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Why China Is Creating a New Asia-Pacific Trade Pact: QuickTake

First President Donald Trump withdrew the U.S. from a 12-nation, pan-Pacific trade deal known as the TPP. Then Prime Minister Narendra Modi pulled India out of another regional grouping led by China known as the RCEP. In both cases, protectionism played a part; in both cases, the show went on without them. With the 15-country RCEP deal now signed, the question is what the impact will be on American and Chinese efforts to boost their clout -- and business -- across Asia.

1. What is the RCEP? What began in 2012 as a routine harmonizing of agreements between members of the Association of Southeast Asian Nations, or Asean, turned into a deal creating potentially the world’s biggest free trade bloc. The Regional Comprehensive Economic Partnership, to give its full name, is aimed at strengthening trading ties among China and others with Asean members. Broadly speaking, it would lower tariffs and other barriers to the trade of goods among the 16 countries that were in, or had existing trade deals with, Asean.


2. But that’s now down to 15 nations?

Correct. India pulled out in November 2019, saying it wanted to protect service workers and farmers. There were also worries the country would be flooded by cheap goods from China. Modi had pushed the other nations to address concerns over deficits and to open their markets to Indian services and investments.


3. Is India’s loss a big deal?

It would have been the third-biggest economy in the RCEP, so yes. On the other hand, its exit ended up removing one of the biggest impediments to the pact, which the remaining 15 members hope will help them deal with the unprecedented challenge the Covid-19 pandemic has created for trade, supply chains and investment. For its part, China has been looking to further integrate itself with its neighbors as the Trump administration urged them to shun Chinese infrastructure loans and 5G technology. China says India is welcome to come back aboard whenever it’s ready.


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