America’s new blueprint for economic engagement with Asia aims to compete with China. But the plan has failed to take advantage of America’s greatest economic power.
Since withdrawing from the Trans-Pacific Partnership in 2016, the US has lacked a clear economic strategy in the region. Other countries in the TPP moved without the US to a new trade agreement now called the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership, which entered into force in 2018. Several CPTPP members also signed on to another major trade deal, called Regional Comprehensive Economic Partnership in 2020. Although it is less ambitious in scope, RCEP is notable because it includes China as a member.
The new IPEF aims to put America back on the economic map in the region, to match its growing security plans in the region. There are few details about how the new agreement is going to tackle its stated objectives like supply-chain resilience and clean energy development, but the elephant in the room—changes in tariffs and market access—is conspicuously absent. India’s inclusion in the IPEF is particularly noteworthy, as the country has always been skeptical of opening up its market too much. It pulled out of RCEP because of its potential impact on farmers and businesses. The fact that India is set to join in is perhaps a sign that IPEF lacks the bite to match its bark.
The US, with its vast domestic economy, provides a viable market for Indo-Pacific economies if it aims to counter China’s growing economic clout in the region. Many American companies and farmers would also have benefited from increased access to fast-growing markets in friendly Asian countries, while reducing the relative importance of the Chinese market. That was the basic idea of TPP. But the US is facing huge domestic opposition to revive the TPP.
The IPEF is therefore seen as perhaps the weakest second or third best option: something that can survive in domestic politics while still sending a signal of intent to the US. But it may not work nearly as well. China is a major trading partner for most countries in the Indo-Pacific region. For example, trade between China and countries in the Association of Southeast Asian Nations has more than doubled in the past decade. The US remains an important export destination but less so as a source of imports.
If the US joins the CPTPP, it will reject any discussion of the China-backed RCEP becoming a key determinant of commercial standards. Anyway, the drift in US policy – toward stronger, more expensive Asian security commitments and a second role for US exporters and manufacturers – may continue.
Write Jacky Wong at [email protected]
Credit: www.Businesshala.com /