The largest free trade area in the world came into existence over the weekend — and the U.S. was not even invited.
Why it matters: For the first time in living memory, the hegemon at the center of a major global free trade agreement is not the U.S.
- China has stepped into Uncle Sam's shoes, and now anchors the Regional Comprehensive Economic Partnership, or RCEP, an area covering 2.2 billion people and 1/3 of all the economic activity on the planet.
The big picture: President-elect Joe Biden is expected to seek a broad multilateral alliance to pressure China on everything from trade to human rights once he becomes president. But China is making broad multilateral alliances of its own.
- RCEP includes rich democracies such as South Korea, Japan, and Australia. Their position in this major free trade area will make it that much harder for Biden to unite them against China.
Flashback: The Obama administration was explicit that the U.S. should be the anchor of a Pacific Rim trade agreement, the TPP, that pointedly excluded China.
- "China is negotiating a trade deal that would carve up some of the fastest-growing markets in the world at our expense," wrote then-President Obama in 2016.
- That trade deal is now reality, while America has pulled out of the TPP. There is very little chance that the U.S. will rejoin it under Biden's presidency.
The bottom line: Big new trade pacts are extremely difficult to negotiate. China showed real determination in getting this one done, even as the U.S. demonstrated almost no interest in improving or even maintaining economic relations with the region. China's partners in RCEP are likely to remember for many years which of the two giants was more reliable.