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Asia-Pacific Countries Sign Major Trade Pact


China and 14 other Asian and Pacific countries have signed one of the biggest free trade agreements in the world. It is called the Regional Comprehensive Economic Partnership, RCEP - RCEP, they say. The United States is not part of this giant free trade deal. NPR's Southeast Asia correspondent Julie McCarthy is covering it. Hi there, Julie.


INSKEEP: OK. Apart from China, who's in?

MCCARTHY: Well, there's these 10 Southeast Asian countries, like Vietnam, Indonesia, plus China, Japan, South Korea, Australia and New Zealand. This group accounts for almost a third of global gross domestic product and covers nearly a third of the world's population. It's big.

INSKEEP: And I should note, it seems to include a number of U.S. allies - South Korea, Japan, Australia, New Zealand. What's the deal do?

MCCARTHY: Well, it's largely an exercise in lowering tariffs between these 15 economies. And member states say the deal encompasses 90% of goods between them, with a very long time frame to get to zero tariffs. But the breakthrough is that the region will effectively harmonize into a more unified trading system, rather than the dozens it has now. And analyst Jeffrey Wilson, who is in Perth, says it would have the effect of expanding supply chains for countries like Australia.

JEFFREY WILSON: It's going to provide Australia an opportunity to lessen our trade dependence on China by doing more with Vietnam, more with Indonesia, more with Malaysia. So in the long run, it may actually foretell a period where countries have a greater number of options for economic partnerships in Asia that aren't simply China, China, China.

MCCARTHY: And what this deal doesn't do, Steve, is set standards for labor or the environment. Still, it does potentially deepen economic integration within Asia.

INSKEEP: Does it also sideline the United States?

MCCARTHY: Well, the U.S. withdrew itself from the Asian trade game when President Trump rejected the rival pact to this one just signed, which was the Trans-Pacific Partnership. So the United States is languishing on the sidelines of two major trade deals. China hailed this latest free trade agreement as a triumph of multilateralism. Michael Green, with the Center for Strategic and International Studies, says China acting in concert with Asian-Pacific countries on trade gives Beijing an opening that the U.S. will regret.

MICHAEL GREEN: It will create a narrative within the region that China's the new leader with the most influence on trade and rules-making.

INSKEEP: And that last part, rules-making, is key. The question of who gets to make the rules for the world is a huge one because the United States has been the rule-maker up to now. Can the United States get back in the game?

MCCARTHY: Well, President-elect Joe Biden will be under pressure to engage more on trade with Asia. You know, but getting back into another version, say, of a TPP would require a lot of his political capital. The fact is big free trade agreements are not popular where Biden won the presidency, in swing states, where labor tends to reject these trade deals.

But maybe trade takes another shape. Michael Green says, look; the world's changing. It's technology - 5G and digital trade. He says that is more important to the future of economic and geopolitical competition. So Green says the United States is not out of the game yet.

INSKEEP: NPR Southeast Asia correspondent Julie McCarthy, always a pleasure talking with you.



Julie McCarthy has spent most of career traveling the world for NPR. She's covered wars, prime ministers, presidents and paupers. But her favorite stories "are about the common man or woman doing uncommon things," she says.
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