• November 28, 2020

THE ECONOMIST: The big one - Odessa American: Ray Perryman Column

e-Edition Subscribe

THE ECONOMIST: The big one

Font Size:
Default font size
Larger font size

Posted: Sunday, November 22, 2020 5:30 am

A new trade agreement covering about 30 percent of the global economy has been signed. The Regional Comprehensive Economic Partnership (RCEP) includes China, Japan, South Korea, New Zealand, Australia, and 10 Southeast Asian economies. It’s the world’s largest in terms of the amount of gross product covered, slightly above the U.S.-Mexico-Canada Agreement (USMCA) according to most estimates. About 2.1 billion people reside in member nations. India is not in the deal at this point but can join at a later date.

It’s been a long time in the making, with negotiations dragging on for about eight years. With the coronavirus pandemic causing economic dislocations worldwide, however, there was an even greater incentive to get it done (though member nations still have to ratify it). In addition, the agreement may help China, Japan, and South Korea reach a free trade agreement; they’ve been struggling for years to work through barriers and reach an accord.

Although clearly a landmark in terms of the proportion of the world economy which is covered, tariffs among most of these nations were already low or nonexistent. While further reductions will clearly enhance growth prospects, they will be phased in over time, and the starting points are generally not that high.

Unlike more comprehensive trade agreements which attempt to reduce a variety of barriers to free trade, the primary goal of the RCEP is to reduce tariffs. In fact, some observers note that, from China’s perspective, it is particularly attractive in that it is narrowly focused on tariffs rather than other issues. The agreement touches on intellectual property, but environmental protections and labor rights are not addressed.

Free trade is good for the economy. It can help open markets, strengthen supply chains, and enhance economic growth. This basic fact of economics has been proven over centuries. The increased Chinese influence may prove to be detrimental to the ability of the U.S. to compete in the region. This outcome was largely preordained when the U.S. pulled out of the Trans Pacific Partnership negotiations in early 2017, but may be reversed through future policy shifts.

As an illustration of the potential magnitude of a major trade deal, we analyzed the benefits to the United States having the USMCA in place and found that it leads to an additional $64.9 billion in gross product and almost 600,900 jobs compared to trading under the terms that would otherwise be in place (including multiplier effects). While the RCEP is not as comprehensive as the USMCA, it will nonetheless yield benefits to all member nations.

As nations struggle to recover from the pandemic fallout, free trade can help by enhancing competitiveness and reducing costs. Let’s hope the U.S. comes to the party. Stay safe!

Odessa, TX

Current Conditions

Humidity: 86%
Winds: N at 8mph
Feels Like: 38°

Your Extended Forecast


High 53°/Low 32°
Cloudy with morning rain. Highs in the low 50s and lows in the low 30s.


High 57°/Low 28°
Mainly sunny. Highs in the upper 50s and lows in the upper 20s.


High 52°/Low 28°
Mainly sunny. Highs in the low 50s and lows in the upper 20s.
Online Features

Pet Central


Having a pet is a lot of responsibility, and we’ll help by giving you lots of tips and tricks! More >>



Our fitness articles will help teach you how to work out with gym- and home-based exercises. More >>



Enjoy the crosswords challenge in our free daily puzzles, from the harder Sunday crossword to the quicker daily. More >>



Every Sudoku has a unique solution that can be reached logically. Enter numbers into the blank spaces so that each row, column and 3x3 box contains the numbers 1 to 9. More >>

  • ALL-ACCESS: Subscribe to our e-edition and premium website at myoaoa.com.
    You can read your daily newspaper without taking a walk to the driveway.
    Look back at yesterday's newspaper, or issues from months ago with our archive feature.
    Call circulation at 432-337-7314 to sign up today.