U.S. Readies New Asia-Pacific Economic Strategy to Counter China

While details of the plan have yet to be released, the framework isn’t expected to try to return the U.S. to the TPP. A cross-section of economists, diplomats and trade experts say the administration faces a battle in creating an effective pact that brings together many of Asia’s economies to set the rules of engagement for commerce and new technology.

The framework is expected to be unveiled “within weeks,” Sarah Bianchi, deputy U.S. Trade Representative for the Asia-Pacific region, said at a recent trade conference.

President Biden isn’t expected to offer tariff cuts and other traditional market-opening tools to trading partners, which are opposed by U.S. labor groups and their Democratic allies as well as some Republicans on grounds that they come at the expense of U.S. jobs and manufacturing.

At the same time, these so-called market-access measures are considered essential to building stronger U.S. relations in the region, particularly with less developed nations in South and Southeast Asia seeking to sell more agricultural and manufacturing products in the U.S. market.

“Market access could be one of the important returns that the countries in the region would expect from the U.S. leadership,” South Korean Trade Minister Yeo Han-koo said after a meeting with U.S. officials in Washington last month.

Without market-access measures, the framework could become simply another club for the U.S. and its rich allies such as Japan, Australia, New Zealand and Singapore, which already operate on similar values and rules, some diplomats and economists say.

“The real question is, ‘How do we get countries like Vietnam and Indonesia into this?’” said Bill Reinsch, a senior adviser at the Center for Strategic and International Studies. “I think these are the countries that are going to be cautious, that are going to take a wait-and-see approach to see how it evolves entering into these kinds of commitments.”

The Biden administration sees the new Indo-Pacific framework as a significant step in U.S. efforts to move beyond security ties to counter China’s growing ambitions in Asia.

Mr. Biden last year reinforced the U.S.’s substantial presence with the strengthening of the “Quad” group including India, Japan and Australia, as well as a new submarine pact with Australia and the U.K. But it has lacked a comprehensive economic strategy since pulling out of the TPP in 2017 amid bipartisan worries about the negative impact of trade agreements on American jobs.

The new framework comes as China beefs up its economic diplomacy in the region. China in recent months applied to join the new iteration of the TPP and the Digital Economy Partnership Agreement, an alliance between New Zealand, Chile and Singapore viewed as a model for future digital-trade agreements.

A digital trade agreement could cover a range of issues including technology standards to facilitate e-commerce such as electronic payment and invoicing, and rules governing personal data protection and cross-border data flows. Setting standards for 5G technology and the ethical use of artificial intelligence could also be part of such an agreement.

China is also heavily promoting its role in the Regional Comprehensive Economic Partnership, a 15-nation trade agreement launched last month.

Beijing’s pro-trade steps have fueled concerns among American businesses and close allies. They worry that the U.S.’s absence in regional trade agreements gives Beijing an opening to establish its leadership in setting rules and standards for trade and economy, particularly in emerging technologies such as artificial intelligence and digital trade.

Mr. Biden unveiled the idea for the new economic framework during the East Asia summit in October and is expected to roll out details in the weeks ahead.

“This is an incredibly important aspect of our effort to ensure a free and open region,” Laura Rosenberger, senior director for China at the White House National Security Council, said in a recent speech to the National Bureau of Asian Research.

She emphasized “the importance of U.S. leadership in establishing the rules of the road…so that we do not let China put U.S. workers and companies in long-term disadvantage.”

The framework will be structured as a collection of individual agreements, which nations in the region can pick and choose to sign up on. It will likely exclude tariff cuts and other legally binding market-opening steps that require Congressional approval.

U.S. Trade Representative Katherine Tai will lead the trade component of the framework, which will include digital trade, labor standards and trade facilitation. Commerce Secretary Gina Raimondo will oversee the segments on supply chains, infrastructure and decarbonization, and tax and corruption.

In putting together the strategy, the administration must find a balance between the demands of the trading partners, U.S. businesses and labor, and the progressive wing of the Democratic Party.

U.S. business groups have been lobbying for strong digital-trade provisions in the framework, hoping it will serve as a vehicle for ensuring U.S. leadership in emerging technologies like artificial intelligence and 5G.

Charles Freeman, senior vice president for Asia at the U.S. Chamber of Commerce, says a digital agreement must be “front and center” of the broad strategy.

“There’s a lot that needs to be done to get us back to some sort of competitive parity with China,” he said.

Meanwhile, some in Mr. Biden’s party worry that the framework could become a backdoor scheme to introduce significant rules in digital trade and other areas detrimental to workers and consumers without Congressional approval.

“The U.S. has thus far failed effectively to regulate the tech sector here at home to ensure that consumer privacy rights are protected,” said Rep. Andy Levin (D., Mich.) during a House hearing last month. “How can we ensure that U.S. engagement in digital trade in future agreements doesn’t perpetuate a race to the bottom?”

Some governments in the region including Japan, Australia and Singapore have pressed the U.S. to return to the TPP, even as administration officials have ruled it out, citing a lack of sufficient support from either party in Congress and opposition from labor unions.

For now, these governments welcome signs of Mr. Biden’s broader economic engagement with the region.

“Short of coming back to the TPP, there are many areas where the U.S. can play a leadership role,” Koji Tomita, Japan’s U.S. ambassador, said in a recent panel discussion.

Write to Yuka Hayashi at [email protected]