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Fifteen countries including China signed a major trade deal after years of tricky negotiations, posing an early challenge to President-elect Joe Biden as he formulates his administration’s trade policies.

The agreement, called the Regional Comprehensive Economic Partnership, or RCEP, creates a regional bloc that covers around a third of global economic output.

Biden has said he would wait before signing new trade deals and will seek to rally allies behind a more forceful policy to confront China. However, the new Asian agreement signals that other countries—including U.S. allies such as Japan and South Korea—are forging ahead.

The new bloc stretches across many of the largest and most vibrant economies in the Asia-Pacific region, which set aside geopolitical differences to boost trade and growth during the coronavirus pandemic. In addition to China, it includes Japan, South Korea, Australia, New Zealand and 10 Southeast Asian nations, from Indonesia and Vietnam to Thailand and Singapore.

The deal is more limited in scope than the Trans-Pacific Partnership, from which the Trump administration withdrew the U.S. China was not part of the TPP, which was ultimately approved in a modified form by 11 other entities.

While most participating countries in the new regional deal already have tight trade ties—they rely on one another for goods from rice imports to semiconductor sales—their new agreement is considered significant because it will result in a more unified trading system. That should make it easier for the region’s manufacturers to import raw materials from around the bloc without facing high tariffs, and export finished products throughout the region with lower tariffs, trade experts familiar with the deal said.

National governments need to ratify the pact before it takes effect.

Source: Wall Street Journal