[It is the second major pact in two years that excludes the United States: In 2018, Australia, Japan and nine other countries salvaged a version of the Obama-era Trans-Pacific Partnership (TPP) that Trump had rejected as a “disaster” for American workers.]
By Gerry Shih and Simon Denyer
After four years and two new trade
agreements, the answer from Asia appears to be a resounding yes.
On Sunday, 15 countries, led by the
Association of Southeast Asian Nations bloc and including China, Japan and
others, announced they had struck the world’s largest trade deal, covering about
30 percent of the global population and a similar share of economic
output, after eight years of negotiations.
The accord, known as the Regional
Comprehensive Economic Partnership (RCEP), would cut tariffs on everything from
Japanese auto parts to Malaysian palm oil and solidify supply chains within a
sprawling new trade zone that would be larger than the European Union in
population and gross domestic product.
It is the second major pact in two
years that excludes the United States: In 2018, Australia, Japan and nine other
countries salvaged a version of the Obama-era Trans-Pacific Partnership (TPP)
that Trump had rejected as a “disaster” for American workers.
Taken together, the two overlapping
deals illustrate how Asian governments are looking to bolster regional trade —
rather than looking toward Washington — at a moment when protectionist
sentiment is rising in much of the world, including the United States.
[Trump’s China tariffs violate
global trade rules, WTO says]
“The U.S. vacated the rulemaking
and leadership role it previously aspired to, and the region has gone on to
writing the rules in the absence of the U.S.,” said Stephen Kirchner, director
of investment and trade at the University of Sydney’s United States Studies
Center.
Although the United States is
eligible to apply to join the RCEP, it’s not clear that it would anytime soon.
On the 2016 campaign trail,
presidential candidates including Trump, Sen. Bernie Sanders (I-Vt.), and
former secretary of state Hillary Clinton all criticized President Barack
Obama’s TPP as a threat to American manufacturing jobs. In this year’s election
cycle, President-elect Joe Biden has not committed to a position on whether he
would opt in or out. Biden has said he would prioritize first strengthening
American worker competitiveness and infrastructure before considering entering
trade deals.
India, Asia’s third-largest
economy, also pulled out of the RCEP last year amid fears that some domestic
industries would be ravaged if it lowered tariffs on Chinese products.
But the new deal has been toasted
by several Asian leaders, none more than Chinese Premier Li Keqiang, who
praised the signing as “victory for multilateralism and free trade” and “a ray
of light and hope amid the clouds.”
Across Asia, reactions were more
mixed. In Japan, where industries from cars to sake would probably see tariffs
slashed, the Keidanren business alliance cheered while security analysts
fretted about the implications of Beijing’s growing regional clout and the
absence of the United States or India — counterweights to China.
“It is feared that the departure by
India and leniency in terms of rules could create problems in the future,” the
Nikkei newspaper wrote in an editorial. “We hope to see continued efforts in
order to develop RCEP further, including the expansion of the membership and
the deepening of the pact.”
In Australia, labor unions
questioned whether the deal would benefit the country given that Chinese
regulators were already squeezing Australian export industries, such as wine and beef. China has enacted tariffs and
partial bans on a range of Australian exports including barley, beef and wine,
and has informally discouraged domestic firms from buying Australian coal and
timber.
Analysts say the RCEP does not lay
out immediate or groundbreaking rules that will govern countries on thorny
issues such as intellectual property, which limits its significance. Many
details of the agreement — and when some items will begin to be enforced — are
not yet known.
“If we’re just talking about
eliminating tariffs, then that’s low-hanging fruit that’s already been picked
by existing trade deals,” said Alexander Capri, a senior fellow at the National
University of Singapore. “But data privacy, IP protection, digital trade and
e-commerce, how deep does it really get into that? And even if it does get into
details, when will they be enacted, given that there’s such huge disparity
among the countries in RCEP?”
[Trump expresses anger that his
China trade deal is off to a rocky start]
Still, many say the deal will
cement accelerating international trends — the binding of the Northeast Asian
economic powers with one another and with fast-growing Southeast Asian hotbeds
such as Vietnam, which increasingly provides manufacturing for electronics and
presents enormous market opportunities. The new agreement will be the first
multilateral trade deal that includes China, South Korea and Japan, and it will
incentivize companies to source parts from other countries within the trade
zone.
In July, Chinese officials
announced that ASEAN countries cumulatively became China’s largest trading
partner after China’s trade with the United States and the European Union fell
10 percent and 5 percent, respectively. State media highlighted the
statistic as evidence that China’s economy was diversified and faring well in
the face of a bruising trade war with Trump, icy relations with Europe and the shock
of the coronavirus pandemic.
Other international experts have
offered a similar outlook. A simulation by
the Peterson Institute for International Economics this year found that the two
new Asian trade deals would raise trade among members by $428 billion and
global GDP by $186 billion by 2030. The trend toward trade within the
region, rather than along the U.S.-China axis, could be accelerated by the
pandemic and the trade war, the authors projected.
“By lowering East Asian trade
costs, RCEP will accelerate the decoupling of the East Asian and U.S.
economies, arguably the most productive regional partnership in economic
history,” wrote Peter Petri and Michael Plummer.
Evan Feigenbaum at the Carnegie
Endowment for International Peace said the problem was deeper for U.S.
leadership in the region. U.S. power in East Asia had long been premised not
only on security but also on its economic role as a driver of demand.
But the United States is “walking
away from that role” as a “standard-setting nation and a driver of
liberalization,” he wrote on Twitter, “and doing the walking away against the
backdrop of a shrinking relative economic role overall.”
Read more
Trump’s
bid to tame China’s rise falters
Trump
expresses anger that his China trade deal is off to a rocky start
How
a Trump decision on trade became a setback for democracy in Vietnam
