Shunning the Trans-Pacific Partnership Was a Costly Mistake

Johnny Dinar · November 19, 2020

Shunning the Trans-Pacific Partnership Was a Costly Mistake

The Editors

Wed, November 18, 2020, 2:07 PM EST·3 min read

Within weeks of his 2016 election victory, President Trump announced plans to withdraw the U.S. from the Trans-Pacific Partnership (TPP), a multilateral trade deal intended to build an economic bulwark against China. That decision paved the way for this weekend’s signing 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 largest-ever trade agreement, even after India’s withdrawal scaled it back. Though of marginal material consequence to the global economy, its signing represents another step in China’s march to regional dominance.

The RCEP will phase out most tariffs between member countries over a 20-year period, a provision that essentially replicates existing trade arrangements. Indeed, previous deals with much more comprehensive and stringent rules have already achieved most of the trade liberalization included in the RCEP, muting its effect. Rather than altering the region’s economic terrain, the RCEP merges a hodgepodge of bilateral and plurilateral deals into a single framework.

It does, though, contain one significant provision instituting a common rule of origin. Whereas previously businesses had to attain various certifications to ship products between member countries, they now need just one so-called certificate of origin. That makes supply-chain management easier and could incentivize 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 untouched, and unlike the TPP, it contains no environmental or labor rules.

Still, the sheer extent of the trade zone should worry Washington, which has missed opportunity after opportunity to convert the grievances of China’s neighbors into meaningful policy victories. If previous ASEAN agreements are any indication, the scope of the RCEP is likely to expand over time. And those nations most willing to partner with the U.S. against China — Japan and South Korea — rank among the largest beneficiaries of the agreement. By abdicating our role in the region, we’ve allowed our allies to grow more dependent on Chinese corporations and consumers just as Beijing ratchets up its military and diplomatic aggression.

The Trump administration deserves credit for emphasizing the dangers of China’s economic malfeasance. For too long, Western leaders overlooked the trade barriers, industrial subsidies, and intellectual-property theft that gave China an unfair advantage in international trade. But over the past four years, the White House never delineated clear, cohesive goals for economic policy in Asia, often taking measures at cross-purposes with each other.

Tariffs meant to punish China ended up hitting imports from Japan, Taiwan, Canada, and the European Union. As with his decision to withdraw from the TPP, Trump’s trade war repeatedly weakened the U.S. allies best positioned to combat Beijing.

Unfortunately, we don’t expect any better from the incoming administration. President-elect Biden has a history of downplaying the Chinese threat and has not announced plans to rejoin TPP or put together an alternative trade deal. The longer Washington neglects its leadership role in Asia, the sooner Beijing’s dream of regional dominance will come to fruition.

https://www.yahoo.com/news/shunning-trans-pacific-partnership-costly-190715078.html