With the U.S.-led Indo-Pacific Economic Framework evolving as a vague economic cooperation initiative, President Joe Biden seems to have succeeded in avoiding politicizing trade at home ahead of the November midterm elections.

But depending on the outcome of the elections, when control of Congress will be at stake, the Democratic president may shift to an “ambitious” trade approach and strive to make the fledgling IPEF initiative into a more substantial regional economic engagement amid China’s growing clout, some trade experts say.

Just two months ahead of the Nov. 8 voting, U.S. Trade Representative Katherine Tai and Commerce Secretary Gina Raimondo were in Los Angeles with officials from 13 IPEF partners, including Japan, India and some from Southeast Asia, touting how the framework would fuel economic activity and investment throughout the region.

IPEF, launched in May, seeks deeper cooperation among member countries in the areas of trade, supply chains, clean economy, and tax and anti-corruption rules.

Participants of a ministerial meeting of the U.S.-led Indo-Pacific Economic Framework pose for a group photo in Los Angeles on Sept. 8, 2022. (Kyodo)

But the Biden administration has ruled out negotiations to offer greater U.S. market access through tariff reductions, leaving the benefits for the participating economies largely vague.

Still, Biden may view his overall approach to trade issues as a “success” so far, in the sense that he has not faced a strong backlash from both Republicans and Democrats on sensitive trade liberalization issues, said Gary Hufbauer, senior fellow at the Peterson Institute for International Economics in Washington.

“Trade policy is not a big agenda item in the midterms…It’s kind of way down there at the bottom of anybody’s list, and that’s where he wants it,” said Hufbauer, a former Treasury Department official.

In traditional free trade agreements, the lowering of tariffs usually serves as a “carrot” offered by Washington in exchange for tougher standards related to intellectual property, labor rights, the environment and other issues. But concern persists in the United States that free trade deals in the past have led to the offshoring and erosion of U.S. jobs.

IPEF has been basically welcomed by countries in the Indo-Pacific as a sign that the United States is seeking to reassert its economic leadership in the region following the country’s pullout in 2017 from the Trans-Pacific Partnership free trade agreement under then Republican President Donald Trump.

Biden apparently decided to launch IPEF as an alternative to rejoining the unpopular TPP, renamed as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP, while at the same time showing “some response to China,” Hufbauer said.

Trump won the 2016 election largely because he carried states in the declining industrial area known as the “Rust Belt.” He appealed to white working-class voters by speaking to their disaffection with globalization and free trade deals, deviating from the orthodox Republican pro-trade stance.

Biden defeated Trump in the 2020 election, but he has basically followed his predecessor’s protectionist trade policies, including keeping punitive tariffs on China that were imposed to address U.S. concerns over Beijing’s alleged unfair trade practices.

Whether the midterm elections will become a turning point in Biden’s trade policy and his approach to IPEF remains to be seen.

The Democratic Party has a thin majority in the House of Representatives. The Senate is evenly divided, but the Democrats hold the majority due to the tie-breaking vote of Vice President Kamala Harris. The sitting president’s party tends to lose seats in the midterms, which are generally viewed as a referendum on the incumbent leadership.

If the Democrats surprisingly keep control of the House as well as the Senate in November, the expectation is that the IPEF talks during the Biden administration will be “just talk” and “nothing more” so as not to risk annoying the progressive wing of his party who are “very protectionist,” Hufbauer said.

But if the Republicans win the House, Biden may “very well take a more ambitious approach,” Hufbauer said, citing Trump’s predecessor Barack Obama, who pushed hard to make the TPP a key part of his presidential legacy after the Democrats suffered a major setback in the midterm elections in 2014.

“If the Republicans take the House, he’ll be on the defensive in terms of any legislation. So, why not turn to foreign affairs? That’s what Obama did,” the trade expert said.

“Biden…might really try to make something of this IPEF and he might even be willing to talk about market access, even though he won’t have the authority to make a commitment on market access because he won’t have the Trade Promotion Authority under either scenario.”

TPA is a power granted by Congress to the president to negotiate international trade deals with limited interference from lawmakers. The Biden administration let it expire in July last year without seeking renewal.

Gabe Horwitz of the Third Way, a center-left think tank in Washington, said Biden’s trade policy stance could be affected if Republicans take over one or both chambers of Congress, but the question will be “which type of Republicans win.”

“On one side, there are Republicans that are loyal to Trump, predominantly shun increased global ties, and are focused on subverting American democracy more than being constructive. On the other side, there are Republicans who want to help businesses in a more traditional sense,” said the senior vice president for the group’s Economic Program.

While acknowledging that market access is important to galvanize trade, Horwitz said excluding tariff-cutting negotiations does not necessarily mean that IPEF cannot become “a meaningful initiative.”

A report published by Third Way in July showed that increasing trade facilitation, such as by simplifying customs processes, in the East Asia and Pacific region alone could lead to $24.1 billion in cost savings for U.S. exporters. Excluding China, U.S. export cost reductions in the region were estimated at $12.3 billion.

But Hufbauer warned that the United States currently has “nothing to counter” China if it sticks with the present trade approach of not discussing market access, with Beijing already part of a mega free trade deal involving 14 other Asia-Pacific countries, including Japan and members of the Association of Southeast Asian Nations.

“My view is that the president after Biden — if it’s a more traditional Republican or a middle-of-the-road Democrat — will probably rethink this whole market access, traditional trade and will very well shift the discussion from IPEF to merge it with CPTPP. But that wouldn’t happen until 2025,” he said.


Related coverage:

Indo-Pacific nations agree to enter economic initiative negotiations

Indo-Pacific ministers to launch talks for new economic initiative

Indo-Pacific ministers to boost regional supply chains: Japan


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