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| Japan usually goes along with US economic plans... but how about other Asian countries? |
Before Trump, the Republican Party represented the pro-trade American political party--especially in contrast to the trade union-dependent Democratic Party. Although Democratic presidents like Clinton and Obama promoted free trade agreements, they relied on Republican support to push FTAs through. After Trump, 'free trade' has become a dirty term in American politics regardless of party. So how is President Biden to shore up America's presence in the Asia-Pacific after his predecessor Barack Obama proposed the Trans-Pacific Partnership subsequently abandoned by Donald Trump? The answer is... do away with 'free trade' altogether.
I am not sure what appeal Biden's Indo-Pacific Economic Framework for Prosperity [IPEF] offers to Asian countries absent the usual tariff reductions. The details of IPEF are still very much to be determined based on consultations with the proposed participants. At best, it could represent useful technical assistance to others about making their economies more connected, resilient, clean, and fair. At worst, it could actually worsen trade access--especially to the vast American market--by imposing developed country environmental and labor standards on developing countries.
At this stage, all we have to go on are the following bullet points:
- Connected Economy: On trade, we will engage comprehensively with
our partners on a wide range of issues. We will pursue high-standard
rules of the road in the digital economy, including standards on
cross-border data flows and data localization. We will work with our
partners to seize opportunities and address concerns in the digital
economy, in order to ensure small and medium sized enterprises can
benefit from the region’s rapidly growing e-commerce sector, while
addressing issues is such as online privacy and discriminatory and
unethical use of Artificial Intelligence. We will also seek strong labor
and environment standards and corporate accountability provisions that
promote a race to the top for workers through trade [my emphasis].
- Resilient Economy: We will seek first-of-their-kind supply chain commitments that better anticipate and prevent disruptions in supply chains to create a more resilient economy and guard against price spikes that increase costs for American families. We intend to do this by establishing an early warning system, mapping critical mineral supply chains, improving traceability in key sectors, and coordinating on diversification efforts.
- Clean Economy: We will seek first-of-their-kind commitments on clean energy, decarbonization, and infrastructure that promote good-paying jobs. We will pursue concrete, high-ambition targets that will accelerate efforts to tackle the climate crisis, including in the areas of renewable energy, carbon removal, energy efficiency standards, and new measures to combat methane emissions.
- Fair Economy: We will seek commitments to enact and enforce effective tax, anti-money laundering, and anti-bribery regimes that are in line with our existing multilateral obligations to promote a fair economy. These will include provisions on the exchange of tax information, criminalization of bribery in accordance with UN standards, and effective implementation of beneficial ownership recommendations to strengthen our efforts to crack down on corruption.
Right now, IPEF is still nebulous enough to be vaporware. For others, there is a possibility that IPEF is largely downside (a grab bag of broadly protectionist US priorities) without upside (enhanced market access especially through lower tariffs).