Joe Bidens Indo-Pacific Economic Framework continues many of Donald Trump’s protectionist trade policies and is not friendly to the Asia-Pacific

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For now, this means eschewing traditional trade negotiations that include market access and instead promoting re-shoring, or at least friend-shoring, to bring manufacturing jobs back to US.

The recently enacted Inflation Reduction Act is a good example of this, providing a major incentive to bring manufacturing back to the US in sectors such as semiconductors, batteries and critical minerals.

Container ships at Yangshan Deepwater Port in Shanghai. Companies want to make their supply chains more resilient and less vulnerable to choke points and shortages caused by natural disasters, pandemics, or political interference.Bloomberg

A third change is companies’ interest in making their supply chains more resilient and less vulnerable to choke points and shortages caused by natural disasters, pandemics or political interference. Here too, companies are interested in security, although for them it is economic and security of supply rather than national security. However, the former is directly related to the latter.

The company’s efforts to strengthen their supply chains generally have the support of the US government.

The result of all these trends is a reassessment by companies and governments of the risks of doing business around the world. All three trends are at work in US economic policy in Asia, particularly the Indo-Pacific Economic Framework (IPEF).

Although no one says it out loud, IPEF is about strengthening the US presence in the region and presenting an alternative to Chinese influence, such as the Trans-Pacific Partnership. It is also remarkably not about market access.

Asian countries looking for tangible benefits won’t find much. The US approach, described by its slogan A trade policy for workers, focuses on better labor and environmental policies and standards as well as other regulatory issues.

There is no solution to the political dilemma

The changes in other countries’ policies that the US is seeking are not without economic or political costs, but so far the US does not seem willing to pay them. It argues that the changes sought are good for these countries and for the world to avoid a race to the bottom. That’s probably true, but it’s unlikely to be persuasive enough on its own.

As a result, most of the negotiations will focus on issues not directly related to trade but closely aligned with the trends mentioned above, such as supply chain resilience, cooperation, information sharing, infrastructure, decarbonization, taxes and policies against corruption.

The most difficult pillar is trade. Asian parties will find many of the US demands difficult to accept and have no visible benefits.

In Washington, Biden presented the IPEF in response to widespread criticism that he has no Asian economic policy. He soon discovered that his proposals did not solve the political problem of trade for the Democratic Party.

The proposals are too little for the business community, which wants more market access, and too much for left-wing Democrats, who would oppose existing trade agreements that could tie Congress’ hands on shaping future US policy.

The US’s rejection of WTO cases it has lost will further complicate trade negotiations by casting doubt on the superpowers’ willingness to respect international trade rules and undermining its credibility when it tries to call on other country for their violations. The US has been the bulwark of the system for 75 years, but now risks becoming the main offender.

If other IPEF parties begin to doubt the US commitment to trade expansion and the international rules that govern it, two things are likely to happen: IPEF negotiations will become more difficult to conclude; and other countries may begin to devote more time and resources to other regional groups, such as RCEP (Regional Comprehensive Economic Partnership) and APEC (Asia-Pacific Economic Co-operation).

This is not in the interest of the US, and the consequent increase of China’s economic influence in the region may not ultimately be in the interest of the region.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, DC. This article is part of a series from the East Asia Forum (www.eastasiaforum.org) at the Crawford School in ANUs College of Asia and the Pacific.

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