When the US launched the Indo-Pacific Economic Framework for Prosperity (IPEF) in May 2022, along with Australia, Brunei, Fiji, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam, there were high expectations.
The US said it would “advance resilience, sustainability, inclusiveness, economic growth, fairness and competitiveness” and would “offer tangible benefits that fuel economic activity and investment, promote sustainable and inclusive economic growth, and benefit workers and consumers across the region”.
Between them, the IPEF partners represent 40 per cent of global gross domestic product and 28 per cent of global goods and services trade. Surely, with that heft, efforts would go into making what the Council on Foreign Relations (CFR) describes as the Biden administration’s “first major trade initiative” a great success?
In San Francisco earlier this month, the leaders did indeed sign an agreement that marked some progress on three of the four “pillars”, relating to supply chains, the environment, improving transparency and fighting corruption. But no amount of ceremony and forced smiles could conceal why what the White House called “ground-breaking agreements” were dismissed by others as a “washout” or a “failure”.
For when it came to trade, the most important pillar, the US dropped plans to announce advances at the last minute – despite officials having reportedly told the other partners that they would be able to declare that some negotiations had been successfully wrapped up.
The reason? The Biden administration came under pressure from Democrats in Congress, notably Senator Sherrod Brown of Ohio, who are mindful of the damage they believe previous trade deals have done to American jobs and are fearful of the impact of any new ones – not least on their ability to retain their own seats as legislators. “I’ve made it very clear that the trade portion of the Indo-Pacific Economic Framework is unacceptable, and I’m glad it’s not moving forward,” Mr Brown told reporters after the signing.
To many, this is in danger of sounding like deja vu all over again.
In February 2016, the US signed up to the Trans-Pacific Partnership (TPP), an ambitious trade agreement between 12 Pacific Rim countries that had been championed by then president Barack Obama. The TPP was, in fact, supposed to be the centrepiece of Mr Obama’s famous “pivot to Asia”. It never entered into force, however, as one of president Donald Trump’s first executive actions after taking office in January 2017 was to withdraw from the partnership – which then went ahead in a different form as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), just without the US.
Despite having been Mr Obama’s vice president, Mr Biden never evinced any interest in joining the CPTPP. IPEF was supposed to be his replacement, and an important plank in the US strategy of containing and reducing dependency on China in the region.
A polite way of describing the current state of affairs comes from the CFR’s Inu Manak, who wrote: “Without a more substantial trade component, the IPEF will likely be a missed opportunity to deepen economic ties across the Pacific.” John Murphy, senior vice president of the US Chamber of Commerce, put it more strongly: “Collapse of the IPEF trade pillar would deal a blow to US standing in the region,” he said. “To follow President Trump’s withdrawal from the TPP with President Biden’s capitulation on his own trade arrangement would be a dreadful setback for US leadership.”
Timing may well be an issue here. With Mr Trump almost certain to be the Republican candidate in next year’s presidential election, Mr Biden will not want to gift his opponent a trade deal that could be used to attack him. Neither would it be a happy outcome if IPEF’s trade pillar was finalised, only for a possibly re-elected President Trump to scrap the agreement shortly after returning to the Oval Office.
But it leaves IPEF woefully short on substance. Increased trade is what would give the agreement momentum and importance. Meanwhile, China has applied to join the CPTPP, and it is a member of the blockbuster Regional Comprehensive Economic Partnership, which is already in effect and includes nearly all of East and South-East Asia as well as Australia and New Zealand. The US, of course, is not in that either.
As Bloomberg’s editors recently warned: “By turning its back [on the trade pillar of IPEF], the US stands to lose not just the economic benefits of closer co-operation on trade but also the geopolitical gains from restoring its leadership in setting rules and, above all, conducting itself as a consistent and reliable partner.”
Talk of the US “setting rules” will be viewed with greater suspicion than ever in much of the Asia-Pacific after Mr Biden’s near-unwavering support for Israel in the face of the horrendous number of deaths in Gaza. American soft power has been gravely weakened by Washington’s apparent indifference to Palestinian lives, and it would be a brave US official who dared turn up in Kuala Lumpur or Jakarta to lecture locals on democracy or “values”, for many years to come.
But this is a region that has long thrived on trade, the key factor that has seen so many of its countries transformed over the past few decades. US involvement in new pacts that aim to stimulate economic activity for all members would be widely welcomed – if they ever happen, that is.
A Malaysian defence analyst once gloomily remarked to me, in reference to US military and security guarantees: “The Americans always leave in the end.” When it comes to trade agreements, the US now seems to be in danger of convening the meeting, but then not showing up when it counts – and with IPEF, make that twice.