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US-China trade


NEXT STEPS FOR BIDEN’S INDO-PACIFIC ECONOMIC FRAMEWORK


KURT TONG


CHUIN WEI YAP

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Published 26 March 2024

> As the US presidential election nears, no one in the world expects much
> progress on advancing global trade via IPEF in 2024. Nevertheless, many
> recognize the dire need for Washington to convince its allies and partners in
> the Indo-Pacific on American's intent on economic engagement with the region.

The Biden1 administration launched the Indo-Pacific Economic Framework for
Prosperity2 in May 2022, promising its 13 partners high-standard commitments
that would deepen US involvement in Asia-Pacific trade, supply chains, clean
energy and graft-busting.

But on the most politically and economically important aspect of the framework,
its trade pillar, Washington’s partners got a rude shock.

As the framework’s delegations, representing an arc of nations from India to
Australia to Japan, disembarked from flights in San Francisco3 in November
expecting closure and bold announcements, they learned instead that the United
States had yanked back4 the negotiated text on trade.

In baseball parlance, the US team stepped up to the plate at last November’s
Asia-Pacific Economic Cooperation meeting hoping to score some runs for its
Indo-Pacific Strategy. Instead, Washington lost courage at the crucial moment
and squared off for a bunt. For baseball and cricket fans, this means gently
swatting away the ball instead of swinging for the fences. The resulting
dribbling ground ball got the US (barely) to first base, with the group
concluding a couple of novel but less ambitious and non-trade-related outcomes.

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JUMP-STARTING US TRADE AND ECONOMIC ENGAGEMENT IN THE INDO-PACIFIC

Wendy Cutler
26 September 2023

What happened to President Joe Biden’s pledge5 in May 2022 to use the framework
to "engage comprehensively with our partners on a wide range of issues,"
including trade?

The short answer is politics.

Just before the APEC summit in San Francisco, Sen. Sherrod Brown 6 (D-Ohio)
forcefully appealed7 to the White House to cancel the Indo-Pacific Economic
Framework’s trade pillar. Brown must defend a highl vulnerable seat8 in a
predominantly Republican state in November. Fearful of electoral backlash, Brown
is steadfastly opposed to anything that remotely "promotes" trade. Biden, very
aware that the Democratic Party holds only a one-vote majority9 in the Senate,
acquiesced.

The political dilemma extends beyond Brown and the Senate. To secure a second
term, Biden himself must win Michigan, Pennsylvania and Wisconsin, three swing
states with strong labor movements and powerful anti-trade sentiment. This
explains why, in San Francisco, Biden scuttled much of the framework and instead
rolled out a new White House memorandum playing up labor rights.10

In this politically charged environment, virtually no one in the world expects
much progress on trade via the Indo-Pacific Economic Framework in 2024.

Nevertheless, many recognize the dire need for the US to reach out to the
Indo-Pacific, a keystone in the strategic and economic contest between the
world’s two largest economies. To be effective in that contest, Washington must
convince its allies and partners there of America’s intent on economic
engagement.

The most obvious and effective strategy for Washington would be to return to the
Trans-Pacific Partnership11 that the US designed and nurtured during the Bush
and Obama administrations. That is what Japan would like Washington to do. But
that appears politically impossible.

RELATED ARTICLE


LORI WALLACH’S ENDURING INFLUENCE ON US TRADE POLICY

Keith M. Rockwell
12 December 2023

Instead, now far-sighted observers are looking toward two possible paths forward
for the United States on trade policy — probably after this year’s upcoming
election battle.

The first would be for Washington to reach agreements with its allies on
critical emerging growth sectors.

Perhaps the biggest loss from last year’s setback was the abdication of US
leadership on global digital trade policy. The framework’s initiative aimed for
progress on digital policy but in October, even before APEC, the White House
ditched12 long-held positions on cross-border data flows, data localization and
source code transfers, undermining years of its contributions toward
multilateral digital governance.

Now, parts of the Asian region are moving forward on these issues without the
United States. Meeting in Singapore in late January, the Association of
Southeast Asian Nations confirmed a plan13 to conclude an ASEAN Digital Economy
Framework Agreement by 2025. Nation by nation, significant changes in regulatory
environments throughout the Indo-Pacific region are taking rapid shape on
internet governance, artificial intelligence, data privacy, data management,
e-commerce and digital trade.

If the United States were to reengage under a sectoral approach, it would focus
strategically on narrower trade policy areas with the greatest impact on
America’s economic growth. This would imply going after narrower deals on
artificial intelligence, advanced computational technology, new energy
technologies and securing upstream minerals and materials that make these
innovations possible.

