U.S. plans new deal with Pacific Rim, other countries

The United States is pursuing an Asian Pacific trade agreement that isn’t a free trade agreement.

On May 23, while visiting Japan, U.S. President Joe Biden officially launched talks for the Indo Pacific Economic Framework.

The IPEF, as it is known, is a partnership between the U.S., Australia, Brunei, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam.

“The United States is an Indo-Pacific economic power and expanding U.S. economic leadership in the region is good for American workers and businesses — as well as for the people of the region,” the White House says in an IPEF fact sheet.

“IPEF will enable the United States and our allies to decide on rules of the road that ensure American workers, small businesses and ranchers can compete in the Indo-Pacific.”

The IPEF is far from a done deal. Biden’s announcement represents the beginning of talks for the framework.

In a briefing with reporters before Biden’s announcement in Japan, U.S. National Security Advisor Jake Sullivan said the IPEF is different from “traditional” trade agreements.

“This is an open platform.  So, there are other countries that could conceivably join us as we move forward,” Sullivan said. “The fact that this is not a traditional free trade agreement is a feature of IPEF, not a bug (problem). There are free trade traditionalists who have raised questions about it. Our fundamental view is that the new landscape and the new challenges we face need a new approach.”

Rather than focusing on the usual aspects of trade agreements, like eliminating tariffs and other barriers to trade, the IPEF will emphasize four pillars: supply chain resiliency; clean energy; tax and anti-corruption; and trade.

The bit on supply chain resiliency is a direct shot at China, as American leaders want to rework the current supply chain model that relies heavily on China’s output of chemicals, machinery parts, electrical components and other goods that support manufacturing and production around the globe.

“I would say, especially as businesses are beginning to increasingly look for alternatives to China, the countries in the Indo-Pacific Framework will be more reliable partners for U.S. businesses,” said U.S. Commerce Secretary Gina Raimondo.

“I think we all have seen how — the cost of supply chains that aren’t resilient.  And COVID exposes incredible economic costs of insufficient supply chain resilience.”

The U.S. involvement in IPEF could help restore American influence in the region.

America lost some of that influence when former President Donald Trump pulled the U.S. out of the Trans Pacific Partnership, a trade deal between Canada, Japan, America and a number of Pacific nations.

Trump abandoned the agreement days after he took office in 2017 as part of his America First agenda.

“We’re going to stop the ridiculous trade deals that have taken everybody out of our country and taken companies out of our country, and it’s going to be reversed,” Trump said at the time. “I think you’re going to have a lot of companies come back to our country.”

During the briefing with media, a reporter asked why the U.S. isn’t rejoining the TPP agreement and is pursuing an alternative deal.

Katherine Tai, the U.S. Trade Representative, said the TPP didn’t have the necessary public and political support.

“I think that there’s a very, very strong lesson there: that TPP, as it was envisioned, ultimately was something that was quite fragile and that the United States was not able to deliver on,” she said.

“For decades, trade policy was often reduced to a zero-sum game that left many of our workers behind. And that is why we are designing trade policies that aim to deliver real economic prosperity and advance our global priorities, like combating climate change, protecting labour rights, and building resilient supply chains.”

Tai added that typical trade agreements don’t always deliver as expected. Removing barriers to trade doesn’t necessarily increase trade.

“In our trade policies, our trade experiences and trade relationships, we have so many examples of situations where there are no tariffs between us and another country,” she said.  “And yet … we have farmers who can’t get, for example, a single potato across the border and into the other market.”

Some American farm groups support the Indo Pacific Economic Network.

Farmers for Free Trade, the American Farm Bureau Federation and the U.S. Grains Council said the announcement is a positive first step to expand opportunities for American farmers.

“The IPEF is a new approach to trade negotiations that will hopefully still create the same positive, high-standard outcomes for U.S. farmers as traditional trade agreements,” said U.S. Grains Council president and chief executive Ryan LeGrand.

“We look forward to engaging the office of the U.S. Trade Representative on IPEF negotiations, to ensure grain and ethanol can freely move around the world.”

Tags: clean energy, China, anti-corruption, United States, Free Trade Agreement, trade, Trade Agreement, tariffs, tax, talks, Asian Pacific, Indo Pacific Economic Framework, IPEF, supply chain resiliency