THERE IS NO lack of American engagement in Asian capitals on security and geopolitics. That is what all the talk of a “free and open Indo-Pacific” is about—seeking friends and allies in a new great-power contest, to China’s annoyance. There has been much less evidence of an economic dimension to America’s Asian diplomacy—despite a strong desire for one across the region.
Countries in East and South-East Asia thrive on their economic ties with China, but want an American counterbalance. They fear that over-relying on the regional giant would erode their agency and sovereignty. Yet hopes of serious American engagement were dashed when, in one of his first acts as president, Donald Trump in 2017 pulled out of the Trans-Pacific Partnership, a high-grade trade deal with 12 members. What remained of those hopes has just taken another beating. A cornerstone of President Joe Biden’s economic initiative for Asia, launched in May 2022 and called the Indo-Pacific Economic Framework for Prosperity (IPEF), has crumbled.
At the initiative’s unveiling in Tokyo, Mr Biden called it “an economic vision” that would underpin “new rules for the 21st-century economy”. Four pillars were envisaged: that America and its Asian partners would co-operate to promote clean energy; fight tax evasion and money laundering; boost trade, especially of the digital sort; and build resilient supply chains in the face of such things as pandemics. IPEF was emphatically not a trade pact to open markets and cut tariffs. Trade deals need congressional approval, which is a non-starter in Washington these days, given the protectionist turn in both America’s main parties. Yet if IPEF looked weaker for that, it was thought to be executive-led, so relatively fleet and flexible. Countries swiftly signed up, including Australia, Brunei, Fiji, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand and Vietnam.
A summit of APEC, the Asia-Pacific trade talking-shop, held in San Francisco on November 16th and 17th, was due to showcase this American initiative. After months of negotiation among ipef members, agreements on all four pillars were promised. A signed deal to co-operate more on supply chains was announced, along with in-principle agreements on green energy and fighting corruption. Yet the most important pillar, concerning trade, collapsed. At the last minute America dropped plans to announce even a partial agreement on enforceable trade rules.
This has left Asian negotiators (Australian and Japanese above all) and Asian and American business executives utterly dismayed. They had known something was wrong for months. For one, America flipped its negotiating position on digital trade, from pushing to ease access to data to opposing it. That seemed to be in response to pressure from Senator Elizabeth Warren, a left-winger who thinks big tech has conspired to capture government. Additional opposition, it emerged last week, had come from another leftist Democrat, Senator Sherrod Brown, who is up for re-election next year in Ohio, a battleground midwestern state. Last week Mr Brown criticised the proposed trade pillar on the basis that it “lacks enforceable labour standards”. That seems to have put the kibosh on it.
The US Trade Representative, Katherine Tai, no avid fan of open trade herself, says the negotiations will continue and a conclusion is possible. That seems unlikely. To develop digital business with America and others, countries such as Indonesia and Vietnam were prepared to allow more scrutiny of their labour and environmental standards and resist their own protectionist impulse to wall off national data. Now, says Deborah Elms of the Hinrich Foundation, a think-tank in Singapore, that carrot is off the table.
China’s trade web is meanwhile growing. Asian policymakers have no illusions about the dysfunctional nature of American politics or how long it may last—this week Mr Trump promised to “knock out” IPEF if he is re-elected next year. Even so, there is still Asian goodwill towards America, though dwindling.
Despite their growing sense of frustration, Asian governments want to persist with IPEF. That is partly because, as one South-East Asian diplomat says, the region views the framework as of more strategic than economic value. So it is better to keep America engaged in lengthy discussions about Asian supply chains and standards than to see it wander off altogether. And (who knows?) maybe one day it might even rediscover that trade liberalisation is in its interest.■
Read more from Banyan, our columnist on Asia:
Myanmar’s junta suffers startling defeats (Nov 16th)
Australia and China patch things up (Nov 7th)
Narendra Modi has shifted India from the Palestinians to Israel (Nov 2nd)
"trade" - Google News
November 23, 2023 at 10:08PM
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America's crumbling trade initiative in Asia - The Economist
"trade" - Google News
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