The difficulty of reaching agreements through the World Trade Organization (WTO) has led world leaders to seek alternative means of trade cooperation, such as Regional Trade Agreements (RTA). Thomas Oatley (2012) views RTA as a more promising way to negotiate and implement trade agreements. RTA is a way to enhance a country’s market access with a crucial trading partner, indicating a strong commitment to economic reform to attract foreign investors. RTA aims to bolster bargaining power as a group in multilateral trade negotiations and it is easier to establish than global trade agreements, which involve a larger number of countries with diverse interests. While operating on a regional scale, RTAs can have implications for global trade governance (Oatley, 2023).
Starting in 2000, world leaders, including the Indo-Pacific region, have considered various frameworks for establishing RTA. One result of this thinking is the Regional Comprehensive Economic Partnership Agreement (RCEP). RCEP was initiated by Indonesia as the chairman of ASEAN in 2011. RCEP involving 10 ASEAN member countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam) and 6 non-ASEAN countries which already have a Free Trade Agreement with ASEAN (Australia, China, India, Japan, New Zealand, and South Korea) (Oba, 2016). However, India decided to withdraw from RCEP in 2019. Despite the delays and hurdles in the ratification process due to the Covid-19 pandemic, RCEP came into force for Indonesia on 2 January 2023, coinciding with the start of Indonesia’s ASEAN Chairmanship. RCEP encompassed various aspects such as trade in goods and services, investment, economic and technical cooperation, intellectual property, competition, dispute resolution, e-commerce, and support for small and medium enterprises in ASEAN member States and ASEAN trade partners (ASEAN, 2023).
RCEP AND ITS VAST POTENTIAL
Beyond trade, the Indo-Pacific has emerged as a concrete area for regional cooperation across various fields. Increased RTA will certainly help in reshaping policies in the region. Such advantages place the Indo-Pacific as the foremost channel for economic collaboration. It is important for Indonesia to place itself as the pivotal country to expand markets and integrate Indonesia’s economy into the Regional Value Chain and Global Value Chain through RCEP (Gultom, 2020). Especially, RCEP serves as the umbrella for ASEAN’s economic collaboration with partner countries which creates a favorable economic climate in the region. It has the potential to create spill-over effects that can enhance Indonesia’s efforts in achieving its interests (Springer, 2021).
Collectively, RCEP represents a significant market. It covers 30.2% of the total world GDP and 30% of the world’s population, with 27% of global trade and 29% of world FDI. This vast potential suggests that RCEP could offer substantial opportunities for its member countries. RCEP is expected to attract more foreign direct investment to Indonesia from both local and foreign sources. Because of its vast market with great potential, Indonesia sees RCEP as a productive framework to thrive. It is more than just a trade agreement, it is a comprehensive economic cooperation pact that enhances security, regional political stability, and reinforces ASEAN’s centrality in Southeast Asia and the Indo-Pacific (Maulana, 2021).
INDONESIA’S FOREIGN POLICY IN UTILIZING RCEP
Various geopolitical debates surround the running of RCEP especially when Indo-Pacific Economic Framework for Prosperity (IPEF) was initiated not long after. Amid the economic tensions between the US, which is part of the IPEF, and China as a member of RCEP, both partnerships in the Indo-Pacific region are seen as a battlefield and competition arena for major powers to expand their influence. However, Indonesia emphasized that RCEP does not stand as a competitor, but rather RCEP as a balancing act (Kavanagh & Cuéllar, 2024). Therefore, the further path of RCEP must be cautious given that the US and China each have partnerships in Indo-Pacific. Indonesia and member countries need to pay close details to prevent new tensions and ensure it can serve as a mediator by establishing a free and open order based on the principles of the rule of law.
RCEP is a great opportunity for Indonesia to lead the middle power in geostrategy. Beside as the initiator, Indonesia is also a key coordinator in the RCEP negotiations with unwavering commitment to prioritizing collective regional development to sustain trade, coupled with domestic reforms aimed at eliminating trade barriers, particularly within the RCEP framework (Patunru & Aprilianti, 2020). As a pivotal member of ASEAN, Indonesia also holds the potential to contribute significantly to maintaining geopolitical stability and collaboration in bridging differences and adherence to principles. Indonesia encourages the participation of ASEAN to become a bridge between large and small countries in discussing the emerging Indo-Pacific strategic concept. Indonesia wants RCEP to reflect the value of its initiator, which allows members to have their opinion and enter the partnership formally on their terms. Not to forget that RCEP is an ASEAN-driven initiative and with barriers being lifted, ASEAN member states have the opportunity to diversify their trading partners, thereby bridging any country (Sandrina & Prastyono, 2024).
Being a member of RCEP is a step towards implementing Indonesia’s foreign policy in promoting regional stability and advancing shared interests over time. Compared to others, Indonesia’s policy in the Indo-Pacific region is more inclusive, less overtly geopolitical, and places a stronger emphasis on collaboration. Indonesia’s commitment and participation in RCEP is by promoting free and active foreign policy with an orientation towards national interests and world peace. This foreign policy is not transactional, rather it is rooted in principles and long-term strategic objectives. Through this foreign policy, Indonesia wants to include all actors without isolating any particular player and maintaining the principle of neutrality by fostering peaceful economic relations with both the US and China (Agastia, 2020). In particular to free and active foreign policy, Indonesia will show neutrality by not favoring any particular actor and will cooperate with every country. And as a developing country, Indonesia will have the potential to bridge other developing countries with major powers.
There is no reference to how the RCEP should proceed or develop, especially its unprecedented size and member composition. Given that Indonesia’s efforts to integrate into this vast market are still in their early stages, it must optimize its potential through its foreign policy. Indonesia should also maintain an inward-looking policy, meaning it must maintain inclusiveness and open to any country, but primarily focused on domestic issues. If Indonesia wants to remain as a pivotal country, it must be firm in its known role as a mediator and advocate for regional integration with addressing a range of challenges that affect the region’s security and prosperity. As the initiator, this foreign policy will not only boost Indonesia’s economic growth from RCEP but also strengthen its position in the Indo-Pacific geopolitics. This is a way to remain active in promoting peace, stability, and sustainable development not only in Indo-Pacific region but also at the global level.
References
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ASEAN. (2023, January 4). RCEP Agreement enters into force for Indonesia. ASEAN Main Portal. https://asean.org/rcep-agreement-enters-into-force-for-indonesia/
Gultom, D. (2020, November). RCEP: The Opportunity for Indonesia and Steps of Its Implementation, An Insider’s Perspective [Policy Brief No. 6]. Regional Comprehensive Economic Partnership (RCEP): How Indonesia Can Maximize the Opportunities. https://www.cips-indonesia.org/post/rcep-the-opportunity-for-indonesia-and-steps-of-its-implementation-an-insider-s-perspective
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