Americans Should Not Fear China's Regional Trade Pact

by Roy Allen Howell

President Obama has pitted China's Regional Comprehensive Economic Partnership (RCEP) against the U.S.-led Trans-Pacific Partnership (TPP), offering Americans a binary choice to either support his trade agenda or risk losing the Asia-Pacific market to the Chinese.  The choice the President offers, however, is a false one, as he once again ignores the virtues of free trade and puts politics ahead of consumer interests.

RCEP is a regional free trade agreement in the works between China, the ten member states of the Association of Southeast Asian Nations (ASEAN), India, Australia, South Korea, Japan, and New Zealand.

In an op-ed penned for the Washington Post earlier this month, President Obama described the agreement in his own terms:

As we speak, China is negotiating a trade deal that would carve up some of the fastest-growing markets in the world at our expense, putting American jobs, businesses and goods at risk.

This past week, China and 15 other nations met in Australia with a goal of getting their deal, the Regional Comprehensive Economic Partnership, done before the end of this year. That trade deal won’t prevent unfair competition among government-subsidized, state-owned enterprises. It won’t protect a free and open Internet. Nor will it respect intellectual property rights in a way that ensures America’s creators, artists, filmmakers and entrepreneurs get their due. And it certainly won’t enforce high standards for our workers and our environment.


What the President really wants is not free trade, it's managed trade.  President Obama, through the TPP, wants to pad his own legacy and re-write the social and environmental laws and policies of lower-income countries like Vietnam and Malaysia while ignoring what is really at the core of free trade agreements: an opening of international markets to allow cross-border competition and drive down prices for consumers.  After all, trade occurs between individuals not between countries.

So, will RCEP harm individual Americans? No; in fact, the truth is probably to the contrary. The purpose of the Regional Comprehensive Economic Partnership is to untangle the so-called "noodle soup" in Asia, numerous bilateral trade agreements with varying rules and standards between countries party to the regional agreement. As the Cato Institute's Simon Lester points out, "[w]hat all of China’s agreements do is very similar to what other trade agreements do: among other things they lower tariffs, liberalize services, and encourage the free movement of labor." If that continues to be true of RCEP, liberalized trade between the largest economies in the Asia-Pacific, even to exclude the United States, should ultimately benefit American consumers as well as numerous American businesses.

The U.S. imported nearly $500 billion in goods and services from China last year, including a combined $17 billion to North and South Carolina alone (*over a fifth of North Carolina's imports come from China). However, as AEI's Derek Scissors notes in a recent report, "the supply chain phenomenon means the PRC gets credit for the full value of consumer electronics and textile exports to the U.S. when it is only involved in final assembly."  What this means is that many parts of U.S. imports from China came from somewhere else in the supply chain.  One can assume that at least a portion of these supply chains involve countries party to RCEP, and eliminating barriers to trade between these countries would ultimately mean lower production costs across the region. And, in the end, the result for American consumers is the same: (at least marginally) lower prices.


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