U.S. Could Be the Big Loser in the Huge RCEP Trade Deal Between China & 14 others

[Bill]

Why the U.S. Could Be the Big Loser in the Huge RCEP Trade Deal Between China and 14 Other Countries

The signing of the RCEP also indicates that it may be more difficult than previously thought for a Biden Administration to reverse course on four years of President Donald Trump’s “America First” withdrawal from multilateralism.

“The trade pact more closely ties the economic fortunes of the signatory countries to that of China and will over time pull these countries deeper into the economic and political orbit of China,” says Eswar Prasad, a professor of economics and trade policy at Cornell University and the former head of the International Monetary Fund’s China Division.

Here’s what to know about it.

What is the RCEP?
The RCEP will lower or eliminate tariffs on various goods and services, although the scope of the agreement—essentially an extension of free trade under existing frameworks—is limited.

One of the biggest benefits, experts say, relates to the pact’s so-called rules of origin, which make it easier for companies to set up supply chains spanning multiple countries.

Deborah Elms, the founder of the Asian Trade Centre, says it will be much easier to manufacture and sell goods in the region once RCEP comes into force. “Firms can just build and sell across the region with just one certificate of origin paper and no more juggling different forms and rules,” she says.

That means that it will be harder for companies from the U.S., and other countries that aren’t party to the RCEP, to compete in Asia. “Companies in Asia will have lower tariffs to pay, may get better access at customs, have improved market access for services and significantly better investment opportunities,” says Elms.

The full list of RCEP signatories is: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, Australia, China, Japan, New Zealand and South Korea.

India was initially meant to sign on, as well. But, fearing a deluge of cheap imports, it withdrew from negotiations in late 2019. That caused concern among some parties to the agreement that China, the world’s second largest economy, would have outsized influence.

Why is the RCEP important?
I

t’s one of the largest trade pacts ever signed, with its member nations representing just under a third of the world’s population and economic output.

It also marks the first multilateral trade deal for China, the first bilateral tariff reduction arrangement between Japan and China, and the first time China, Japan and South Korea have been in a single free-trade agreement.

The RCEP will add almost $200 billion to the global economy and 0.2% per year to the GDP of its members, according to estimates by academics Peter A. Petri and Michael G. Plummer, writing for the Peterson Institute for International Economics.

Plummer, director of Johns Hopkins University’s School of Advanced International Studies campus in Bologna, Italy, says the agreement is important because it will inspire investor confidence.

The RCEP’s formalization comes as the Asia-Pacific region, which has largely been able to keep the pandemic under control, seeks to recover economically. Although experts caution that the agreement will take time to implement, it may still help boost Asian economies.

“RCEP underscores the high priority that the region places on opening up international markets and deepening economic integration, at a very challenging time for the global trading system,” says Plummer.

What does the RCEP mean for the U.S. and China?
To understand what the RCEP means for the United States, it’s important to look at the big trade deal that got away: the Trans-Pacific Partnership (TPP).

The TPP was part of the Obama Administration’s “pivot” to Asia, and was intended to counter China’s rise by improving economic cooperation with regional allies. The TPP included a raft of environmental, human rights, intellectual property and labor regulations that stood to bolster U.S. competitiveness. The authors of the deal hoped that if enough of China’s other major trade partners signed on, China would be forced to join as well—and comply with the new standards.

But Trump made quitting the TPP a campaign issue in 2016, painting it as another free trade deal that would ship U.S. manufacturing jobs overseas. He withdrew from it on his first full day in office in 2017. The agreement morphed into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which 11 nations—including Japan, Canada and Australia—have signed. But, without the heft of the U.S. in the mix, China has not signed on.

The RCEP, unlike the TPP does not include detailed provisions related to environmental and labor standards.

“The U.S. now has even less leverage to pressure China into modifying its trading and economic practices to bring them more in line with U.S. standards on labor, the environment, intellectual property rights protection, and other issues related to free trade,” says Cornell’s Prasad.

The U.S. Chamber of Commerce said in a statement on Monday that it is concerned that the U.S. is being left behind as economic integration accelerates across the Asia-Pacific region—pointing out that the region is forecast by the IMF to regain an average growth rate of over 5% in 2021. “U.S. exporters, workers, and farmers need access to these lucrative markets if they are to share in this dramatic growth,” the U.S. business group said.

China is already a major trade partner for most Asian economies, and its clout is set to grow under RCEP.

This may make it difficult for the U.S. to come back from Trump’s “America First” foreign policy. The swift about-face on the TPP, which undermined trust in the United States as a trading partner, may also make re-engagement in the region more difficult.

“Even if I was able to get a win-win outcome under this U.S. president, how do I know that it will remain under the next one? If the U.S. can so easily cancel commitments, it can do so again in the future,” says Elms.

So far, President-elect Joe Biden has been noncommittal about whether he will seek to join the updated TPP. But, experts say, the RCEP might force the next administration to re-engage in the region.

Speaking on Monday, Biden said that the U.S. needs to work with its allies to set global trading rules to counter China’s growing influence.

“We make up 25% … of the economy in the world,” Biden said of the U.S. “We need to be aligned with the other democracies, another 25% or more so that we can set the rules of the road instead of having China and others dictate outcomes because they are the only game in town.”

Plummer says that he hopes the RCEP will act as an incentive for the U.S. to rebuild its ties. “Otherwise China’s influence is going to rise significantly” he says, “and the U.S. risks falling behind in the world’s most economically promising region.”

