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Asian Nations Expected To Sign Big Trade Deal Backed By China

SCOTT SIMON, HOST:

While the Trump administration engages China in a trade war, the rest of Asia, including major U.S. allies, are joining Beijing this weekend in a virtual meeting to sign one of the world's largest free trade agreements. NPR's Julie McCarthy has the story.

JULIE MCCARTHY, BYLINE: With the stroke of their pens, representatives of 10 Southeast Asian countries, plus China, Japan, South Korea, Australia and New Zealand, will usher in the world's newest mega-trade bloc. Its bland name masks its import. The Regional Comprehensive Economic Partnership, or RCEP, encompasses nearly a third of the world's population and accounts for nearly a third of the global GDP.

DEBORAH ELMS: It is transformative. I mean, it says, you know, Asia remains open for business and that you have set up an institutional structure to help Asia continue to lead.

MCCARTHY: That's Deborah Elms, executive director of the Asian Trade Centre. She argues that RCEP could create supply chains that deepen the integration within Asia so member countries will look closer to home instead of having the U.S. or EU be their preferred trading partner. Elms says the pact, eight years in the making, reduces tariffs on a range of goods and services to a point.

ELMS: Not everything will be cut. Not everything will go to zero. And the timelines are very long on some sensitive products.

MCCARTHY: Sensitive products, such as Japanese beef, are likely to be left out, nor will the deal enforce high standards for workers or the environment or curb government subsidies to state-owned enterprises.

CHAD BOWN: So it really doesn't provide any kind of disciplines or constraints or new rules that would really change China's economic model at all.

MCCARTHY: Trade economist Chad Bown is with the Peterson Institute for International Economics. He says the significance of RCEP is that it binds major players in ways that they haven't been bound before.

BOWN: The major economies - the Japans, the Chinas and the Koreas - never really had the big free trade agreement between each other. And this could be a big boost to the trade between those three.

MCCARTHY: President Obama led the drive for a rival trade initiative to RCEP - the Trans-Pacific Partnership, a more comprehensive trade agreement that joined 11 other countries, including Japan, Vietnam and Australia. But President Trump pulled out of the TPP within days of taking office. And Bown says that refusal to join a trade bloc in one of the world's fastest-growing regions has far-reaching implications for American producers.

BOWN: Because the United States doesn't have these kinds of free trade agreements in the Asian region, it now is on an unlevel playing field with a lot of the other, you know, companies and farmers out there in the world. And it makes American companies and American businesses less competitive.

MCCARTHY: Deborah Elms says that the U.S. is now seen as a less-than-reliable partner. And she says every capital will likely be asking...

ELMS: Even if I get an agreement with this guy, or someday this lady, is it going to stay, or is the next one going to just throw it all out the window and start over?

MCCARTHY: Bown says the U.S. has lost face in Asia and that it will be tough for the Biden administration to regain ground.

BOWN: But I do think it's going to take effort and some mea culpas on the American side to be able to ingratiate themselves with countries in the region again.

MCCARTHY: Which could make RCEP a big win for Chinese influence in the region. Julie McCarthy, NPR News. Transcript provided by NPR, Copyright NPR.

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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