The next steps for Biden’s Indo-Pacific Economic Framework

The Biden administration has launched Indo-Pacific Economic Framework for Prosperity In May 2022, we committed to 13 partner countries high-level commitments to deepen U.S. engagement in Asia-Pacific trade, supply chains, clean energy, and graft destruction.

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

As the delegation stepped off the plane, representing countries spanning an arc from India to Australia to Japan, in san francisco In November, they expected a closure and a bold announcement, but instead learned that the United States had: pulled back Trade negotiation documents.

In baseball terms, the U.S. team attended last November’s Asia-Pacific Economic Cooperation meeting hoping to add some points to its Indo-Pacific strategy. Instead, Washington lost his courage at a critical moment and went for a bunt. For fans of baseball or cricket, this means brushing the ball away rather than swinging for the fences. The resulting dribble grounder got the U.S. (barely) to first base, and the group put together some novel but less ambitious non-trade-related accomplishments.

what happened to president joe biden pledge Will it use a framework in May 2022 to “engage comprehensively with partners on a wide range of issues” including trade?

The short answer is politics.

Sen. Sherrod Brown (D-Ohio) just before the APEC Summit in San Francisco was forced to appeal We have asked the White House to withdraw the trade pillar of the Indo-Pacific Economic Framework. Mr. Brown will have to defend a very vulnerable seat in a Republican-controlled state in November. Mr. Brown is adamantly opposed to anything that remotely “promotes” trade, fearing an electoral backlash.Biden is backed by the Democratic Party majority of one vote It was acquiesced in the Senate.

The political dilemma extends beyond Brown and the Senate. To secure a second term, Biden himself needs to win three battleground states with strong labor movements and anti-trade sentiment: Michigan, Pennsylvania and Wisconsin. This explains why Biden scrapped much of the framework in San Francisco and announced a new White House memorandum instead. worker rights.

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

Nevertheless, many recognize the urgent need for the United States to reach out to the Indo-Pacific, the linchpin of the strategic and economic competition between the world’s two largest economies. To be effective in this competition, America’s allies and partners must be convinced of America’s intentions for economic engagement.

The most obvious and effective strategy for Washington would be to return to the status quo. Pacific Rim Partnership It was designed and cultivated by the United States during the Bush and Obama administrations. That’s what Japan wants from Washington. But that seems politically impossible.

Instead, far-sighted observers are now looking at two possible paths for the United States on trade policy going forward—perhaps after the next election campaign this year.

The first would be for Washington to reach agreements with allies on key emerging growth areas.

Perhaps the biggest loss from last year’s setback is the relinquishment of US leadership in global digital trade policy.The framework initiative was aimed at advancing digital policy, but in October, before APEC, the White House got thrown away Long-held positions on cross-border data flows, data localization, and source code transfer are undermining long-standing contributions to multilateral digital governance.

Parts of the Asian region are currently pursuing these issues without the United States. The Association of Southeast Asian Nations made the confirmation at a meeting in Singapore in late January. plan We aim to conclude the ASEAN Digital Economy Framework Agreement by 2025. Significant country-by-country changes are rapidly reshaping the regulatory environment across the Indo-Pacific region with respect to internet governance, artificial intelligence, data privacy, data management, e-commerce, and digital trade.

If the United States were to reengage based on a sectoral approach, it would strategically focus on narrower trade policy areas that have the greatest impact on U.S. economic growth. This means pursuing narrower deals on artificial intelligence, advanced computing technology, new energy technologies, and securing the upstream minerals and materials that enable these innovations.

The Indo-Pacific Economic Framework was designed to fall somewhere between the harsh restrictions of binding trade agreements and more consensual and cooperative arrangements like APEC. The United States could adopt this approach to negotiations on important emerging sectors and have a high probability of success.

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

From the perspective of developing an optimal Indo-Pacific political strategy, it may make sense for the US government to focus on bilateral negotiations with the Indo-Pacific’s most important economic partners and adversaries.

The best approach would be to begin negotiating a full comprehensive free trade agreement with Japan and Taiwan, and restart negotiations at the same time. Phase 2 trade negotiations Together with China.

A lot of preparatory work has been done on such an approach over the past few years. Japan-US trade agreement and work in progress US-Taiwan Initiative in 21st Century Trade. The US government must also return to trade talks with China, given the impracticality of separating the Chinese market from US exporters. One can imagine that the second Trump administration will pick up where high-stakes bilateral trade negotiations with China left off in 2019.

After what is likely to be a painful political year, it will be imperative that Washington gets back to business in 2025 and demonstrates the level of global economic leadership that is still attainable.

Kurt Tong is a managing partner of the Asia Group and an advisor to the Hinrich Foundation. He previously served as Chief of the U.S. Mission in Hong Kong and Ambassador to the Asia-Pacific Economic Cooperation Group.

Chuin Wei Yap is Program Director for International Trade Research at the Hinrich Foundation. He was previously a correspondent for the Wall Street Journal and a policy manager for Singapore’s Ministry of Trade and Ministry of Defence.