The Indo-Pacific Economic Framework was designed to fit somewhere between the
hard limitations of a binding trade agreement and the more consensual and
collaborative deals like those in APEC. The US could adopt this approach to
negotiations on critical emerging sectors, with a high probability of success.

A second, perhaps overlapping, alternative would be to reinvigorate binding
bilateral trade agreement negotiations.

From the standpoint of crafting an optimal Indo-Pacific political strategy, it
could make sense for Washington to concentrate on negotiating on a bilateral
basis with some of its most important Indo-Pacific economic partners — and
adversaries.

RELATED ARTICLE


WHY DOES THE US HATE DIGITAL TRADE?

Sam Lowe
31 October 2023

The best approach would be to launch full comprehensive free trade agreement
negotiations with Japan and Taiwan while restarting Phase Two trade talks14 with
China.

Much preparatory work has been done on such approaches over the past few years,
including a first-round US-Japan Trade Agreement15 and ongoing work on a
US-Taiwan Initiative on 21st Century Trade.16 Given the impracticality of
decoupling the Chinese market from U.S. exporters, Washington must also return
to trade talks with China. One could imagine a second Trump administration
picking up where it left off in its high-stakes bilateral trade negotiations
with China in 2019.

After what’s likely to be a bruising political year, it will be essential for
Washington to get back to business in 2025 and show the level of global economic
leadership it is still capable of achieving.

This article was first published on The Hill on March 9, 2024.

***
[1] https://thehill.com/people/joe-biden/
[2]
https://ustr.gov/trade-agreements/agreements-under-negotiation/indo-pacific-economic-framework-prosperity-ipef
[3]
https://www.whitehouse.gov/briefing-room/statements-releases/2023/11/16/fact-sheet-in-san-francisco-president-biden-and-13-partners-announce-key-outcomes-to-fuel-inclusive-sustainable-growth-as-part-of-the-indo-pacific-economic-framework-for-prosperity/
[4]
https://www.reuters.com/world/asia-pacific/us-commerce-secretary-says-closed-three-pillars-indo-pacific-talks-2023-11-15/
[5]
https://www.whitehouse.gov/briefing-room/statements-releases/2022/05/23/fact-sheet-in-asia-president-biden-and-a-dozen-indo-pacific-partners-launch-the-indo-pacific-economic-framework-for-prosperity/
[6] https://thehill.com/people/sherrod-brown/
[7]
https://www.brown.senate.gov/newsroom/press/release/brown-successfully-pushes-biden-administration-to-remove-the-trade-pillar-from-the-indo-pacific-economic-framework
[8]
https://thehill.com/homenews/campaign/4247899-sherrod-brown-ohio-2024-tough-reelection-poll
[9] https://www.senate.gov/history/partydiv.htm
[10]
https://www.whitehouse.gov/briefing-room/presidential-actions/2023/11/16/memorandum-on-advancing-worker-empowerment-rights-and-high-labor-standards-globally/
[11] https://ustr.gov/tpp/overview-of-the-TPP
[12]
https://www.whitehouse.gov/briefing-room/statements-releases/2022/10/07/fact-sheet-president-biden-signs-executive-order-to-implement-the-european-union-u-s-data-privacy-framework/
[13] https://ustr.gov/tpp/overview-of-the-TPP
[14]
https://www.cnbc.com/2020/07/10/trump-says-us-china-relationship-damaged-phase-2-trade-deal-not-a-priority.html
[15]
https://ustr.gov/countries-regions/japan-korea-apec/japan/us-japan-trade-agreement-negotiations/us-japan-trade-agreement-text
[16]
https://ustr.gov/about-us/policy-offices/press-office/press-releases/2023/august/united-states-and-taiwan-hold-second-negotiating-round-us-taiwan-initiative-21st-century-trade-1


© The Hinrich Foundation. See our website Terms and conditions for our copyright
and reprint policy. All statements of fact and the views, conclusions and
recommendations expressed in this publication are the sole responsibility of the
author(s).

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Author


KURT TONG

Ambassador Kurt Tong is a Partner at The Asia Group, where he leads the firm’s
work in Japan and Hong Kong, and on East Asia regional policy matters.

Articles by this expert

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--------------------------------------------------------------------------------

Author


CHUIN WEI YAP

As the program director for international trade research, Mr. Yap leads the
Foundation’s development of original research content.

Articles by this expert

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