Why Canada should treat an Indo-Pacific approach to Asia with caution

On November 15, fifteen nations, representing more than two billion people and around one-third of the global economy, signed on to the Regional Comprehensive Economic Partnership (RCEP), which by most measures is one of largest free trade agreements inked to date. It is the first free trade agreement to include China, South Korea and Japan — three of Asia’s largest and most developed economies. In June 2020, the Peterson Institute for International Economics released a study that showed RCEP has the potential to add around US$200 billion to the global economy by 2030.

Lost in almost all accounts of the RCEP, however, is its broader geopolitical significance, which will be far more consequential. Whether viewed as a singular agreement or as one part of a regional trend, RCEP’s real importance is as a harbinger of how Asia is changing in ways largely lost in western commentary.    

First, RCEP is notable as it is a uniquely Asia Pacific trade deal, one that establishes deeper relations and linkages between different Asia Pacific economies and summarily excludes extra-regional states and actors such as the United States and the European Union. The RCEP demonstrates that Asia Pacific states are pursuing economic consolidation at the Asia Pacific regional level and are determined to effect economic consolidation without the United States.  

Second, RCEP excludes India, not by design, but rather because New Delhi chose to prioritize protectionism and import-substitution over economic integration with the other RCEP-negotiating states.

While India may join at a future date, its unease over RCEP, along with Asia Pacific states’ willingness to proceed without New Delhi, suggest speculation about India’s integration into the Asia Pacific, whether economically or politically, is premature. Indeed, the fact that India has not taken full advantage of economic integration in South Asia, where it enjoys a natural geo-economic centrality, suggests it has a long way to go before it can match up successfully with Asia’s more established economies. 

Third, RCEP further establishes the 10-country Association of Southeast Asian Nations (ASEAN) as an economic centre of gravity and dominant political force in the Asia Pacific. While external observers have long been sounding ASEAN’s death knell as a regional force, its ability to conceptualize and promote RCEP is further evidence of its growing relevance as an Asia Pacific actor with agency to shape economic and political relations with states, including China, so as to advance its member states’ interests. 

Fourth, RCEP shows that economic relations trump security concerns for all Asia Pacific states, including Australia and Japan, both of which are active alliance partners with the United States and have troubled security relations with China. Indeed, RCEP is further evidence that western commentary over the Chinese economic ‘boogeyman’ does not translate into state or public sentiment on the ground in the Asia Pacific. Asked categorically whether the Asia Pacific needs more or less China, by signing on to RCEP, 14 other states left no ambiguity around their positive response.

These four points taken together add to what is arguably the most significant lesson one can draw from RCEP, which is the need to question the relevance around Washington’s drive — together with Canberra and Tokyo — to rebrand the Asia Pacific as the Indo-Pacific. 

Since 2018, these three states, as well as India, though with less enthusiasm, have been advocating for a geographic collapse of the Indian and Pacific Ocean regions into a super ‘Indo-Pacific’ region. Ostensibly designed to reflect the growing economic interconnectedness between Asia, the Middle East and Africa, the Indo-Pacific has been framed by the United States — and to a degree by Japan — as a security strategy designed to contain China’s influence in Asia by expanding and strengthening a network of like-minded allies. Yet as membership in RCEP and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, another free trade deal, clearly shows, economic consolidation is occurring within the Asia Pacific region, or more particularly between East and Southeast Asia, without either an Indo or Pacific anchor to justify such a broad geographic and strategic realignment.    

If there is one conclusion outside observers should take from RCEP, it is that there is little regional push from anyone but Australia and Japan for a geographic ‘widening’ to include the Indian Ocean states in an economic consortium outside the already established lines of energy trade. Indeed, there is even little sense that India’s economy has natural complementarities with the Asia Pacific’s other economies, aside from its potential as a consumer of Asia Pacific manufactured goods.

With the changing geopolitical reality resulting from the recent U.S. election, it will be in Canada’s best interest to bide its time before committing to an Indo-Pacific construct that defines its strategic approach to Asia. Far from better positioning the Canadian government and Canadian businesses to achieve their maximal outcomes in the Asia region, adoption of such a construct will require a careful assessment of the risks and benefits. In the meanwhile, a parallel narrative indicative of a more immediate sea change in Asia’s economic and strategic landscape must be unpacked and factored: the arrival on the global stage of the ASEAN-led mega-bloc that is RCEP.

For more on how Canada should approach trade and diplomacy with the Indo-Pacific, read Hugh Stephens’ November 2020 essay in Open Canada here.