Reviews | Biden’s trade framework misses key points on, well, trade
So they decided to split the baby: a developing trade deal that somehow won’t involve much (if any) trade liberalization.
In a resounding announcement on Monday, President Biden and leaders of 12 other countries unveiled the “Indo-Pacific Economic Framework for Prosperity.” This “framework”, a real beginning of longer-term negotiations, is intended to strengthen ties with Asia-Pacific countries tired of being harassed by China.
We have some catching up to do on this front. Many of these 12 “partner” countries are still annoyed by Donald Trump’s erratic trade policies. Among them, his decision to withdraw from a previous trade pact, negotiated under the Obama administration, which had largely the same geopolitical objectives as this new “framework”: to create an economic alliance to counter China.
Biden officials are scrambling to let it be known that this is do not like that other cursed trade deal, the Trans-Pacific Partnership, which lawmakers in Biden’s own party had opposed even before Trump killed him. Plus, it’s unlike any previous trade deal, period, the administration points out.
“This framework is intentionally designed not to be a traditional ‘same, same’ trade agreement,” Commerce Secretary Gina Raimondo told reporters on a conference call with members of the media.
So what’s different this time around? Well, there are no plans to reduce tariffs or guarantee these 12 partner countries greater access to the coveted US market. Nor is there any plan to guarantee US exporters reciprocal access to the valuable markets of these other countries, which is what US companies want.
Trade liberalization is usually a central element of trade agreements. But as with other economic issues, the Biden administration has apparently decided to defer to Trump’s worldview and assume that any tariff repeal is too politically dangerous to be. tempted.
So instead, the framework has four “pillars” on which participating countries will consult: supply chain resilience, digital economy rules, clean energy and infrastructure, and taxation. and the fight against corruption.
These all sound like critical areas for international coordination, and I hope the negotiations will succeed. But there are reasons to be skeptical about the extent to which this trans-Pacific partnership (which, again, has nothing to do with other Trans-Pacific Partnership) can achieve.
The first is that the negotiations are à la carte; participating countries can opt out of any of these four “pillars”, which are already somewhat vague.
” It depends [administration officials], more “flexible” and more “innovative,” says Mary E. Lovely, senior fellow at the Peterson Institute for International Economics. “Well, what does that mean?” It also means that it is completely ill-defined, indefinite.
Moreover, it’s unclear what possible enforcement mechanisms will be, particularly if (as White House officials have said) the administration hopes to work out a deal that won’t ultimately require congressional approval.
It’s a practical choice: Congress refused to ratify the Trans-Pacific Partnership after years of negotiations. Working towards a different deal designed not to depend on the assent of fickle lawmakers could make an eventual deal more likely. But it also makes any new deal more likely to be toothless.
More importantly, without providing additional access to US markets, it is unclear to what extent we can induce other countries to make changes that will be costly to them, especially in the short term.
For example, removing cheaper Chinese inputs from their supply chains or creating separate production lines just for the US market would be expensive. Without the promise of greater access to American consumers, these types of investments might not be worthwhile.
In an interview, a senior administration official said that other non-tariff incentives are offered to spur cooperation. Hanging carrots, the official said, include “more reliable access to American capital” and the prospect of “harmonized” rules surrounding complex digital issues such as intellectual property and data privacy. In this way, foreign companies can more easily “understand when and in what context they can provide services to the American economy”.
“The reduction in fares is more familiar, so when you think of other benefits, those might seem more speculative,” the official said. But, added this person, these other incentives could nevertheless prove interesting.
Perhaps. The problem, however, is that these countries have explicitly said they want better market access. Moreover, many of these non-tariff incentives also demand action from Congress. What the administration has tacitly suggested not to count on.
The one thing that can be reliably counted on, it seems: a growing political aversion to anything labeled “free trade.”