Regional Comprehensive Economic Partnership (RCEP) should be signed over the next few days. It represents the most significant trade agreement in modern history. Fifteen Asia-Pacific nations, including China, Japan, Australia and New Zealand, have tentatively agreed to reduce tariffs, strengthen supply chains, and establish new e-commerce rules. RCEP represents a continuation of worldwide globalization efforts and reinforces regional integration. Effectively, China is now leading the global economic recovery.

Currently, America and India have opted out of RCEP. Trade experts expressed concerns that failure to belong to RCEP will diminish American companies competitiveness, making it harder to compete. RCEP encompasses 2.2 billion people with a combined GDP of approximately $26 trillion (29 % of the world)

Shaun Roche, Asia-Pacific chief economist at S&P Global Ratings, said “China has pulled off a diplomatic coup in dragging RCEP over the line.”

President Donald Trump withdrew in 2017 from a previous trade pact formerly known as the Trans-Pacific Partnership (TPP). Trade experts expressed concern that America’s failure to participate in multi-national trade agreements will diminish our ability to counterbalance China’s economic clout. Already, there is speculation that president-elect Joseph Biden might reject Trump’s position, and make efforts to join RCEP.

William Reinsch, a senior adviser at the Center for Strategic Studies, expressed concerns that America’s abstinence favors China. Reinsch said, “If the U.S. continues to ignore or bully the countries there (Asia), the influence pendulum will swing toward China. If Biden has a credible plan to restore the U.S. presence and influence in the region, then the pendulum could swing back our way.”

Mary Lovely, a Syracuse University economics professor, stated her support for Biden to participate in an Asian trade partnership. She said, “The choice for Biden is clear. Return the U.S. to the Trans-Pacific Partnership (TPP) to ensure access for U.S. companies.” President Barack Obama strongly supported TPP, but met resistance from the Republican dominated Senate.

Although China scored a diplomatic triumph, many Asian countries remain fearful of being too economically dependent upon China. On the other hand, they also fear America will not stick around as the costs of any war with China–hot or cold–grow over time.

While not expected to block signage, a few details remain before RCEP becomes effective. Specifically, some of the participating nations need to negotiate bilateral trade issues.

Covid-19 represented a foremost economic threat to Southeast Asia. Their ability to sustain economic activity was checkered, depending upon their ability and willingness to provide fiscal and monetary stimulus to their hard-hit industries. Thailand’s GDP contracted 7.2% in 2020. By contrast, Vietnam enjoyed economic growth.

India opted out of RCEP in part to woo American and European countries and in part because of India’s ballooning trade deficit with China. Indian leaders worried that China would flood their country with cheap goods. They hope to attract foreign capital and technology to enhance their manufacturing infrastructure. To counter Chinese global presence, the Indian government has introduced preferential measures to encourage multinational countries to move some of their manufacturing facilities from China to India.

For decades China and India have been at loggerheads. Their mutual distrust led to border clashes earlier this year. India and China share a border of 2,100 miles and have overlapping territorial claims. China is the world’s second-largest military power. Technologically it is superior to India.

RCEP represents the world’s largest trade agreement in modern history. It will make China a more important trade partner for neighboring countries and even the world. President Obama summed up its impact, “The TPP sought to give Washington the upper hand in writing the rules of international trade in order to boot others, like China out of such a strong position. If America does not write the rules, then countries like China will.”

Originally published in the Sarasota Herald-Tribune