Security, Not Economy, Likely to Boost U.S. Trade Engagement in Asia – Analysis – Eurasia Review


By Gary Clyde Hufbauer and Megan Hogan *

It was a year of transition for US trade policy in 2021. Trump administration trade representative Robert Lighthizer has been replaced by Katherine Tai, a trade lawyer who has previously faced off against China. While Tai’s appointment signaled President Joe Biden’s penchant for a multilateral approach, under his leadership the United States maintained many “hard on China” Trump-era policies, including the first-phase trade deal and tariffs on hundreds of billions of dollars in imports.

Like Trump, Biden has struggled to craft an effective approach to dealing with China. Multiple WTO cases have prompted China to reform aspects of its trade regime, but no action by the WTO has persuaded Beijing to change the core features of forced technology transfers and corporate subsidization public. Trade battles have not allayed US fears about China’s military and technological rise.

Biden’s new take on the Chinese problem made Indo-Pacific engagement a top priority. After taking office, Tai met with several Indo-Pacific trade ministers, government officials, and industry stakeholders to strengthen U.S. trade and economic relations in the region, as well as to assess the recently announced interest in the Indo-Pacific economic framework. But meaningful engagement in the region faces a number of challenges, both inside and outside the administration.

In 2021, Biden found himself engrossed in the challenge of Congress to implement its national agenda and the military challenge of withdrawing from Afghanistan. As a result, the direction of Asian trade policy, traditionally held by the office of the United States Trade Representative (USTR), has been shared with the State Department and the Commerce Department. The consequence of the presidential neglect was that rather than pushing for a single cadre, Secretary of State Antony Blinken, Secretary of Commerce Gina Raimondo and Tai each supported different and somewhat competing angles on the Indo-Pacific engagement.

The competition between the Blinken, Raimondo and Tai agendas can lead to a lot of talk and little action, requiring a presidential resolution. As Tai is expected to co-lead the development of the Indo-Pacific economic framework with Raimondo, differences over appropriate digital trade focal points could be the first issue requiring reconciliation.

The United States continues to dominate global finance, but China will soon have the world’s largest economy. China significantly outperforms the United States in Indo-Pacific trade – all members of the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP) and a number of non-members (including Indonesia, South Korea, the Philippines and Thailand) traded more with China in 2020. This underscores the challenge facing US economic diplomacy in Asia.

The success of the United States’ economic engagement in the Indo-Pacific rests on the Indo-Pacific economic framework. But with better access to the US market as an incentive for countries to join, the framework will likely prove to be an insufficient substitute for the CPTPP. Indo-Pacific countries are unlikely to prioritize the Indo-Pacific economic framework – which is non-binding and lacks trade and investment liberalization – over the CPTPP – which is enforceable and offers demonstrable benefits to its members. This is especially true given China’s demand to join the CPTPP and the benefits member countries would enjoy from lowering barriers to the vast Chinese market.

Following the conclusion of the Regional Comprehensive Economic Partnership (RCEP), which entered into force on January 1, 2022, China applied to join the CPTPP in September 2021, positioning itself as a champion of trade liberalization in the Indo-Pacific. The United States has repeatedly rejected the idea of ​​joining the CPTPP, advocating the Indo-Pacific economic framework as an alternative. While many CPTPP countries are skeptical of China’s bid for a combination of economic and security reasons, the United States is offering little to offset China’s rise in the CPTPP and other trade deals.

Currently, the strongest American counterweight to China, and the best prospects for the Indo-Pacific economic framework, lie in the area of ​​security.

In 2021, the Biden administration insisted on integrating social issues into trade deals. Tai is committed to a “worker-centered” trade policy that advances America’s middle class and raises labor standards abroad. As a result, officials in the Biden administration have said climate change, workers’ rights and the digital economy should be focal points for Info-Pacific’s economic framework.

Items of the digital economy agenda should appeal to Asia, but it is questionable whether the Indo-Pacific economic framework can thrive as a forum for tackling climate change and labor standards. Without meaningful trade concessions from the United States, Indo-Pacific countries have little incentive to make firm climate and labor commitments in the new forum. But many can still be drawn to its connotations of security.

Trying to address social issues through trade policy is not new and is not limited to the United States. But emphasizing such themes in trade deals is problematic when executives begin to believe trade deals are only worth pursuing if they have a major impact on difficult social issues.

Perhaps after the November 2022 congressional election, Biden will take another look at his languid business agenda. Or he may decide that the Indo-Pacific initiative is really about confronting China in the security realm.

* About the authors: Gary Clyde Hufbauer is a non-resident senior researcher at the Peterson Institute of International Economics and Megan Hogan is a research analyst at the Peterson Institute for International Economics.

Source: This article was published by East Asia Forum


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