Biden’s Economic Plan Leaves Asian Leaders Wanting More

Months after U.S. President Joe Biden first indicated that his administration would launch a new Indo-Pacific Economic Framework (IPEF) that would signal strengthened U.S. engagement with Asian economies, the president, together with the leaders of a dozen countries from across Asia, announced the launch of the IPEF in Tokyo on May 23.

The Biden administration is convinced that the new framework is an opportunity to showcase what senior U.S. officials have described as a “foreign policy for the middle class,” an initiative that fulfills a strategic need while delivering results for U.S. workers and businesses.

In a discussion with the press before the IPEF’s launch, U.S. National Security Advisor Jake Sullivan stated that “expanding U.S. economic leadership in the Indo-Pacific through vehicles like IPEF is good for America.” U.S. Commerce Secretary Gina Raimondo, whose department is responsible for negotiating three of the framework’s four pillars, described it as “an important turning point in restoring U.S. economic leadership in the region and presenting Indo-Pacific countries an alternative to China’s approach,” And U.S. Trade Representative Katherine Tai called it an opportunity to “tackle 21st-century challenges and promote fair and resilient trade for years to come.”

Months after U.S. President Joe Biden first indicated that his administration would launch a new Indo-Pacific Economic Framework (IPEF) that would signal strengthened U.S. engagement with Asian economies, the president, together with the leaders of a dozen countries from across Asia, announced the launch of the IPEF in Tokyo on May 23.

The Biden administration is convinced that the new framework is an opportunity to showcase what senior U.S. officials have described as a “foreign policy for the middle class,” an initiative that fulfills a strategic need while delivering results for U.S. workers and businesses.

In a discussion with the press before the IPEF’s launch, U.S. National Security Advisor Jake Sullivan stated that “expanding U.S. economic leadership in the Indo-Pacific through vehicles like IPEF is good for America.” U.S. Commerce Secretary Gina Raimondo, whose department is responsible for negotiating three of the framework’s four pillars, described it as “an important turning point in restoring U.S. economic leadership in the region and presenting Indo-Pacific countries an alternative to China’s approach,” And U.S. Trade Representative Katherine Tai called it an opportunity to “tackle 21st-century challenges and promote fair and resilient trade for years to come.”

However, while Japan and other U.S. partners in Asia have wanted Washington to reinvigorate economic cooperation with the region ever since former U.S. President Donald Trump withdrew the United States from the Trans-Pacific Partnership (TPP) in 2017, there is some unease about the IPEF. After all, Asia-Pacific governments have been clear that they would prefer that the United States rejoin the TPP—now rechristened as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)—to any alternative.

The slow process of determining what will be in the four “pillars” of the IPEF, how negotiations will be handled due to a division of labor between the U.S. trade representative and the commerce secretary, and uncertainty about which governments would sign up have deepened the ambivalence.

As a result of this ambivalence, the joint statement launching the framework referred to “collective discussions toward future negotiations,” indicating that there is more work to do to flesh out the initiative.

Asian governments are not wrong to have mixed feelings about the IPEF. U.S. trade officials plan to seek higher labor and environmental performances from negotiating partners, but they have also indicated that they are not prepared to offer access to the U.S. market—let alone pursue a TPP-style free trade agreement. Tai, the U.S. trade representative, has described such conventional agreements, which provide broad market access in exchange for pledges to improve labor and environmental standards that critics contend will likely have little practical impact on real-world conditions, as a “20th-century tool.” She wants to show that it is possible to pursue an international economic policy that delivers for working- and middle-class Americans.

But it’s unclear whether or how Asian leaders will play ball. Asian governments, which recently brought the Regional Comprehensive Economic Partnership into force and are lining up to join the CPTPP, view market access as the crown jewel of international economic cooperation. They are still enamored with old-style free trade agreements and will not be easily convinced to embrace a new model. Nor, for that matter, do they believe that the IPEF can supplant the CPTPP as a standard-setting organization. Taro Kono, the former Japanese foreign minister, offered a blunt assessment at a recent appearance at the Brookings Institution think tank in Washington. The CPTPP, he said, is the rule-making body for the region.

