Shunning the Trans-Pacific Partnership Was a Costly Mistake
Within Weeks after his 2016 election victory, President Trump announced his intention to withdraw the United States from the Trans-Pacific Partnership (TPP), a multilateral trade deal designed to build an economic bulwark against China. This decision paved the way for the signing this weekend of the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement between China and 14 Asian neighbors.
The RCEP – signed by the ten members of the Association of Southeast Asian Nations as well as Australia, China, Japan, New Zealand and South Korea – covers 2.3 billion people, making it the biggest trade deal ever, even after India’s full-scale withdrawal. He returns. While this has marginal material consequences for the global economy, his signing represents another step in China’s march towards regional domination.
RCEP will phase out most tariffs between member countries over a 20-year period, a provision that essentially replicates existing trade agreements. Indeed, previous agreements with much more comprehensive and stricter rules have already made it possible to achieve most of the trade liberalization included in the RCEP, thus mitigating its effect. Rather than changing the economic terrain of the region, RCEP merges a mishmash of bilateral and plurilateral agreements into a single framework.
However, it contains an important provision establishing a common rule of origin. Whereas previously companies had to obtain various certifications to ship products between member countries, they now only need one so-called certificate of origin. This facilitates the management of the supply chain and could encourage companies to locate more of their production in the region.
Otherwise, the agreement maintains the economic status quo in Asia: it leaves trade in services, investment and intellectual property intact, and unlike the TPP, it contains no environmental or labor rules.
Nonetheless, the sheer size of the trade zone should worry Washington, which has missed opportunity after opportunity to turn grievances from China’s neighbors into meaningful political victories. If past ASEAN agreements are any indication, the reach of RCEP is likely to expand over time. And the countries most willing to team up with the United States against China – Japan and South Korea – are among the biggest beneficiaries of the deal. By abdicating our role in the region, we have enabled our allies to become more dependent on Chinese businesses and consumers just as Beijing escalates its military and diplomatic aggression.
The Trump administration deserves to be commended for pointing out the dangers of China’s economic wrongdoing. For too long, Western leaders have overlooked trade barriers, industrial subsidies, and theft of intellectual property that have given China an unfair advantage in international trade. But over the past four years, the White House has never set clear and coherent goals for economic policy in Asia, often taking actions that contradict each other.
Tariffs intended to punish China ended up hitting imports from Japan, Taiwan, Canada and the European Union. Like his decision to pull out of the TPP, Trump’s trade war has repeatedly weakened American allies best positioned to fight Beijing.
Unfortunately, we don’t expect better from the incoming administration. President-elect Biden is used to playing down the Chinese threat and has not announced his intention to join the TPP or strike an alternative trade deal. The more Washington neglects its leadership role in Asia, the sooner Beijing’s dream of regional domination will materialize.