US President-elect Joe Biden faces an uphill struggle in regaining leverage and credibility lost during Trump's divisive and often chaotic trade policies in Asia. Photo: AFP / Angela Weiss

In his statement “Why America Must Lead Again,” published in the March/April 2020 issue of Foreign Affairs, now US President-elect Joe Biden wrote:

The wrong thing to do is to put our heads in the sand and say no more trade deals. Countries will trade with or without the United States. The question is: Who writes the rules that govern trade? Who will make sure they protect workers, the environment, transparency and middle-class wages? The United States, not China, should be leading that effort.

As president, I will not enter into any new trade agreements until we have invested in Americans and equipped them to succeed in the global economy. And I will not negotiate new deals without having labor and environmental leaders at the table in a meaningful way and without including strong enforcement provisions to hold our partners to the deals they sign.

There are some things right and some things wrong with this statement.

Start with a great America-centric misconception. Anyone paying the slightest bit of attention knows that China is not leading the effort to determine the rules of global trade and investment.

But China is contributing to trade liberalization, as demonstrated by the signing today of the Regional Comprehensive Economic Partnership (RCEP) agreement today at the virtual Association of Southeast Asian Nations (ASEAN) summit hosted by Vietnam.

RCEP is a 15-nation trade agreement covering Japan, South Korea, China, ASEAN (Vietnam, Thailand, the Philippines, Laos, Cambodia, Myanmar, Malaysia, Singapore, Indonesia and Brunei) as well as Australia and New Zealand.

China’s Foreign Minister Wang Yi (C on screen) addresses ASEAN counterparts in a live video conference during the ASEAN-China Ministerial Meeting held online due to the Covid-19 pandemic, Hanoi, September 9, 2020. Photo: AFP/Nhac Nguyen

In addition, there is a provision allowing India to join if and when it decides to do so. Japan in particular is anxious for India to join, both because of the South Asian giant’s economic potential and because it would serve as a counterweight to China.

Eight years of negotiations have produced a broad but somewhat limited agreement among countries with widely varying economies, economic policies and standards of living. It is an exercise in compromise as well as a boost for regional economic integration and growth.

The RCEP nations have a combined population of more than two billion and account for nearly 30% of global economic output. The agreement reduces tariffs and establishes rules in areas including trade in goods and services, e-commerce and protection of intellectual property.

Protection of intellectual property involves a compromise that the US would almost certainly oppose. Signatory nations will not be allowed to restrict the flow of digital information or force companies from other signatories to locate data processing equipment on their territories. But they may require the disclosure of source codes.

Trade in agricultural products will be liberalized to a lesser degree than trade in manufactures. This reflects both the power of agricultural lobbies and the wide gap between Asia-Pacific nations and the US on the importance of protecting domestic food supplies.

RCEP is the first trade agreement that includes Japan, South Korea and China, demonstrating that seemingly intractable political disputes can be overcome in the interest of mutual prosperity.

Tariffs on some 86% of Japan’s industrial exports to China and 92% of its exports to South Korea will be eliminated when the agreement goes into effect. Tariffs on 91.5% of Japan’s exports to and 98.6% of its imports from signatory countries will be removed.

The agreement should also help solve politicized trade conflicts between China and Australia.

For all signatories, American efforts to contain China by forcing countries to choose one or the other are likely to be derailed. If taken to a logical conclusion, those US efforts would sabotage the Asia-Pacific economy.

Shipping containers from China at a dock in Long Beach, California. Photo by Mark Ralston / AFP

For reference, Japanese government data show that 21% of Japan’s trade is with China, 5% with South Korea and 15% with ASEAN, for a total of 41%. Trade with the US amounts to only 15%.

RCEP follows the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which is also known as the TPP-11 (TPP minus the US); the Japan-EU Economic Partnership Agreement; the EU-Vietnam trade agreement; the establishment of the Singapore-Shanghai Comprehensive Cooperation Council; and other trade and investment initiatives involving Asia-Pacific.

Biden lays out strict and sensible conditions for American participation in new trade agreements, but the world is moving on. His focus should be not on leading the band but on finding rational compromises to reduce the damage caused by Trump’s ill-considered policies. For the time being, there is very little leadership left for America to take.

Scott Foster is an analyst with Lightstream Research, Tokyo.

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