China excludes US from broad coalition of trading partners

The world’s largest trade bloc will not include the world’s largest economy.

Under Chinese leadership, fifteen eastern countries joined together on Sunday to create what is likely to become the world’s most influential multi-national trade agreement—but in so doing purposefully excluded the United States, according to Reuters.

With its participants accounting for a third of the world’s total population and international trade, the creation of the Regional Comprehensive Economic Partnership, (RCEP) gives China a chance to continue expanding its influence in Asia and the Western Pacific without the possibility of American competition. The Chinese economy, the second most powerful in the world, will be the largest involved in the agreement, making China by far its most influential participant.

While the designs for the bloc originated back in 2012, final negotiations to the deal were made this past week and finalized on Sunday at a regional summit in Hanoi. India declined to join the partnership.

For Vietnam’s Prime Minister, Nguyen Xuan Phuc, its competition has been a long time coming.

“I am delighted to say that after eight years of hard work, as of today, we have officially brought RCEP negotiations to a conclusion for signing,” Phuc said.

Mary Lovely, a senior fellow at the Peterson Institute for International Economics, believes it’s an agreement that smaller countries, like Vietnam, could benefit from. She told the New York Times that its likely to encourage a more active Asian economy apart from the globe’s two economic giants and provide its less-developed participants room to grow.

“Lower tariffs within the region increases the value of operating within the Asian region, while the uniform rules of origin make it easier to pull production away from the Chinese mainland while retaining that access,” Lovely said.

The RCEP agreement includes a number of developing economics. It includes Brunei-Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam, Australia, China, Japan, South Korea, and New Zealand.

Besides the United States, another notable exclusion Taiwan. Taiwan will not be part of the agreement despite being surrounded by its other participants.

At first glance, the exclusion of the United states in the RCEP may not make much sense for a trade deal of its size. From the NATO to the United Nations, the United States plays a center-stage role in almost every significant international agreement. But for China, the United States is a primary economic rival, and the RCEP is an opportunity to gain the upper hand in its two-year American trading conflict.

Under the Trump administration, the United States has recurrently used trade as a way to incentivize or deter Chinese behavior. In addressing concerns like the treatment Uyghur Muslims in the Xinjiang province, intellectual property disputes, or political conflicts in Hong-Kong, tariffs and trade sanctions between the two have been the battleground for larger ideological and political differences.

It’s a conflict of ideas being fought by dollars.

The RCEP gives China a chance to throw its weight around in an arena where the United States has substantially less say. As the New York Times puts it, China’s leadership in the agreement could act as a “counterweight to American influence in the region.”