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15 Asia-Pacific countries have signed the Regional Comprehensive Economic Partnership (RCEP), a regional free trade bloc that China spearheaded after US President Trump pulled the US out of a similar deal (which excluded China) known as the Trans-Pacific Partnership. Most the states in the TPP remained in that agreement which provided a big boost to international trade. The Brookings Institute describes the significance of the deal:

“Once completed, RCEP will offer a powerful boost to the rules-based global trading system. It will be a free trade area for the record books—huge in population and output (covering 3.6 billion people and a GDP of $25 trillion, exceeding that of the United States) and the most ambitious ever negotiated by developing countries. It will encompass first-ever agreements among China, India, Japan and South Korea, building upon commitments in the World Trade Organization (WTO), and offer new evidence of Asian leadership in world trade….

“RCEP will increase global real incomes by an estimated $286 billion per year (about 0.2 percent of global GDP) once the agreement is fully in place in 2030. Absolute gains will be almost twice as large as those from the CPTPP due to RCEP’s greater scale. These gains represent a permanent upward shift in real income and make RCEP equivalent to a $7.2 trillion investment that returns 4 percent per annum.

“Global trade is expected to increase by 1.9 percent with RCEP. Trade diversion (in which trade shifts from more to less efficient exporters because of trade discrimination) is estimated to be small. Some non-members may in fact benefit due to the multilateral nature of the liberalization that RCEP requires and spillovers from members’ increased productivity.”

The deal will address one of the thorniest issues in international trade: creating rules of origin, which will smooth over many difficulties caused by extensive supply chains. The Center for Strategic and International Studies assesses the significance of the change:

“One of the most significant changes under RCEP is the creation of common rules of origin for the entire bloc. Once implemented, RCEP countries will only require a single certificate of origin. This will allow companies to easily ship products between RCEP countries without needing to worry about specific rule of origin criteria in each country or for each manufacturing step. A common rule of origin for the RCEP bloc will lower costs for companies with supply chains that stretch throughout Asia and may encourage multinationals that export to RCEP countries to establish supply chains across the bloc.”

The RCEP represents the first agreement including China, Japan, and South Korea, a significant achievement. India pulled out of the RCEP last November but held out the possibility of joining at a later date. But it is extraordinary that the US, a champion of free trade since 1945, is not a member of the two largest free trade agreements ever signed. “America First” is actually “America Alone”.