Did you ever in your dreams think there would be a day when the largest regional free trade deal would be signed without the US being part of it? That just happened in the middle of the night while the US was sleeping — which I must say seems fitting, in a figurative sense.
We have unfortunately had four years of turning inward — isolationism and nationalism. I think a lot of us had second thoughts about the TPP a few years back, but the Regional Comprehensive Economic Partnership (RCEP), it’s successor, is a huge trade deal that we are not a part of. Nor is the EU, nor India.
It is very telling that Japan — despite its tenuous relationship with China — is signed on to the deal, as is Australia, (much to the dismay of Sky News I’m sure). India is also excluded from the deal but the reason they didn’t partake is probably evident.
This deal encompasses 30% of global GDP and 2.2 billion people. It is significant. Perhaps the only thing more noteworthy is the fact that the rest of the world is prepared to move forward without the US.
I could see this coming, I wrote about this sort of thing in a previous article. The world has gotten tired of the US dollar and our sanction-happy tendencies, which we abuse when we feel the game is not to our advantage.
If this is not an historic time, this day when the US is facing getting left behind in global trade, I don’t know what is. There is great excitement about this over in Asia, as one could tell by the flood of tweets in Chinese at 2 AM.
Joe Biden will be taking the reins soon, and it’s hard to tell what that will mean, though he’s expected to be a bit more trade friendly. We also have to remember what’s been going on over in Taiwan Strait of course.
In some respects, we are likely paying the price for not allowing the “creative destruction” inherent in capitalism to happen. We are busy pouring trillions into the banks and giant corporations to keep them on life-support, while so many small and medium businesses die.
Ant Financial was not a bank, but they became dominant — because it was a superior model to the traditional banks in many ways. Over here in the US, we are simply behind; we are only just starting to talk about CBDC (Central Bank Digital Currency) and beginning to offer special purpose national bank charters to Fintech companies, but it could be too little too late. But this is just part of the reason we are behind.
This NY Times article quote sums it up quite well:
“…this new agreement shows that the rest of the world will not wait around for the United States.”
Just a reminder that China is currently the world’s second largest economy, and Japan is the third largest. Vietnam and the Philippines are growing fast.
Below is the list of all nations that signed onto the RCEP deal, and their economy ranked by Nominal GDP:
- China -2
- Japan — 4
- South Korea — 12
- Australia — 14
- Indonesia — 16
- Thailand — 23
- Malaysia — 35
- Singapore — 36
- the Philippines — 38
- Vietnam — 46
- New Zealand — 52
- Myanmar — 74
- Cambodia — 103
- Laos — 113
- Brunei — 128
It’s important to note that nominal GDP is one way of calculating GDP, PPP (Purchasing Power Parity) is the other accepted method. Using PPP, China has already overtaken the United States for the lead position.
If you’ve been living under a rock, or were otherwise in denial about the threat of China’s economy surpassing America, it’s time to be intellectually honest with yourself. It’s happening starting from when you woke up today.