Indo-Pacific Economic Framework

Assessing IPEF’s Supply Chain Breakthrough

Assessing IPEF’s Supply Chain Breakthrough

This is not what seems to have happened.  Instead, members shared experiences and tried to figure out how to solve challenges that might arise in the future.  Given the rapid timelines, it may not be a surprise that the best “solutions” turned out to be to continue talking.  In fact, most of the supply chain pillar consists of a series of committees to address specific aspects of resilience in the future. This is, frankly, a bit like getting a toothbrush for Halloween.  It’s not a bad idea.  Talking and keeping lines of communication open is important.  But it’s not really what you thought you were getting when you dumped out the bag at the end of the night of trick-or-treating.  As a result, businesses are already showing impatience and disappointment with IPEF.  A group of nearly 30 diverse sizable industry associations just sent a letter to the US Commerce Secretary and the US Trade Representative expressing their concerns about IPEF outcomes.  The key sentence of relevance is “However, we are growing increasingly concerned that the content and direction of the administration’s proposals for the talks risk not only failing to deliver meaningful strategic and commercial outcomes but also endangering US trade and economic interests in the Indo-Pacific region and beyond.” IPEF’s peculiar negotiating structure, as has been noted before, is largely the result of a White House determination that market access of any kind was off the table for the talks.  The letter from businesses highlighted a range of topics that could have been included that did not offer up tariff reductions but could still provide important economic and business outcomes.  These include standards-related barriers to trade, obstacles to remanufactured goods, or specific regulatory challenges for key sectors. Of course, it is possible that these types of issues will end up being identified by the IPEF committee structures, with the creation of new approaches to solve some of the concerns raised by American businesses and firms across the region.  However, it’s also possible committees never get past sharing experiences or never manage to meet at all. The great irony is that governments and businesses do seem keen to address new issues that will be increasingly important in the future like digital trade rules, sustainable trade, or resilient supply chains.  But if the supply chain pillar that has been substantially concluded is any guide, the IPEF as a whole falls woefully short of accomplishing these tasks.  It’s a toothbrush and a lecture rather than a bag with candy.

Biden’s Trade Policy: Modern American Industrial Strategy

Biden’s Trade Policy: Modern American Industrial Strategy

One way to interpret much of Sullivan’s speech is that it attempts to make lemonade out of lemons.  Given that the White House has had little cooperation with Congress, much of the economic agenda outlined by Sullivan will have to be enacted through Executive Orders.  Having foreign policy driven by this process severely limits the scope of the possible.  For example, while Sullivan rails in the speech about a focus on tariffs in the past, this is also an area of Congressional responsibility.  Unless and until Congress is prepared to address tariffs, the topic cannot be added to any negotiated trade agenda.  Declaring that tariffs are the root of all evil is a handy way of avoiding doing anything about them. Something similar is likely for a wide range of potential foreign economic topics which require or are enhanced by Congressional support.  Absent endorsement from Congress, it is necessary to come up with a complicated and complex agenda that allows the US to engage on economic issues with potential friends in Asia and elsewhere. Even within topics, the scope of commitments can be constrained by self-imposed negotiating limits on potential American actions.  This includes, as Talking Trade noted earlier, funding to support an IPEF or broader trade agenda, unless resources have been allocated elsewhere and can be readily redeployed.

IPEF: The Party Few Wanted to Attend

IPEF: The Party Few Wanted to Attend

The final document, released by US President Joseph Biden, ran to just over a page. It described the elements of the proposed framework, which include four pillars of activities. Only 12 governments have agreed to think about starting to discuss something in the future. Why was this party such a disaster? In a nutshell, because the US was promising to hold a very dull event. It was not just that the food and beverages were going to be either bland and uninteresting for some party goers or inedible for others. The proposed music was not danceable. But much worse, the hosts had a series of activities planned for the party. These activities were, in fact, mostly quite unpopular for the proposed guests. The individual games or plans were largely built to suit the hosts without much consideration of the needs or interests of potential guests. These activities are also set to continue long after the original launch party ends. Some could, in fact, take years to wrap up. Guests could be committed to regular gatherings for an indefinite amount of time. While some of the activities have titles that are unobjectionable, others may be quite problematic. The description of these events is so brief and so bland that almost any sort of outcome could be imagined. There is no way to tell how involved any guest will have to be at any given time. This sounds less like a fun party and a lot more like work.