Biden’s trade framework misses key points about, well, trade

Biden administration officials know they need to do something to contain China’s growing economic influence in Asia. That something probably involves encouraging other, friendlier Asian countries to do more business with the United States rather than China. Unfortunately, the Biden team also thinks the usual measures required to give these friends more access to the U.S. market — such as cutting tariffs — are too politically toxic.

So they decided to split the baby: a developing trade deal that will somehow not involve much (if any) trade liberalization.

In a splashy announcement Monday, President Joe Biden and leaders from 12 other countries unveiled the “Indo-pacific Economic Framework for Prosperity.” This “framework,” really the start of longer-term negotiations, is intended to strengthen ties with Asian-pacific countries tired of being bullied by China.

We have some catching up to do on this front. Many of those 12 “partner” countries are still annoyed by former President Donald Trump’s erratic trade policies. Among them was his decision to pull out of a previous trade pact, negotiated under the Obama administration, that had largely the same geopolitical objectives as this new “framework”: creating an economic alliance to counter China.

Biden officials are taking pains to message that this is not like that other, cursed trade deal, the Trans-pacific Partnership, which lawmakers in Biden’s own party had opposed even before Trump killed it. Moreover, it’s like no previous trade deal, period, the administration stresses.

“This framework is intentionally designed not to be a ‘same old, same old’ traditional trade agreement,” Commerce Secretary Gina Raimondo told reporters in a conference call with media members.

So, what’s different this time? Well, there are no plans to lower tariffs or otherwise guarantee those 12 partner countries broader access to the coveted U.S. market. There are also no plans to guarantee U.S. exporters reciprocal access to these other countries’ valuable markets, which U.S. firms want.

Liberalization of trade is typically a core element of trade agreements. But as with other economic questions, the Biden administration has apparently decided to defer to the Trump worldview, and assume that tariff repeal of any kind is too politically dangerous to attempt.

So, instead, the framework has four “pillars” on which participating countries will confer: supply chain resiliency, digital economy rules, clean energy and infrastructure, and taxation and anti-corruption.

These all sound like critical areas for international coordination, and I hope negotiations are successful. But there are reasons to be skeptical about how much this trans-pacific partnership (which is, again, nothing like that other Trans-pacific Partnership) can achieve.

One is that the negotiations are a la carte; participating countries can opt out on any of those four “pillars,” which are already somewhat vague.

“This is, according to (administration officials), more ‘flexible’ and more ‘innovative,’ ” says Mary Lovely, senior fellow at the Peterson Institute for International Economics. “Well, what does that mean? It also means that it’s completely right now ill-defined, undefined.”

Additionally, it’s not clear what the possible enforcement mechanisms will be, particularly if (as White House officials have said) the administration hopes to work toward an agreement that won’t ultimately require congressional sign-off.

This is a practical choice: Congress refused to ratify the Trans-pacific Partnership after years of negotiations. Working toward a different deal crafted to not be contingent on fickle lawmakers’ assent might make an eventual agreement more likely. But it also makes any new deal more likely to be toothless.

Most important, without offering any additional access to U.S. markets, it’s not clear how much we can incentivize other countries to make changes that will be costly to them, particularly in the short term.

For example, cutting cheaper Chinese inputs out of their supply chains or creating separate production lines just for the U.S. market would be expensive. Without the promise of greater access to U.S. consumers, these kinds of investments might not be worthwhile.

In an interview, a senior administration official said that other, non-tariffbased incentives are being offered to stoke cooperation. Carrots being dangled, the official said, include “more reliable access to U.S. capital” and the prospect of “harmonized” rules surrounding complex digital issues such as intellectual property and data privacy. That way foreign firms can more easily “understand when and in what context they can provide services to the U.S. economy.”

“Reducing tariffs is more familiar, so when you think about other benefits, those might feel more speculative,” the official said. But, this person added, those other incentives might nonetheless prove attractive.

Perhaps. The problem, though, is that these countries have explicitly said they want greater market access. Plus, many of these non-tariff-based incentives would also require acts of Congress. Which the administration has tacitly suggested should not be counted on.

The only thing that can reliably be counted on, it appears: a growing political aversion to anything branded as “free trade.”