Biden’s America First Trade Policy Offers Opportunity for China

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President Biden has pledged to step up U.S. engagement in Asia after years of ceding influence to China, donating tens of millions of doses of COVID vaccine and bolstering military commitments. But when it comes to the economy of the Pacific region, it is stuck in neutral.

As Asia-Pacific leaders gather for an annual economic summit this week, the Biden administration is still struggling to articulate its economic vision for the region almost five years after Donald Trump pulled out of a deal. trading between 11 Pacific countries. Although Biden announced last week that the United States was exploring a new Indo-Pacific economic framework, he gave few details on how it would work in practice.

China has sought to capitalize on it, pushing to join deals once heralded as vehicles the United States could use to set rules for the region. In September, China made a formal request to join the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP), the deal Trump abandoned. And last month, President Xi Jinping said that China apply to join a digital economy pact that includes the American partners Singapore, Chile and New Zealand.

“For the United States, which is really weakly anchored economically in the region, it is falling behind,” said Deborah Elms, founder of the Singapore-based Asian Trade Center, which maintains close contact with businesses and governments in the region. “You again have an administration that puts ‘America first’ using different language. “

For China, entry into the CPTPP would help Beijing counter perceptions that it is breaking the rules after several high-profile cases of import blocking in geopolitical disputes, notably with Australia in recent years. Beijing leaders also want to prevent Taiwan from joining the CPTPP and portray the United States as an aggressor after agreeing with the United Kingdom to supply nuclear submarine technology to Australia.

Biden and Xi should hold a virtual summit next week, although no date has yet been set, according to people familiar with the matter. Relations between the world’s largest economies have quietly improved in recent months even as they vie for influence in Asia and argue over issues such as Taiwan and Beijing’s expanding nuclear arsenal.

Meanwhile, Southeast Asia has become more dependent on China, which accounted for 18% of trade in goods, including electrical machinery and raw materials, for the 10-member Assn. of Southeast Asian nations in 2019, up from 12% in 2010. The United States accounted for 10% of ASEAN’s trade that year, almost unchanged from a decade earlier, according to the latest statistics of the block.

The only area where the United States retains an advantage is investment in areas such as manufacturing and financial services, accounting for 15% of foreign capital deployed to ASEAN member countries in 2019, or nearly three times that of China. Yet Beijing’s growth rate has been higher over the past decade.

White House officials did not immediately respond to a request for comment. But the Biden administration, while heavily focused on the president’s national agenda, including increasing COVID-19 vaccination rates and passing economic legislation by Congress, said the Indo-Pacific region is a priority.

Biden’s economic framework for the region, which he plans to ‘Exploring with partners’ would cover a multitude of issues, including trade facilitation, digital economy standards, supply chain resilience, decarbonization and workers’ rights, according to a White House statement last week.

However, the political situation in Washington makes it impossible to choose the option favored by the American partners in Asia: to join the CPTPP with 11 countries. This is especially the case after Democrats underperformed in this month’s key election. Last week, Biden hailed the House’s passage of America’s biggest infrastructure plan in decades, calling it a “blue collar plan to rebuild America.”

“Increasing domestic competition through trade deals may be problematic for President Joe Biden ahead of the 2022 midterm elections, but the official membership application filed by China in September puts pressure on Washington to take a position quickly, “Clelia Imperiali, Bloomberg Intelligence analyst, wrote on November 3 in reference to the CPTPP.

Many countries in Asia would welcome any kind of American effort on the economy, as they seek to balance the ties between their largest trading partners. Southeast Asian countries in particular do not want to choose sides between the two, or become so dependent on a country that they have no way of resisting pressures over territorial disputes or other feuds. geopolitics.

“There is a deeper understanding in the region now that having a strong relationship with the United States is almost a prerequisite for having a strong relationship with China,” said Bilahari Kausikan, a former senior diplomat from Singapore.

Xi has sought to emphasize China’s leading role in trade, saying last week his government was open to negotiations on issues such as industrial subsidies and state-owned enterprises – areas that the CPTPP had originally planned to do. ‘to land. Beijing has been a key player in the 15-country Regional Comprehensive Economic Partnership, the largest regional trade deal ever, which takes effect on January 1.

Responding to questions, a spokesperson for the Chinese Foreign Ministry said that any regional agreement should promote peace and “should not target a third party or harm the interests of a third party.”

Even so, China might find it difficult to join the CPTPP, which would roughly double in economic size with the entry of Beijing. China remains unlikely to agree to implement reforms on issues such as state-owned enterprises, labor protection and digital commerce, or whether other members will seek to avoid choosing between Beijing and Taiwan.

“CPTPP members, only four of whom are from Southeast Asia, will assess China’s membership application on its merits,” said Ian Storey, senior researcher at the ISEAS-Institut Yusof Ishak. “If China meets the high standards required for CPTPP membership – which is doubtful – then there is no reason it should oppose it. “

Bloomberg writers Kevin Varley and Jing Li contributed to this report.


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