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INTERVIEW – Manak: Indo-Pacific Economic Framework is US answer to not being in CPTPP

Inu Manak is Fellow for Trade Policy at the Council on Foreign Relations in Washington

Borderlex’s Robert Francis spoke to Inu Manak, Fellow for Trade Policy at the Council on Foreign Relations in Washington. The conversation covers a mid-term stocktake of the Biden administration’s trade policy and initial thoughts on the US’ new Indo-Pacific Economic Framework.

Is the Biden administration that different from the Trump administration on trade?

Most trade policy watchers were very hopeful with the change in administration. But there are challenges to rolling back the policies put in place by President Trump. You must explain why you’re doing it, and you have to explain how that benefits the United States.

The Biden administration may be trying to reach out to the same constituents that they think have been supportive of Trump-era policies.

It’s a delicate balancing act for them, and this is why a lot of people in Washington were very sceptical that on day one we were going to see the 232 and 301 tariffs gone. Re-entering the Comprehensive and Progressive Agreement for Trans-Pacific Partnership would also have been wishful thinking.

What has been surprising has been the level at which the rhetoric has remained similar on trade. We could for example have seen a slight shift in terms of how we’re talking about tariffs: this administration has not yet admitted is a bad thing. That’s problematic.

When we look at how the administration is approaching trade policy, it’s still zero sum in large part. They’re not talking about how reciprocal trade benefits or imports could benefit US manufacturers.

Midterms elections are approaching in November. This is why the Biden administration is not focused on trade. Trade is not something you want to talk about to the average voter.

They’re doubling down on domestic policy investments before they go ahead and shift to global issues.

There is strong continuity with the Trump administration on trade. The Biden administration is just a little nicer in the way the US talks with allies.

The transatlantic Trade and Technology Council is one such exercise in rapprochement with allies – what’s your view of the TTC?

The EU and US are trying to tackle a lot of things. But I am sceptical they will get to all of them.

If the focus is on specific items, there is a good potential to product outcomes.

What we will see is some coordination – which I think is helpful – on investment screening. But that’s going to take some time.

What concerns me about the TTC is that despite this ambitious agenda, there is just endless dialogue.

We can’t just be creating ten new committees and new working groups. I’m glad they’re we’re talking to each other again. But let’s raise the bar! Let’s have some clear benchmarks of what we hope to achieve within a certain timeline.

I fear that the interest of keeping it going will be lost as time goes on if we can’t achieve things quickly.

Why doesn’t the US just join the CPTPP? And what is IPEF?

The other area where the administration is really ramping up efforts is on the Indo-Pacific Economic Framework, which was launched on 23 May.

This is the US answer to not being part of the Comprehensive and Progressive Transpacific Partnership. But there are a lot of ambiguities on what IPEF is going to look like.

The IPEF is a new initiative from the Biden administration. It’s not really developed yet. It will likely touch upon supply chains, digital trade, labour rights, and the environment. So far there are 14 participating countries: Australia, Brunei, Fiji, India, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, the United States and Vietnam.

The countries in the CPTPP but not in the IPEF are Canada, Mexico, Peru and Chile.

The initiative is largely being led by US Commerce Secretary Gina Raimondo. USTR is taking a bit of a backseat. Commerce will be responsible for three of the four “pillars” under negotiation: supply chain resilience, clean energy and decarbonisation,  and tax and anti-money laundering. USTR will manage the trade pillar.

The administration want to have different policy pillars which are up for negotiation. But there is no obligation to be part of all of them. It is an interesting flexible trade agreement model where the countries that decide to negotiate only commit to the pillars they want.

I have no idea how this is going to work in practice. You reach compromises in FTAs because you’re trading off concessions across different parts of the deal. You usually don’t just negotiate one small slice of it.

It could end up being the US saying: “These are our policy objectives, who wants to sign on to it?”.  That could be a little problematic in the long run.

IPEF is not open to China. It is a way to build up a network of allies that abide by the same rules, – thereby putting China into a corner and eventually forcing them to adopt similar rules.

While including India in the talks could help counter China, our expectations for India’s cooperation should remain low. This is particularly true in the trade pillar, where India has been at odds with the United States for years on digital trade, which appears to be a major part of the trade pillar at the moment.

Without CPTPP we’ve lost opportunities for trading in the Asia Pacific, so IPEF is a way to make up for lost time.

We should probably just join the CPTPP and offer amendments that would assuage all parties, such as strengthened environmental and labour chapters.

Even the Japanese are encouraging the US to reengage on CPTP. I’m certain that the other CPTPP members would be amenable to amendments to the agreement if it meant getting the US back on board – assuming those amendments are reasonable.

The big issue is market access. Because the administration has generally pursued an anti-trade agenda, I think it would be very hard for them to sell why we’re importing more goods from these countries. They need to have a narrative to explain why it’s good to trade with these countries: they have not made that case.

What could the US do about the World Trade Organization?

The WTO is a very tricky issue for the Biden administration.

One of the reasons it has not done anything on dispute settlement so far is because it believes it has a lot of ‘leverage’ left over from the Trump years. The discussion is complicated by the fact that the administration doesn’t know how to use that leverage yet. They’re just kicking the can down the road. I am also not convinced that this administration really wants an appeals mechanism function.

Even if that were the case: what would the future of the WTO look like?

I believe dispute settlement is going to be the last issue that will be discussed among all the other reform issues that the United States wants to potentially tackle in Geneva. They want to figure out what else they can do in the meantime to stay engaged and keep the WTO running,

As for the 12th ministerial conference, I am very sceptical that there will be anything major agreed. I hope we get a fisheries deal – but I think the TRIPS waiver discussion has poisoned the well.

I am consistently puzzled by the lack of enthusiasm on the part of the US on fisheries. We should be loud and vocal and championing getting it across the finish line.

I think it is a missed opportunity for the US. An agreement would also be a win for the WTO negotiating function and an even larger win for environmentalists.

Beyond fish, the WTO subsidies regime is probably in need of some changes.

One reason for that is how to deal with China’s subsidy programs, but also how do we deal with a situation in which every country is rushing to subsidise a range pf different industries. We’re seeing a resurgence of industrial policy, and we can’t stop it.

There may be places where we could greenlight subsidies, and we need to think through what that means, how it affects our trading partners, and how to create a fair system where we’re not just engaging in outright protectionism.

We should be thinking more creatively creatively about how to incentivise the types of production that we want.

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