Senior Vice President for International Policy
September 13, 2022
The eyes of the U.S. business community were on Los Angeles last week as trade officials from 14 countries met for the first in-person Indo-Pacific Economic Framework (IPEF) ministerial. The stakes are high: The Indo-Pacific is the world’s largest and most dynamic economic region, and U.S. workers, farmers, and companies find its vast opportunities enticing.
At the same time, it’s been a decade since the U.S. added to the list of 20 countries with which it has comprehensive trade agreements. Even as other countries have signed scores of preferential trade pacts that benefit their domestic producers, the U.S. has been standing still — and we risk falling behind.
Further, China’s burgeoning commercial links across the Indo-Pacific and worldwide, the challenge posed by its model of state capitalism, and the disruptions to the global economy caused by Russia’s unprovoked invasion of Ukraine underscore the need for the U.S. to get back on offense on trade.
All of this generates strong support for the IPEF, in principle — but questions remain:
What exactly will IPEF do? The administration says the IPEF is a new kind of trade agreement that it hopes to negotiate in just a year or two. It’s organized around four pillars:
- Connected economy: Led by the Office of the U.S. Trade Representative, this pillar will address trade, digital economy and emerging technology, labor commitments, trade facilitation, transparency, and good regulatory practices;
- Resilient economy: Led by the Commerce Department (as are the remaining two pillars), this effort will involve commitments related to supply chain security, including early warning systems, mapping critical mineral supply chains, improving traceability in key sectors, and coordinating on diversification efforts to prevent disruptions in supply chains;
- Clean economy: This pillar will address climate and the energy transition with commitments to renewable energy, carbon removal, and additional climate-related initiatives; and
- Fair economy: This pillar will focus on the enactment and enforcement of tax, anti-money laundering, and anti-bribery laws and standards.
Who’s taking part? Fourteen Indo-Pacific countries are participating: Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, the United States, and Viet Nam.
All 14 countries are participating in all four pillars, with one exception: India has declined to join the trade pillar. Indian Commerce and Industry Minister Piyush Goyal expressed concern that the trade pillar’s possible rules on the environment, labor, and digital trade may “discriminate against developing countries,” but he left the door open for possible later participation.
What about tariffs and market access? U.S. officials argue that some IPEF rules will create new access to foreign markets for U.S. exporters, for instance, by eliminating technical or unscientific barriers to trade. However, the administration has refused to consider reciprocal tariff elimination in the IPEF.
The reasons for this refusal appear to include: opposition from organized labor; the fact that a tariff-lifting trade pact would require congressional approval (which they say their vision of IPEF won’t); and officials’ sense that “we’re actually living in a pretty tariff-liberalized world as it is,” as U.S. Trade Representative Katherine Tai told a Senate committee early this year.
What’s the cost of leaving out market access? For many American workers, farmers, and companies, ending foreign tariffs and locking in access to foreign markets is essential to their trade competitiveness. Many Indo-Pacific countries maintain high tariffs on key U.S. exports. Especially with other countries inking dozens of new trade pacts, U.S. agriculture and manufacturing may wind up at a sharp disadvantage to competitors abroad. For these reasons, dozens of Democrats and Republicans in Congress have pressed the administration to alter its stance.
Closing the door on traditional market access presents other challenges. After all, foreign governments in the past have only committed to the high-standard trade rules the U.S. champions when enticed by the prospect of new market access. Further, it is the threat of revoking access to the U.S. market that makes our trade agreements enforceable.
What is the U.S. Chamber seeking? The U.S. Chamber laid out its recommendations for the IPEF in April, with specific input on customs administration and trade facilitation, good regulatory practices, anticorruption, health systems, medical products, infrastructure, sustainability, the energy transition, and more. Meaningful support for these initiatives will benefit from robust stakeholder engagement, which we anticipate will continue.
One area at the top of the list for the U.S. Chamber and many others is digital trade. As explained in the U.S. Chamber’s recent report, The Digital Trade Revolution: How U.S. Workers and Companies Can Benefit from a Digital Trade Agreement, digital trade opportunities are supporting dynamic growth and good jobs in all 50 states, and firms of all sizes and sectors are poised to benefit. However, these opportunities are endangered by the spread of digital protectionism and the accumulation of discriminatory digital rules that often target American firms. To forestall these threats, including strong digital trade rules in the IPEF can secure these opportunities for American workers, small businesses, services industries, and others.