[dukkha]

The U.S. now has even less leverage to pressure China into modifying its trading and economic practices to bring them more in line with U.S. standards on labor, the environment, intellectual property rights protection, and other issues related to free trade,

not if we continue a bilateral trade agreement started under Trump
Beijing Biden will not of course

[Walt]

not if we continue a bilateral trade agreement started under Trump
Beijing Biden will not of course

The problem with bilateral trade agreements is very little trade is bilateral anymore. Supply chains usually go over several borders, and rarely will companies import and export the exact amounts from the same country. trump is making agreements for the 1700's, when we need agreements for the 21st century.

A good example of trump's bilateral agreement(s), and practically the only example, is that China is to buy soybeans from the USA. I do not grow soybeans, so why should I care?

[archives]

The problem with bilateral trade agreements is very little trade is bilateral anymore. Supply chains usually go over several borders, and rarely will companies import and export the exact amounts from the same country. trump is making agreements for the 1700's, when we need agreements for the 21st century.

A good example of trump's bilateral agreement(s), and practically the only example, is that China is to buy soybeans from the USA. I do not grow soybeans, so why should I care?

Exactly, they are nearly antiquated, and what was to be TPP isolating China is now RCEP isolating the US

[dukkha]

The problem with bilateral trade agreements is very little trade is bilateral anymore. Supply chains usually go over several borders, and rarely will companies import and export the exact amounts from the same country. trump is making agreements for the 1700's, when we need agreements for the 21st century.

supply chain components are taxed (or not) within the supply chain -
in other words the costs are built in before the country of export
trade agreement regulates trade of the finished product

ex. NAFTA 2 has rules for auto content.
If it's more then a certain percentage from within NAFTA, then it's duty free If it's not then there are customs due

A good example of trump's bilateral agreement(s), and practically the only example, is that China is to buy soybeans from the USA. I do not grow soybeans, so why should I care?

it's much more then soybeans -you care (among other reason) because it effects balance of payments of trade

Multi-lateral agreements lead to poor or non-existent grievance procedures ( like the WTO)
bi or tri-lateral have built in enforcement pre-negotiated, and are nimble to enforce

[dukkha]

Exactly, they are nearly antiquated, and what was to be TPP isolating China is now RCEP isolating the US

ROFL.
NAFTA 2 (USMCA) is a tri-lateral / is it "antiquated?" Gawd almighty Biden voters don't get basic trade

[Walt]

supply chain components are taxed (or not) within the supply chain -
in other words the costs are built in before the country of export

You have clearly never worked with supply chains. Each time a supply chain crosses an international boundary, that is an export/import. It is not just the final product that can be taxed.

trade agreement regulates trade of the finished product. ex. NAFTA 2 has rules for auto content.

trump is moving in exactly the opposite direction. For example, NAFTA 2 requires taxes on components of a car if they go above a threshold.

it's much more then soybeans -you care (among other reason) because it effects balance of payments of trade

It touches on a little more in agriculture, but not much. Because this agriculture is so small, it only hurts our balance of payments. It destroys software, something that could be big.

[Bigdog]

The full list of RCEP signatories is: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, Australia, China, Japan, New Zealand and South Korea.

South China Morning Post
China slaps ‘distressing’ duties of up to 212 per cent on Australian wine
China's commerce ministry said on Friday it will impose temporary anti-dumping measures on Australian wine imports from Saturday.
11 hours ago"


That disn't take long

[Bigdog]

The full list of RCEP signatories is: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, Australia, China, Japan, New Zealand and South Korea.

Does this mean China will order NoKo not to launch test missiles over Japan?

[Bill]

Does this mean China will order NoKo not to launch test missiles over Japan?

I don't think they have a lot of sway of lil leader..........

trump didn't seem to mind them doing it??

Who knows what biden will do....

[Bigdog]

I don't think they have a lot of sway of lil leader..........

trump didn't seem to mind them doing it??

Who knows what biden will do....

That's what they want you to believe. China would never allow an insane murderous gangster to have nukes on their border, if it wasn't THEIR insane murderous gangster.

Trump threatened to nuke lil leader if he didn't stop. You don't remember that?

Yep, the press never asked Plugs about his foreign policy for the whole election campaign.

[Bigdog]

Does this means China will stop its military expansionism in the arena of its trading partners.

The full list of RCEP signatories is: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, Australia, China, Japan, New Zealand and South Korea.

[Bill]

That's what they want you to believe. China would never allow an insane murderous gangster to have nukes on their border, if it wasn't THEIR insane murderous gangster.

Trump threatened to nuke lil leader if he didn't stop. You don't remember that?

Yep, the press never asked Plugs about his foreign policy for the whole election campaign.

I think they tolerate kim because he is a beneficial irritant to the USA/bargaining chip..........

[Bill]

Does this means China will stop its military expansionism in the arena of its trading partners.

No......... It is part of the strategy IMHO.........

It will force them to concede to ccp wishes/demands so as to not rock the boat & suffer the economic consequences......

new form of tributary tax to the emperor......

[Bigdog]

No......... It is part of the strategy IMHO.........

It will force them to concede to ccp wishes/demands so as to not rock the boat & suffer the economic consequences......

new form of tributary tax to the emperor......

I assume a Trade Agreement removes that leverage. It sets the trade terms so they can not be changed. Admittedly, I don't know the details of this TA.

I suspect the hidden threat may simply be expansion of China's BRI into these countries. However, I think it's great the Agreement eliminates taxes and bureaucracy. And increases the strength of a policy of Mutually Assured Economic Destruction.