASEAN-led, which is incorrect. ASEAN centrality in ASEAN was even written into the declaration that launched the RCEP in November 2012. ASEAN is arguably the most open region in the world, with trade to GDP being approximately equal to 100%. It has a strong interest in keeping international markets open and global governance of trade and investment fair and effective. It has not been able to leverage its considerable potential as an integrated region yet, though this will be easier as the ASEAN Economic Community continues to deepen. But it will become more influential over time.
Unravel: What role do you see for Japan in Southeast Asia? It has traditionally arguably been the region’s most important economic and development partner, until the rise of China. As Japan looks to carve a more independent foreign policy, what is the importance of ASEAN to that endeavour?
Mr Plummer: This is a very big question, obviously, and perhaps better addressed to a political scientist. But it is worthwhile to note that Japan and ASEAN have deep links that have been forged throughout a generation of cooperation, and they find themselves to be strategic allies in the movement toward deeper Asia-Pacific cooperation. In the past, Japan has pretty much relied on US leadership, but with the United States’ withdrawal from the region over the past four years with China becoming more assertive at the same time, the country is finding its way to develop a more independent foreign policy and to think more strategically. ASEAN will be a natural ally.