These objections have not prevented Japan and other Asian countries from joining the framework. They would still prefer some U.S. engagement to none. But their objections should temper some of the Biden administration’s rhetoric about what the IPEF signifies. It is not a new regional architecture or a substitute for the dense economic ties Asian economies have with China.

There remain, moreover, significant questions about the substance of the four pillars: fair and resilient trade, supply chain resilience, infrastructure and decarbonization, and tax and anti-corruption. There are considerable differences in how fleshed out each of the pillars are. The supply chain and infrastructure decarbonization pillars, for example, would build on work done in bilateral and plurilateral settings like the Quadrilateral Security Dialogue. The trade pillar, meanwhile, includes the digital economy but also issues trade facilitation and labor and environmental standards. And the tax and anti-corruption pillar bring a global Biden administration foreign-policy priority into an Indo-Pacific context.

Not surprisingly, negotiating partners are more interested in some of the pillars than others, since several provisions seem more tailored to U.S. domestic political messaging than regional priorities. (Each of the four pillars can be opted into, meaning participation in one is not conditioned on signing up for any others.) As it stands, it seems likely that only the region’s wealthy economies—Japan, South Korea, Australia, New Zealand, and maybe Singapore—will opt into the trade pillar, given Southeast Asian countries’ reluctance to upgrade labor, digital, and environmental standards without being granted market access in return.

Meanwhile, it is unclear whether any prospective IPEF members other than the United States have much appetite for the tax and anti-corruption pillar. And the Biden administration has not included Taiwan, whose prospective participation has unnerved the region’s emerging economies. Although the United States may be preparing separate bilateral talks with Taiwan, its exclusion from the IPEF suggests that China can set the terms of the region’s economic architecture even in arrangements where it is not a participant.

Perhaps most importantly, far from answering questions about U.S. economic leadership in the region, the framework’s awkward rollout has prompted those questions to be asked with greater urgency. Practically speaking, the president’s “fast-track” trade promotion authority expired last year, and the political sensitivities that doomed the TPP have hardly abated. The U.S. withdrawal from the TPP revealed—and the Trump administration’s conclusion of the United States-Mexico-Canada Agreement confirmed—that the only trade pacts that could be ratified would have robust labor and environmental standards with strong enforcement tools, conditions that many emerging Asian economies may find too steep a price to pay even for access to the U.S. market. It is unlikely that the White House could marshal enough votes in Congress for a more traditional trade pact, even if it was interested.

The result is that the IPEF tries to thread the needle between domestic political constraints and demands from Asian governments for market access to the United States that may leave neither Asian governments nor key domestic constituencies in the United States particularly satisfied.

To be sure, the IPEF can still do a lot of good in the region. There is a strong interest in “friendshoring,” the process of shifting supply chains from China and other unfriendly authoritarian countries to allies and partners, the focus of the supply chains pillar. And friendshoring can provide an opening to elevate environmental and labor performances across supply chains.

The region’s wealthier economies are so interested in a digital trade agreement that they pushed the administration to break a digital trade agreement out from the trade pillar and make it a top priority for the IPEF; the administration demurred, but a digital trade agreement is still part of the package.

Finally, the first group of countries to sign on for discussions includes 7 out of the 10 Association of Southeast Asian Nations members, suggesting that the IPEF is an opportunity to, in the words of a senior administration official, “address concerns … that matter to countries today and, obviously, advance our own economic interests in the process.” Fiji’s decision to join the framework shortly after its launch suggests that the IPEF could also contribute to the economic development of Pacific Island nations, particularly as they grapple with the effects of climate change.

The IPEF marks a new start for constructive economic engagement with major U.S. partners in a critical region that could bear fruit over the long term as the U.S. government thinks more seriously about how it can reduce its partners’ vulnerabilities to Chinese economic coercion and contribute to sustainable and equitable growth in Asia’s emerging markets.

But the Biden administration needs to be realistic about what the IPEF signifies. It won’t redraw Asia’s economic map or become the preferred venue for regional rule-making. The talks themselves may yet help the administration identify what regional actors value most after market access and show that Washington understands what East Asian leaders want, even if it can’t deliver a second TPP.