As US tariffs bite, Asean urged to embrace RCEP as ‘economic shield’

As global trade dynamics shift, the implications of US tariffs are becoming increasingly pronounced, especially for countries in the Association of Southeast Asian Nations (ASEAN). With tariffs serving as tools for economic protectionism, Asean nations are now urged to embrace the Regional Comprehensive Economic Partnership (RCEP) as a protective economic alliance amidst this rising global uncertainty.

Current Context of US Tariffs

The US has implemented a series of tariffs intended to protect domestic industries, often resulting in trade tensions that affect economies worldwide. As these tariffs bite deeper, ASEAN countries find themselves at a crossroads. Malaysia’s Prime Minister Anwar Ibrahim recently criticized these tariffs and highlighted the need for stronger inter-Asean trade to mitigate the adverse impacts. The sentiment is echoed by various leaders who acknowledge the necessity for regional solidification and cooperation in the face of external economic pressures.

What is RCEP?

The Regional Comprehensive Economic Partnership (RCEP) is a free trade agreement that encompasses 15 Asia-Pacific countries, representing approximately 30% of the global economy. The partnership was established to ensure economic resilience against rising protectionist measures globally. By reducing tariffs and fostering seamless trade among member nations, RCEP serves as a strategic response to the challenges posed by unilateral trade policies, like those seen from the US.

The Urgency for ASEAN

As ASEAN countries prepare to engage with RCEP counterparts and the US Trade Representative (USTR) Jamieson Greer, the narrative of economic collaboration is gaining traction. Adib Zalkapli, managing director at Viewfinder Global Affairs, emphasizes that in a landscape filled with trade tensions and geopolitical uncertainties, relying on rules-based partnerships like RCEP has become essential rather than optional. The alliance not only offers a platform for trade but also establishes a framework for security and stability in economic relations among member nations.

Benefits of Embracing RCEP

1. Trade Diversification: RCEP provides ASEAN member states an avenue to diversify their trading partners, reducing dependency on markets like the US and China. By engaging with nations across the Asia-Pacific, ASEAN can leverage mutual economic benefits and strengthen its regional economy.

2. Reduction of Trade Barriers: One of RCEP’s primary goals is to lower tariffs on various goods, facilitating smoother trade flows. This reduction in barriers is particularly beneficial for smaller ASEAN nations that may struggle to compete in a high-tariff environment.

3. Investment Opportunities: As member states engage in free trade, opportunities for foreign direct investment (FDI) are likely to increase. RCEP creates a unified market that can attract investors seeking to tap into a larger customer base with simplified compliance.

4. Enhanced Supply Chains: The agreement aims to streamline supply chain processes among member nations. As businesses look to establish more resilient supply chains post-COVID-19, RCEP can provide the framework necessary to achieve this, potentially minimizing disruptions caused by external tariffs.

5. Strengthened Regional Cooperation: Embracing RCEP could lead ASEAN nations to work more collaboratively, thus fostering stability in regional geopolitics. With rising global tensions, a united ASEAN can offer a collective voice in international trade discussions and diplomatic relations.

Challenges to Overcome

While RCEP provides numerous advantages, challenges persist. Countries within ASEAN have diverse economic structures, governance systems, and developmental stages, which may complicate uniform implementation. Additionally, some member countries may find it difficult to relinquish long-standing protective policies or face pressure to maintain tariffs as a means of protecting domestic industries.

Further complicating the landscape is the geopolitical rivalry between major powers like the US and China. As tensions heighten, ASEAN nations may find themselves navigating a complex web of influences, and balancing relationships with these powers while advancing regional integration will require careful diplomacy and strategic foresight.

The Path Forward

As ASEAN countries meet to discuss RCEP and engage with the US, the consensus appears clear: cooperation and regionalism are crucial in buffering against the adverse effects of unilateral protective measures. Strengthening internal economic relations and actively participating in regional agreements like RCEP can serve as an effective countermeasure against rising tariffs.

Moreover, ASEAN must ensure that it leverages RCEP not merely as a defensive mechanism but as a proactive strategy to innovate, grow, and expand its markets. By investing in infrastructure, technology, and human capital, ASEAN countries can enhance competitiveness not just within the framework of RCEP but also on the global stage.

While the challenges posed by US tariffs are significant, they also present an opportunity for ASEAN nations to reassess their strategies and focus on regional integration. Embracing RCEP as an economic shield can enable ASEAN to not only withstand external pressures but also thrive, ensuring economic resilience in an increasingly unpredictable global trade environment.

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