US business group calls for progress on ‘trade pillar’ of Indo-Pacific Economic Framework as talks hit snag

An influential American business group on Monday urged President Joe Biden’s administration to move forward with trade negotiations as part of the Indo-Pacific Economic Framework, a US-led initiative to encourage allies and partners in the strategically significant region to reduce their reliance on China.

“It would be a terrible blow to US credibility after we negotiated and then withdrew from the TPP if we were to do something similar” with the trade portion of the IPEF, said John Murphy of the US Chamber of Commerce, referring to the Trans-Pacific Partnership, a multilateral trade agreement that president Donald Trump ditched in 2017.

The deal, which promised market access benefits, was negotiated by his predecessor, Barack Obama.

There is brewing opposition within Biden’s Democratic Party to his plans to finalise a deal on the “trade pillar” of IPEF this week, when leaders from the group’s 14 member states gather at the Asia-Pacific Economic Cooperation (Apec) forum in San Francisco. But the chance of finishing the negotiations – and sending a message to China that the US is still deeply involved in the region despite leaving the TPP – now seems slim.

US Senator Sherrod Brown, a Democrat from Ohio and chairman of the Senate Banking Committee, wants the US to drop trade talks from the IPEF initiative. Photo: Bloomberg

Last week, Senators Sherrod Brown, a Democrat from Ohio and leader of the Senate Banking Committee, and Ron Wyden, a Democrat from Oregon and Senate Finance Committee chairman, demanded dropping the trade talks from IPEF, citing a lack of “enforceable labour standards”.

Soon reports emerged that the Biden administration was also beginning to feel uncomfortable about possibly angering American labour unions, a key Democratic constituency.

“Any trade deal that does not include enforceable labour standards is unacceptable. That goes against everything … everything we successfully fought against when we led the opposition to the Trans-Pacific Partnership,” Brown said on November 9, asking Biden to remove the entire trade pillar from IPEF.

American labour unions opposed the TPP in 2015, believing it would lead to more offshoring of jobs, lower wages and greater economic inequality and would primarily benefit big corporations.

Murphy of the US Chamber of Commerce said the US business community wanted the government to “provide us with better access to foreign markets, just as the Asia-Pacific economies are doing through some of the 100-plus trade agreements that they’ve negotiated over the past 20 years”.

What is IPEF, the new US-led economic framework for the Asia-Pacific?

Australia, Brunei, Fiji, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand and Vietnam are a part of IPEF, along with the US. All but India and Fiji are also Apec members.

Together, the IPEF participants account for about 40 per cent of the global economy.

IPEF consists of four pillars: supply chains; climate; tax and anticorruption; and trade. Negotiations on only one of the pillars – supply chains – has been closed so far. A deal on strengthening supply chains was reached in May in Detroit during the Apec ministerial meeting.

Trade has been most contentious part of IPEF engagement since it began in October 2021. In May, India sat out of the IPEF trade talks because of pressure from domestic businesses.

Several IPEF participants have been reluctant to meet US labour and environmental standards. The initiative also does not seek to lower tariffs or improve market access.

China must ‘consider’ its neighbours in US’ Asia-Pacific trade framework

Uncertainty also looms over discussions on e-commerce, once a popular aspect of IPEF.

Washington recently withdrew the digital trade proposals made in 2019 by the Trump administration that called on the World Trade Organization to allow free cross-border data flows and prohibited national requirements for data localisation.

Citing a bipartisan outcry, Murphy described the decision as not “well-vetted”. He said that many in the US business community would prefer to move forward with an “ambitious standard, such as the one the administration has, had been supporting previously”.

“We should certainly be pursuing these high-standard digital trade rules in a forum such as the IPEF, which is a collection of US allies and partners, where we very much want to set a high standard and pursue closer economic cooperation,” Murphy said.