There is no doubt that the role of the Asia-Pacific region in international commerce is spiking day by day. This growth process brings along regional cooperation and common action on policymaking. Surely the largest-scale instance of regional consensus in the Asia-Pacific region is Regional Comprehensive Economic Partnership (RCEP) agreement which is signed on November 15, 2020. As the largest regional free trade agreement excluding the WTO, the Regional Comprehensive Economic Partnership involves 15 Asia-Pacific countries including China, South Korea, Japan, Australia, New Zealand, plus the members of the Association of Southeast Asian Nations (ASEAN). The member states correspond to approximately 30% of the world's GDP (USD 26.3 trillion) and 30% of the world's population (2.3 billion). While discussing the dimensions of the RCEP, the burning question should be that whether the agreement will adequately promote energy cooperation in the region or not.
First and foremost, as a regional trade agreement, the nature of the RCEP agreement aims to rule out the 90% of tariffs and barriers on imports which are the hurdles in the face of free trade. From the energy perspective, although the agreement’s entry into force has a possibility to inspirit China’s imports of energy commodities such as bitumen, light cycle oil, and paraxylene cargoes that will benefit the exporters in the bloc such as Japan and South Korea; it will have a scant effect on the natural gas and crude oil market. The underlying reasons for the aforementioned situation are the exclusion of natural gas from the importing tariffs and the low-volume crude oil trade between China and the ASEAN countries.
On the other hand, it shouldn’t be forgotten that becoming part of a free trade agreement does not guarantee zero tariffs. It can be great evidence to mention that, although China already signed a bilateral free trade agreement (FTA) with South Korea, the Beijing government imposes 4.8% import tariff on bitumen, 4.2% on light cycle oil, and 2% on paraxylene cargoes from the country that is one of the most crucial trade partners of China in the Asia-Pacific region.
Taking into account all of those, there is a probability of having a pessimistic position on the impacts of the RCEP accord on the energy sector. Nevertheless, asserting the ineffectiveness of the RCEP is an argument that is out of place. It should be kept in mind that a regional trade agreement that is such far-reaching as the Regional Comprehensive Economic Partnership agreement is going much further than eliminating tariffs. These kinds of agreements should be considered as the tools of creating alternatives, stabilizing commercial relations, and of course, establishing the mechanisms among the member states that can help to institute energy security and sustainability. As an example, China’s coal imports from Australia went into a decline by the geopolitical disputes between the two countries. As might be expected, for China and Australia, becoming part of RCEP is a positive step for ensuring stability and energy security in the region. Although the uptight relations between the two countries in the recent period, China and Australia now have an opportunity to establish a new win-win relationship thanks to RCEP. As the claimer of huge natural gas and coal reserves, Australia has the potential for becoming China’s alternative source.
In addition to all these, when it comes to Japan, which is the world’s largest importer of LNG, the country procures 67% of its LNG imports from the RCEP states. Besides, Australia and Indonesia are responsible for nearly 40% of South Korea’s LNG imports. Despite all these common interests that also include a high trading volume on energy, some might argue that establishing regional stability can be quite challenging. However, all these 15 states demonstrated a will by becoming a signatory state of the RCEP bloc. The joint strategy that is formulated shouldn’t be underestimated. The RCEP is an exemplification of a deal that brings China, Japan, and South Korea, which are the region’s first, second, and third-largest economies, together for the first time in a free trade deal. Accordingly, developments in the Asia-Pacific show promise on the path of regional stability.
Moreover, there is cooperation in significant areas such as the renewable energy sector. Approximately 87% of all solar panels are manufactured by five countries that are members of the RCEP: China, Japan, South Korea, Malaysia, and Taiwan. In addition, the other two members, Thailand and Vietnam, also have a rapidly growing number in the solar energy equipment industry. The aforementioned situation can conduce to define RCEP as the world’s most determined bloc on encouraging solar energy. By the dominance of the industry, it is possible for RCEP countries to create an input that cannot be undervalued.
In conclusion, Regional Comprehensive Economic Partnership has a high potential for assuring energy security and sustainability. The role of the energy sector in the region’s new and large-scale partnership is crucial to designate the common interests and strategies that will shape the future of the people of the region. The consensus and the joint strategy of the Asia-Pacific countries on the future that has stability and prosperity can be shown as epitomist cooperation for the other regions and trade partners across the globe.
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