Deteriorating American Trade Initiative in Asia

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In the realm of security and geopolitics, American engagement in Asian capitals has been prominent, evident in the rhetoric surrounding a “free and open Indo-Pacific.” This approach aims to cultivate friendships and alliances in the face of a new great-power contest, much to China’s discontent. However, there appears to be a noticeable dearth of economic dimensions in America’s Asian diplomacy, despite a strong regional desire for such engagement.

Countries in East and Southeast Asia benefit from robust economic ties with China but concurrently seek an American counterbalance. Concerns linger about over-reliance on the regional giant, potentially eroding their agency and sovereignty. The dashed hopes of substantial American economic engagement date back to 2017 when Donald Trump, early in his presidency, withdrew from the Trans-Pacific Partnership (TPP), a comprehensive trade deal involving 12 members.

President Joe Biden’s economic initiative for Asia, the Indo-Pacific Economic Framework for Prosperity (IPEF), launched in May 2022, aimed to reinvigorate these hopes. The initiative, unveiled in Tokyo, outlined an “economic vision” to establish new rules for the 21st-century economy. IPEF focused on four pillars: promoting clean energy, combating tax evasion and money laundering, fostering digital trade, and building resilient supply chains. Importantly, IPEF was not a traditional trade pact aimed at opening markets and reducing tariffs, as such deals require challenging congressional approval.

Despite its non-traditional approach, IPEF gained traction with countries like Australia, Brunei, Fiji, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand, and Vietnam swiftly signing up. The APEC summit in San Francisco, held on November 16th and 17th, was anticipated to showcase this American initiative. While agreements on green energy, anti-corruption efforts, and enhanced supply chain cooperation were announced, the trade pillar, the most significant element, collapsed. America opted not to unveil even a partial agreement on enforceable trade rules at the last minute.

This development has left Asian negotiators and business executives deeply disappointed. A shift in America’s stance on digital trade, influenced by domestic political pressures, contributed to the breakdown. Senator Elizabeth Warren’s concerns about big tech influence and Senator Sherrod Brown’s criticism of insufficiently enforceable labor standards were key factors. The U.S. Trade Representative, Katherine Tai, expressed optimism about continued negotiations, but the prospects seem uncertain.

Amidst this, China’s expanding trade web is noted, and Asian policymakers acknowledge the challenges within American politics. Despite frustrations and a sense of dwindling goodwill, Asian governments express a desire to persist with IPEF. Partly viewed as having more strategic than economic value, the framework keeps America engaged in discussions about Asian supply chains and standards. The hope remains that, in the future, the U.S. might rediscover the benefits of trade liberalization.