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A new trade agreement debuted to much fanfare last week. The 15-country deal, known as the Regional Comprehensive Economic Partnership (RCEP), connects the Association of Southeast Asian Nations (ASEAN) to Australia, China, Japan, South Korea and New Zealand. The U.S. isn’t a member, leading the media to ask whether President-elect Biden will join. RCEP is not in the cards. Biden shouldn’t prioritize rejoining the Trans-Pacific Partnership (TPP) either. On Day One, Biden should begin rebuilding U.S. trade policy by focusing on Europe.
Given the sudden media attention it has received, one might think that RCEP came out of nowhere and caught the United States by surprise. It didn’t. RCEP was years in the making, but the spotlight had been on TPP, now called the Comprehensive and Progressive TPP (CPTPP). When President TrumpDonald John TrumpBiden team wants to understand Trump effort to ‘hollow out government agencies’ Trump’s remaking of the judicial system Overnight Defense: Trump transgender ban ‘inflicts concrete harms,’ study says | China objects to US admiral’s Taiwan visit MORE took the U.S. out of TPP, few saw RCEP as Plan B. RCEP wasn’t expected to have much depth to it and the agreement ran afoul of Trump’s belief that bilateral deals are better. The final text suggests that RCEP is a work in progress; various chapters anticipate a Version 2.0 in a few years. RCEP is not ready for prime time.
What about TPP? President Obama found TPP a hard political sell. Most notably, the U.S. already had trade deals with six of the 11 members. Of the other five, only Japan, Malaysia and Vietnam are in the US’s top 30 export or import markets. TPP’s benefits weren’t easy to explain. India, Taiwan and others queued up to join, but nothing was written in stone. TPP was going to modernize the North American Free Trade Agreement (NAFTA), but there was more interest in ripping it up. And TPP included investor rights, yet there was greater interest in drafting a carve out for tobacco than filling in for a lack of U.S. bilateral investment treaties in the region.
Trump’s withdrawal from TPP was a mistake. The U.S. should rejoin in the future. But it’s not going to be easy. For one thing, the U.S. will want to revise parts of the agreement, as in the case of intellectual property rights, which were revised down after Trump pulled out. This isn’t likely to win many allies. TPP is also no longer needed to upgrade NAFTA, given that the United States-Mexico-Canada Agreement (USMCA) took effect this summer. Other deals, like U.S.-Chile, could use a fresh coat of paint, but these are not politically salient. And while the new acronym may help, the hangover from the beating TPP took in 2016 still lingers. Biden should put TPP on the back burner.
Why should Europe be the priority? Nothing about trade with the European Union (EU) is easy, but USMCA and reforming the World Trade Organization (WTO) will force Biden’s hand.
The goal is not the Transatlantic Trade and Investment Partnership (TTIP) writ large. The EU is looking for short-term wins. So too is Biden, who said on the campaign trail that he wants to end Trump’s “artificial trade war” with the EU. Here’s how to start.
The EU has authorization to negotiate limited deals with the United States on tariffs and conformity assessment. Tariffs aren’t a big obstacle to transatlantic trade, but reducing them is an easy political win. The “lobster deal” that Europe approved last week is a start.
Conformity assessment is the real payoff. These are the methods used to verify that a product meets a safety standard, for example. Regulatory measures cover most transatlantic trade. Getting the conformity assessment part of this equation right would be a game-changer.
The bigger picture is that limited U.S.-EU deals will help USMCA and start a transatlantic dialogue about WTO reform.
First, USMCA has a design problem: Canada and Mexico have trade deals with the EU, but the U.S. doesn’t. This means American companies have an incentive to move to Canada or Mexico to access Europe on preferential terms, and still sell back home under USMCA. This is called a corporate “inversion.” A longer-term answer might involve a USMCA-EU deal, but for now, limited deals on tariffs and conformity assessment will help a lot.
Second, limited U.S.-EU deals will force a conversation about WTO reform. EU Director-General for Trade Sabine Weyand sees WTO reform as central to deeper transatlantic trade. Weyand says that China should loom large in these discussions. That’s what Biden wants too.
RCEP is a wake-up call. It reminds the U.S. that the global economy can’t be paused until Washington is ready to re-engage. Biden can reorient U.S. trade policy, and reassure allies, with limited U.S.-EU deals. These deals will help restore confidence in transatlantic trade, strengthen USMCA and forge an essential partnership on WTO reform.
Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at the Walsh School of Foreign Service, Georgetown University, a nonresident senior fellow at the Atlantic Council and host of the podcast TradeCraft.