Wednesday, December 6, 2023

Indo-Pacific trade pillar stumbles, US faces setback in countering China

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An anticipated milestone in the Indo-Pacific Economic Framework (IPEF), a crucial element of the Biden administration’s strategy to counter China, hit a roadblock as negotiations on the trade pillar faced opposition, jeopardising the broader initiative.

The IPEF aims to enhance cooperation on supply chains, environmental concerns, and governance issues. However, the lack of progress in concluding enforceable trade rules has raised doubts among allies, reminiscent of challenges faced during the Trans-Pacific Partnership under President Barack Obama.

President Biden and leaders from 13 nations, including a meeting with China’s Xi Jinping, signed agreements focusing on communication and cooperation. Still, the contentious trade negotiations have raised concerns among Asia-Pacific allies, fearing a repetition of the Trans-Pacific Partnership’s fate. The situation underlines challenges for the Biden administration, especially as China actively expands its trade agreements in the region, potentially influencing US allies’ economic preferences.

“Collapse of the IPEF trade pillar would deal a blow to US standing in the region,” Bloomberg quoted John Murphy, Senior Vice President for International Policy at the US Chamber of Commerce as saying. The setback echoes the withdrawal from the Trans-Pacific Partnership under President Trump, reflecting poorly on US leadership and undermining efforts to strengthen economic ties in the Indo-Pacific.

The pressure on the Biden administration from Democratic trade sceptics, including Senator Sherrod Brown, reflects domestic political challenges. Brown deems the trade portion of the IPEF unacceptable, emphasising the difficulties faced by the administration in navigating trade agreements that align with its worker-centric trade policy.

President Biden and his trade representative, Katherine Tai, are attempting to downplay differences with other countries, stressing the ongoing commitment to the trade pillar’s vision. Tai argues that progress has been made and attributes the lack of a significant announcement to concerns about public communication rather than substantive issues. However, deadlocks over labour and environmental standards, along with a recent shift in the US stance on digital trade, contribute to the impasse.

The stalled negotiations raise concerns about the US’s ability to assert itself economically in the Indo-Pacific region. Observers note that while the talks may continue, little progress is expected in the 2024 election year, emphasising the potential impact of the presidential vote on any deal. The uncertainty leaves the door open for China to expand its influence, presenting a challenge to the Biden administration’s efforts to counter China’s economic sway in the region.

“The trade pillar has been more difficult, and we have not made as much progress as people were hoping,” acknowledges Australia’s Trade Minister, Don Farrell. The lack of advancement on trade issues within the IPEF complicates the broader economic diplomacy efforts of the United States in the Asia-Pacific region.

Experts and analysts suggest that failure to move forward on economic and trade matters within the IPEF may make China’s trade agreements more appealing to Indo-Pacific countries. China’s active participation in initiatives such as the CPTPP and its efforts to upgrade its trade agreements position it as a robust economic partner, potentially undermining US influence.

In countries like Indonesia, where the US competes with China for economic influence, the lack of progress in the IPEF is perceived as a missed opportunity. President Joko Widodo expressed frustration with the US’s limited commitment compared to China’s willingness to invest in critical areas like electric vehicles and alternative energy projects.

The overall message is that the US’s capacity for economic diplomacy is in question. Nigel Cory, a former Australian diplomat, compared US trade and economic policy in the Asia-Pacific to a first-time marathoner starting ambitiously but ending up with challenges.

(With inputs from Bloomberg)

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