Chart of the Week: The new trade bloc in town

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Coincidentally, just a week after President-elect Joe Biden was confirmed the winner of the US election, a new trade bloc was announced that is likely to influence his overseas policy.  Covering nearly a third of the global economy, the Regional Comprehensive Economic Partnership (RCEP) encompasses the members of ASEAN plus China, Japan, South Korea, Australia and New Zealand, making it the world’s largest trade bloc. The deal stipulates tariff elimination on 90% of goods, although the extent of this is not as grand as it seems, as many of the nations already have trade deals. However, pooling these nations into one aggregate deal does offer significant benefits. Rules of Origin legislation is now consolidated under the trade bloc, in contrast to multiple legislations across the member nations. Despite this, the main limitation to the trade deal is its lack of coverage of services and agriculture. Furthermore, it seems apparent that the deal is motivated less by a movement towards global free trade, and more by political power play. After years of negotiations, the timing seems fortunate for China, the largest economy in the bloc. The Trump administration was not shy to voice its opinion against the US joining an Asian trade bloc, resulting in the US leaving the Trans-Pacific Trade Partnership deal negotiations. In comparison, it is expected that President-elect Joe Biden will be more open to global unification. With China seeking to exert more control over the Asia-Pacific region, it is to Beijing’s advantage to keep the US out.