The Biden administration’s attempts to and pursue a new type of trade agreement could run into problems over its divergence from traditional trade policy and its growing recalcitrance on complying with global trade rules.
Over the past two years U.S. Trade Representative Katherine Tai has led an effort to steer the U.S. away from free trade agreements and their emphasis on lowering tariffs to improve market access. Instead, Tai has emphasized creating a new worker-centric trade policy via agreements that don’t require congressional approval and cover a broader range of issues, from trade facilitation to supply chain resiliency to good regulatory practices. Examples of this approach include the Indo-Pacific Economic Framework and the Americas Partnership for Economic Prosperity.
Undersecretary of State Jose Fernandez said this week that the U.S. is hoping to conclude talks on both IPEF and APEP by the end of 2023. The first IPEF negotiating round was held in December 2022 and another is scheduled for February. No formal talks have yet been held on the APEP, and in fact the U.S. has yet to even announce which countries will be participating.
Two opinion pieces published this week by the East Asia Forum cast further doubt on whether the U.S.’ anticipated timeline for IPEF and APEP can be achieved and indeed whether the two agreements can be concluded at all. Two primary reasons were given: (1) the U.S.’ turn toward a more protectionist trade policy, as evidenced by the unprecedented measures in the CHIPS and Science Act and the Inflation Reduction Act designed to encourage domestic manufacturing (which an EAF editorial said bear a striking resemblance to Chinese policies the U.S. has consistently criticized), and (2) the U.S.’ turn away from the rules of the global trade system, illustrated by its refusal to comply with two recent World Trade Organization rulings against trade measures the U.S. imposed on national security grounds.
Former U.S. trade official Bill Reinsch said the impetus for these changes has been building for some time. First, shifting U.S. perceptions of China, along with developments like Russia’s invasion of Ukraine, have “made it difficult to have a conversation about trade without also discussing its impact on U.S. national security.” Second, the Biden administration “is determined to rectify” the perceived inequity of traditional FTAs, which are believed to have benefitted large corporations at the expense of workers. Third, companies have a growing interest in “making their supply chains more resilient and less vulnerable to chokepoints and shortages caused by natural disasters, pandemics or political interference.”
The result, the EAF editorial said, has been “a significant U-turn in U.S. economic policy and a major blow to the rules-based economic order.” One result of this change, Reinsch said, will likely be to “further complicate trade negotiations,” including IPEF and APEP.
“The changes in other countries’ policies that the United States is seeking are not economically or politically cost-free,” Reinsch said, “but so far the United States does not seem prepared to pay for them” and instead is arguing that trade partners should pursue a more U.S.-style approach simply because it’s the right thing to do. Moreover, he added, the U.S.’ rejection of the recent WTO rulings and its continued indifference toward the WTO’s dispute settlement system in general have cast doubt on its “commitment to expanding trade and to the international rules that govern it.”
If these conditions hold, Reinsch said, not only will the IPEF and APEP negotiations be more difficult to conclude, but participants may also opt to turn more of their time and resources to other regional groups. This would certainly not be in the U.S.’ interests, he noted, and may not be in theirs either.
For more information on U.S. trade policy and how it may impact your business, please contact Nicole Bivens Collinson at (202) 730-4956 or via email.
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