Author: Editorial board, ANU
Donald Trump’s presidency marked a decisive U.S. retreat from free and open trade and the leadership of the multilateral trading system that had fostered unprecedented trade and economic growth for more than 70 years.
Trump built his political claims to high office on the backing of deep resentment among middle-class Americans who had been denied the benefits of international trade gains by an inadequate and broken national distribution system. And he pointed the finger at the international trading system and foreigners, especially China, as the cause of America’s problems and neglect and walked away from the Trans-Pacific Partnership trade deal that the Obama administration had initiated.
By the end of Trump’s tenure, the outbreak of the trade war with China had resulted in a rule-breaking and damaging managed trade deal, and allies and partners were subject to trade taxes for national security reasons. Appointment of members of the WTO’s appellate body, arbiter of international trade rules that the US had largely crafted, was blocked by the US veto. The principles of international trade that continue to provide the trust on which global integration has been built, nowhere more than in the Asia-Pacific region, have been attacked by the United States and the rules flouted by the two largest economies. of the world.
Defining a new cohesive business strategy has not been a political priority for the Biden administration. Political attention has been dominated at home by the pandemic recovery and large infrastructure spending and abroad by the disorderly withdrawal from Afghanistan and the security posture towards China.
US Trade Representative Katherine Tai’s slogan of a trade policy that works for America’s middle class is just that – a political slogan that has yet to acquire political substance. Meanwhile, America’s middle class has dwindling incomes ripped from its collective pocket by lingering tariffs on Chinese imports, as Tai and Commerce Secretary Gina Raimondo acknowledge that decoupling the world’s biggest trader won’t is not a viable option.
The advent of the Biden administration was the promise of a return to respect for international institutions, first and foremost the WTO. It was quick to break the deadlock surrounding the appointment of its new CEO, Ngozi Okonjo-Iweala, and to mend trade relations with Europe, but in total disregard of multilateral rules. But the US veto over WTO Appellate Body appointments is still in place, Biden has also avoided the Trans-Pacific Partnership, now the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and is negotiating with China under Trump’s Phase 1 trade deal that fails to respect multilateral trade rules in favor of bilaterally managed trade.
In our lead article this week, Gary Hufbauer and Megan Hogan state that “like Trump, Biden has struggled to craft an effective approach to dealing with China.” Multiple WTO cases have prompted China to reform individual aspects of its trade regime, but no WTO action has persuaded Beijing to change the fundamental features, namely forced technology transfers and subsidization of public companies. The trade battles have not allayed US fears over China’s military and technological rise. It is true that there is an agenda for reforming the global trading system, but the United States shows no intention of engaging in it or developing a comprehensive strategy that would address its trade policy issues.
The alternative is a piecemeal, ad hoc approach to forming coalitions that subsume business interests under other issues. After mending his feud with Europe, Biden promised at the East Asia summit last October that he would lay out an Indo-Pacific economic framework for engagement with Asia this coming year.
As Hufbauer and Hogan explain, “meaningful engagement in the region faces a number of challenges, both inside and outside of administration…The consequence of presidential neglect has been that, rather than pushing a single framework, Secretary of State Antony Blinken, Raimondo, and Tai each argued different and somewhat competing angles on Indo-Pacific engagement.” Access to the U.S. market served to attract partners in the Trans-Pacific Partnership. Tariff reductions not being considered, the administration is considering other incentives, such as capacity building financing, infrastructure projects, and green financing. Everything seems to be in the mix except trade policy.
But Washington’s Indo-Pacific economic framework will have to bring ASEAN countries on board if it is to have traction in the region. Southeast Asia is a vital part of any effective Indo-Pacific strategy. And without being ready to negotiate a formal agreement that would replace the CPTPP, while proposing a series of plans to exclude China, the region’s largest market, from supply chains, digital trade and investment, the framework Indo-Pacific is unlikely to be an easy sell in Southeast Asia to those unwilling to subordinate their own economic security to American conceptions of military security.
The leadership the world needs from the United States now demands that it solve its problems at home and recommit to strengthening the multilateral economic system, rather than withdrawing from its global role in exclusive groupings. .
The fact that the United States undermines the WTO while pursuing economic agreements with “like-minded” countries will not lock China into more rules and constrain it in international markets. Concerns about China’s abuse of the rules and its use of raw economic power for political gain present an opportunity for the United States to lead the reform of multilateral institutions and rules that are as crucial as the framework of the American alliance for security in Southeast Asia.
If the Indo-Pacific initiative is really about confronting China on security, as Hufbauer and Hogan suggest, perhaps the United States needs to rethink the uncertainties of its trade policy strategy.
The EAF Editorial Board is located at the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.