The rise of plurilateral trade agreements and the future of trade in the Indo-Pacific

Amid global disruptions, the CPTPP has facilitated trade gains. From 2018 to 2021, intra-CPTPP trade increased 5.5% overall, and trade between members that previously lacked FTAs grew 13.2%. Intra-RCEP trade grew about 8% in the first two and a half years of the agreement, which is roughly proportionate to the growth of RCEP members’ trade with the rest of the world. This period (2022–24), however, was marked by the Biden administration’s full-force de-risking pressure to push businesses away from China. Hence, the stable trade growth itself might show that RCEP has to some degree countered the emerging economic forces of reshoring away from China.

Both FTAs have also influenced the great powers’ trade strategies. China, for its part, is working on a two-pronged defensive strategy: while it spearheaded the formation of RCEP and applied to the CPTPP and the Digital Economy Partnership Agreement, it is also looking to expand its own FTA networks. The Biden administration did not attempt to rejoin the CPTPP, but its concern about being left out of trade rule-setting in the region led it to launch a new initiative, the Indo-Pacific Economic Framework for Prosperity (IPEF), in 2022.

Supply chain disruptions over the last couple of years have prompted two opposing responses around the world. On the one hand, there have been heightened efforts to create supply chain resiliency to strengthen the connections of the global economy. On the other hand, some countries have pursued measures to disconnect from the globalized economy with the aim to increase their autonomy. At the same time as economic issues become increasingly securitized, trade multilateralism through the WTO has fallen vastly behind: members cannot reach consensus, the organization’s prized Dispute Settlement Body is paralyzed, and its traditionally very restrictive use of the national security exemption is largely violated.

Yet, despite the role they play in promoting regional free trade, both mega-FTAs in their respective ways fall short in replacing or even fully supplementing the global trade order long underwritten by the World Trade Organization. In the case of RCEP, its utilization among smaller economies, such as Thailand and Indonesia, as an instrument to manage economic security challenges remains low. CPTPP, meanwhile, does not comprehensively cover all its members’ supply chains. But as a living document, it is working to respond to the changing global trade landscape of the 2020s. On top of expanding provisions for small businesses, CPTPP’s recent review priorities include strengthening supply chain resilience, upholding labor rights, providing against “challenges posed by market-distorting practices,” and complementing WTO rules to respond to economic coercion.

With Trump’s reelection and his actions to date, however, the question of whether the construction and revision of mega-FTAs can fill the large gap left by WTO dysfunction once again resurfaced. For the time being, the CPTPP and RCEP will need to serve as focal points of the rules-based trade order to keep intact open trade and connectivity in the Indo-Pacific. The next step would be the establishment of a sufficiently strong coalition of like-minded powers to sustain these open trade norms. This coalition must include collaboration with European countries and involve partners from emerging economies and the global South. It also should expand into supporting WTO efforts such as the Multi-Party Interim Appeal Arbitration Arrangement. These will be difficult tasks to achieve. China and the US use their respective influence in areas of both economics and security to further expand their own power, whether through competition with each other or, perhaps more unexpectedly, in coordination.

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This article was originally published by the National Bureau of Asian Research, with support from the Hinrich Foundation.

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