It’s summit season again in the Indo-Pacific with the 35th ASEAN Summit and Related Summits (including the all-important East Asia Summit) taking centrestage this fortnight. This week leaders and officials from the ten ASEAN and eight partner nations, including the US, China, Australia, India, Japan, New Zealand, Russia and South Korea are in Bangkok. The most important outcome from these meetings is the successful conclusion of the Regional Comprehensive Economic Partnership (RCEP), after 7 years of negotiations, albeit without India’s participation. (The US wasn’t part of the RCEP negotiations.) The move is extremely significant and beneficial to the region, especially in an era of populism and economic nationalism.
However, as a few analysts point out, we’re now looking at the two major trading and investment blocs in the Indo-Pacific, the RCEP and the Trans-Pacific Partnership (TPP), without the inclusion of the US and India. Evan Feigenbaum succinctly summarises the dilemma, ‘So we get pan-Asian rules/standards without the “Indo” and without the giant economy across the “Pacific.” Can you have “Indo-Pacific” when you have neither?’
India’s decision to walk away from RCEP was motivated by concerns around Chinese goods flooding Indian markets and perceptions of an unequal free trade agreement designed to disadvantage New Delhi. The main issues of contention, from an Indian perspective, were ‘inadequate protection against import surges, insufficient differential with China, possible circumvention of rules of origin and keeping the base year as 2014…’, along with no proper guarantees on market access and lowered tariff barriers.
However, India has held out the possibility of joining in the future if its demands are met. For that to happen, the Modi government needs to introduce a plethora of domestic reforms to boost the competitiveness of Indian industries, especially the manufacturing industry, as Alyssa Ayres points out. A silver lining for Australia is the belief that New Delhi may now concentrate on pushing ahead with bilateral free trade agreements, including with Canberra and Washington.
Speaking of trade, it’s being reported that the US is willing to make some concessions in its trade war with China. Washington is planning to drop tariffs on Chinese goods worth $112 billion. Given the cancellation of the Asia Pacific Economic Community (APEC) Summit scheduled for November, plans for the ‘phase one’ agreement between Trump and Xi being concluded at the summit, have been derailed. In response to US’s overtures, Beijing has put up a tough stance, stressing that the former would need to drop all levies as a precondition for China to agree to ‘phase one’.
Going back to the East Asia Summit for a moment, President Donald Trump’s absence from the summit and the relatively junior rank of his representatives, Commerce Secretary Wilbur Ross and Assistant Secretary of State for East Asia and the Pacific David Stilwell, sent a poor signal of the US commitment to the region. The US State Department’s release of its Report on the Implementation of the Indo-Pacific Strategy this week lost its significance due to the perceived snubbing of the Southeast Asian leaders by Trump in Bangkok. ASEAN leaders responded by sending a low-level representation to the US-ASEAN summit with US National Security Advisor Robert Brien in Bangkok.
Meanwhile, Australian Prime Minister Scott Morrison met Chinese Premier Li Keqiang on the sidelines of the EAS this week, in what’s being seen as an attempt led by China to ‘reset’ ties with Australia after a few tense months. The Chinese foreign ministry published a statement noting that Sino-Australian relations were devoid of any ‘historical feud or fundamental conflict’. Just last week, Beijing lashed out at Australian Foreign Minister Marise Payne for her remarks criticising China’s record on human rights.
Closer to home, Victorian Premier Daniel Andrews visited China earlier this fortnight and signed a fresh deal to further cooperation in areas of infrastructure, innovation, ageing and trade under the Belt and Road Initiative (BRI). Andrews has also urged other Australian state governments and the Commonwealth to consider signing up to the BRI, remarking, ‘We need a strong partnership, Victoria has one, and we would hope that every state and territory and indeed the Commonwealth would have a strong partnership and a friendship with China.’
Moving across to another part of the Indo-Pacific, France and India have deepened their bilateral ties by announcing a ‘3-pronged security partnership’ in the southern Indian Ocean. The two nations will work together on joint maritime surveillance in the region and an Indian navy patrol boat will possibly deploy to Reunion Island next year. Paris and New Delhi are also looking to explore collaborative economic and development opportunities in the Vanilla Islands which include Comoros, Madagascar, Mauritius and Seychelles.
On that note, Indian Prime Minister Narendra Modi put forward a proposal for an ‘Indo-Pacific Oceans Initiative’ at the East Asia Summit, to foster partnerships with like-minded countries to improve maritime security, use of marine resources and disaster prevention and management in the Indian and Pacific Oceans.
In more India-related news, last week reports emerged that India’s civil nuclear facility in Kudankulam was the target of a North Korean cyber-attack in September this year. While the attack didn’t cause any damage to the plant’s nuclear reactors or any critical systems, it revealed crucial weaknesses in India’s cyber defences, as Debak Das notes. And in more damning news from India, New Delhi and much of northern India has been facing unprecedented levels of air pollution, which is likely to trigger a major health crisis.
Significance for Australia
Scott Morrison has had a fruitful time in Bangkok; he’d be more than pleased with the sealing of RCEP this year, even without India. As Peter Drysdale and Adam Triggs put it, ‘RCEP is vital for Australia. RCEP delivers a direct boost for demand, a kickstart to GDP, more productivity growth and cheaper goods and services for stretched household budgets…More importantly, it shows the critical role Australia can play in helping the region towards beneficial, cooperative outcomes.’
Drysdale and Triggs are hopeful of India finally coming round whereas Jeffrey Wilson sees the ‘silver lining’ in India temporarily stepping aside to let the party begin. Wilson also reminds us that the initial suggestions of Australia and New Zealand being excluded as a result of India’s exit haven’t come to fruition, which is cause for significant cheer Down Under. Nonetheless, Canberra would be keen to conclude a bilateral free trade agreement with New Delhi.
Morrison’s meeting with Li was also productive from Canberra’s perspective even though, as I noted in the last iteration of this wrap, the structural problems that are beginning to emerge in Sino-Australian relations, are unlikely to be resolved through meetings alone.
The BRI is one such thorn. Canberra would be anxious about China’s outreach to state governments and the Commonwealth’s inability to prevent the states from signing onto deals it doesn’t like. As Anthony Bergin describes it, ‘The Chinese are weaponising federalism by driving a political wedge between the federal and state positions on the Belt and Road Initiative’. I’m not sure that’s the reset Canberra’s looking for.
Aakriti Bachhawat is a Researcher with the Defence and Strategy team at the Australian Strategic Policy Institute, and Research Assistant at the Griffith Asia Institute.