Upgrading RCEP can help ASEAN partnership

Against a somber backdrop of global volatility — characterized by the resurgence of protectionist tariffs, fractured supply chains and persistent conflicts in the Middle East — the necessity for closer collaboration among Asian economies has never been more acute.

As the traditional pillars of global trade face unprecedented strain, the East Asian region is increasingly being looked upon as the world's primary engine of growth and stability.

In this context, China continues to serve as the regional economic stabilizer. Its performance in the first quarter of 2026 manifested remarkable resilience, defying the "decoupling" narratives that have dominated Western discourse. With solid year-on-year GDP growth of 5 percent in the first quarter, underpinned by a significant 15 percent surge in total exports and imports, China has injected much-needed momentum into the regional economy. This growth provides a vital anchor, offering a sense of predictability in a landscape otherwise rattled by geopolitical tensions and supply chain shifts.

From the Chinese perspective, Malaysia is always well remembered for its proactiveness in bridging China with the Association of Southeast Asian Nations by inviting China to the ASEAN Foreign Ministers' Meeting in 1991. This laid the foundation for the China-ASEAN dialogue partnership.

Continuing the legacy of inclusive multilateralism, Malaysia's rotational chairmanship of ASEAN last year saw the historic inauguration of the Gulf Cooperation Council-China-ASEAN tripartite summit. This milestone further corroborated Malaysia's role as a bridge builder, linking diverse economic groupings to promote a more integrated Global South.

As China has remained Malaysia's top trading partner since 2009, the bilateral relationship is poised to ascend to a "high-value and regional strategic phase". The catalyst for this elevation is the imminent fruition of the China-ASEAN Free Trade Area (CAFTA) 3.0, ratified under the Malaysian chairmanship, thus making Malaysia a natural entry point for deeper regional integration.

From a macro-regional perspective, ASEAN serves as the central platform for East Asian economic integration. However, the region currently navigates a complex web of overlapping trade agreements — often referred to as the "spaghetti bowl" effect. While the Regional Comprehensive Economic Partnership — an ASEAN-led initiative — is the world's largest free trade group, it has yet to unleash its full potential.

The primary hurdle lies in the discrepancy between declaratory rhetoric and pragmatic utilization. Despite steady progress in tariff reductions and the harmonization of "rules of origin", the RCEP's utilization rates remain surprisingly low. For instance, in 2024, when China-Malaysia bilateral trade hit a record $212.4 billion, the utilization rate of RCEP rules was a mere 0.7 percent. Similarly, Vietnam's utilization rate stood at 1.8 percent, dwarfed by the 40.5 percent average for its various ASEAN+1 free trade agreements.

This disparity stems from the fact that entrepreneurs, particularly small and medium-sized enterprises, favor the familiar and simpler procedures of the China-ASEAN Free Trade Area over the more complex RCEP framework.

To make the RCEP relevant, there is an urgent need to review and upgrade its rules to ensure that they are complementary to, rather than at odds with, CAFTA 3.0.

The upcoming RCEP general review presents a critical window for its 15 signatories to "upgrade" the framework. The goal should be to match or exceed the standards set by CAFTA 3.0, specifically by tightening rules on digital data transfers and streamlining administrative hurdles.

In reality, the two core challenges confronting regional economic cooperation will always lie in the conundrums of translating macro-level visions into deliverable actions, in addition to rendering rules that truly serve the needs of businesses.

The RCEP framework includes a chapter on "Standards, Technical Regulations and Conformity Assessment Procedures" that seeks to reduce "technical barriers to trade" by enhancing transparency, encouraging international standards and promoting mutual recognition of conformity assessments.

This regulatory cooperation, intended to lower compliance costs and technical bottlenecks for businesses across the RCEP, provides an opportune dimension for Sino-Malaysian collaboration. By synchronizing standards in sectors such as electronics, automobiles, pharmaceuticals and halal food products across the RCEP, such cooperation helps reduce the non-tariff costs that often negate the benefits of free trade for smaller businesses.

However, a sobering reality check reveals that efforts to establish mutual recognition agreements for conformity assessment results and reducing duplicate testing are not easy. Such efforts require serious political will and concerted multilateral action across the 15-member RCEP to make the agreements enforceable.

The RCEP's stakeholders, notably China and Malaysia, which are ready to harness the dividends of the RCEP's unified rules of origin — which dictate the economic nationality of a product and affect how goods are treated in terms of tariffs and restrictions — could envision creating a seamless manufacturing corridor where raw materials from China are processed in Malaysia for duty-free export across the entire RCEP.

From the development perspective, amid the converging trend of Malaysia's Madani Economy framework and China's high-quality development goals, the bilateral cooperation is well poised to move beyond traditional trade in goods and into artificial intelligence-powered logistics, cross-border digital payments and electric vehicle manufacturing in Malaysia.

By leveraging the RCEP's tariff preferences and trade facilitation measures, the model of "Two Countries, Twin Parks" in both Qinzhou in China's Guangxi Zhuang autonomous region and Kuantan, Malaysia, provides a timely template to showcase an early triumph for the RCEP in the high-tech and new energy sectors.

Under the RCEP framework, deepening collaboration in fields such as 5G networks, smart cities, interoperability of cross-border payment systems, and the new energy vehicle industrial chain are the ready deliverables that can help jointly secure commanding heights for future development.

In the final analysis, the success of any regional framework rests upon the bedrock of trust. The "weaponization" of unilateral tariffs and the use of economic coercion are existential threats to the architecture of regional integration. Malaysia and its ASEAN neighbors are currently facing a test of their resilience.

However, the choice is clear. It is not a choice between global powers, but a choice between fragmentation and integration. Southeast Asian nations must maintain the liberty to decide what is best for their own economic destinies. This principle of strategic autonomy is enshrined in the ASEAN Treaty of Amity and Cooperation, a document to which both the United States and China have acceded.

As the China-ASEAN partnership seeks to deepen continuously amid the prevailing global tumult, it remains the most viable path toward a stable, prosperous and interconnected Asia, through optimization of the RCEP and implementation of CAFTA 3.0.

By translating macro-level visions into deliverable actions, we can ensure that the regional economy remains a beacon of growth in an otherwise uncertain world.

The author is president of the Belt and Road Initiative Caucus for Asia Pacific.

The views do not necessarily reflect those of China Daily.