New Trade Deal A ‘Coup’ For China
The new year brought a new geopolitical reality to bear in the Pacific. On January 1 a major multi-nation trade deal took effect. China is in. The U.S. is not. And many observers are wondering what this may portend for American influence in the region.
The trade agreement is known as the Regional Comprehensive Economic Partnership (RCEP). It’s a deal that promises to reduce roughly 90 percent of tariffs between its parties, which includes the 10 nations of the Association of Southeast Asian Nations (ASEAN) along with 5 other major players in the region: Australia, Japan, New Zealand, South Korea… and China.
All told this new trade bloc is the largest in the world, covering an area with about 30 percent of the earth’s population and 30 percent of global gross domestic product (GDP). It is particularly notable for being the first such deal including China, Japan, and South Korea together.
China did not dictate the terms of RCEP, but it is viewed as a victor in the deal. At the time RCEP was hammered out, Citi Research said, “The diplomatic messaging of RCEP may be just as important as the economics — a coup for China.”
How so? Well, at least one consideration is that productive trade between nations tends to build interdependence. Or at least it gives a nation’s leaders a financial reason to be extra careful when tensions flare among trade partners.
It’s noteworthy that after RCEP took effect, the Trade Minister of Australia ( a country that has had its run-ins with China in recent years) praised the agreement, saying it “will help stimulate growth and investment across the region” and “will advantage local sourcing of goods and promote collaboration through regional value chains, which our businesses are primed to partake in.”
All the while, the United States appears to some to be on the outside looking in. That is largely due to its absence from what analysts believe was a much more robust Trans-Pacific Partnership (TPP).
President Donald Trump exited that deal just as he promised to during in his 2016 campaign, and President Joe Biden has not moved to re-engage the band of nations that continued on under the deal’s auspices (CPTPP).
Now Trump had reasons for his decision. In 2015, he said that “I learned a long time ago, a bad deal is far worse than no deal at all,” and he believed TPP was bad for American businesses, workers, and for our nation’s trade interests. A number of Democrats, including Sen. Bernie Sanders, also vigorously opposed the deal. In fact, they fired arrows at Trump when he suggested his administration take another look at TPP in 2018 — a fact surely on Biden’s mind.
If you’re like me, you’re not an expert on the nuances of TPP, RCEP, and their relationship with bilateral trade deals the U.S. has in place. Nor do you and I know all the likely repercussions for domestic industries under any of these agreements. The reason we elect leaders is for them to wisely guide our nation.
But what I do note is that there are deals that are leaving the U.S. out — deals that have potential geopolitical, as well as economic, ramifications. It is noteworthy to me that the Council on Foreign Relations released a report last fall stating, “RCEP creates one of the world’s largest trade blocs, and analysts say it is another sign, along with the CPTPP, that countries in the region are moving on without the United States.”
I have no doubt these new developments — and China’s role in them — are not going unnoticed in our government’s halls of power. We need to pray for those leaders to make the right moves to reinforce our nation’s economy and security now and in the years to come.
What are your thoughts–is the global economy leaving the U.S. behind?
( Aaron Mercer is a Contributing Writer with two decades of experience in Washington, D.C.’s public policy arena. Photo Credit: Getty Images )
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