Biden’s fear of free-trade deals risks isolating friends in Asia

Southeast Asian nations are increasingly disappointed with the U.S. over a lack of progress on trade issues, undermining President Joe Biden’s efforts to strengthen ties with the region’s leaders at a summit this week in Washington.

The administration has repeatedly highlighted the importance of U.S. leadership in Asia and building relationships to counter China. But when it comes to substance, specifically free-trade deals, the U.S. has little to show.

The main U.S. initiative now, known as the Indo-Pacific Economic Framework, is supposed to deal with regional supply chains, infrastructure and other areas. But details are hazy and the administration has stressed it won’t include lower tariffs or better access to U.S. markets.

Instead, the main U.S. priority in Asia has been bolstering defense ties as part of a broader effort to counter China.

However there is little desire from Southeast Asian nations for increased tensions between the two countries. Singapore Prime Minister Lee Hsien Loong has called for a truce between the U.S. and China and more focus on trade, while newly elected Philippine President Ferdinand "Bongbong” Marcos Jr. has argued that his country will not align with superpowers and will instead have its own foreign policy.

"You tend to approach the region with a single focus, which is security,” Tommy Koh, Singapore’s ambassador-at-large and former envoy to the U.S., said at the American Club in Singapore late last month. "But Asians live by trade.”

For many Asian countries — including the eight members of the Association of Southeast Asian Nations represented in Washington on Thursday and Friday — the best result would be the U.S. returning to the Trans-Pacific Partnership, a wide-ranging deal that was a agreed by the Obama administration and then abandoned by former U.S. President Donald Trump.

But such deals are a nonstarter in Washington, where the Biden administration lacks congressional support for agreements that are seen to undermine U.S. labor and companies, as well as Democratic priorities like climate change. The White House has promised to pursue a "worker-centered” trade policy, and support from the AFL-CIO, the largest U.S. labor federation and a historic opponent of free-trade deals, is important to getting out the vote for Democrats in mid-term elections in November.

That stance leaves little room for substantive new economic links between the U.S. and Asian nations, leaving the IPEF to be the main vehicle.

"Most are happy to see the IPEF as a sign of US re-engagement with economic rule-making, but are also nervous about its implicit role in strategic competition with China,” analysts at the Washington-based Center for Strategic and International Studies wrote in a May 5 report. "The Biden administration should avoid playing into China’s narrative and keep the focus on its positive agenda for the region, emphasizing the benefits that the IPEF would bring to the parties involved rather than on how it relates to U.S. strategy toward China.”

Some in Congress have criticized the IPEF as lacking substance, with senators from both parties blasting Biden’s trade agenda at a March hearing and grilling U.S. Trade Representative Katherine Tai over a shortage of ambition to negotiate new agreements. The head of the U.S. Chamber of Commerce, the largest American business-lobbying group, also issued a scathing criticism of Biden’s trade policy this week, saying that the administration is "consumed by caution and internal reviews.”

At the hearing in March, Tai defended the IPEF, arguing that it will include innovative elements that will be appreciated with time. "New things require some time for socialization and for people to appreciate where the economic meaning is going to come,” she said.

White House spokeswoman Karine Jean-Pierre on Wednesday pushed back on any characterizations that the U.S. has not done much in the region since TPP, "which never went into effect in the first place,” and said that it has strong trade and investment relationships in the Asia-Pacific.

"You can expect to see us deepen our long-standing cooperation by investing in our countries and driving inclusive prosperity in this critical region,” she told reporters, adding the administration will "keep building” on $102 million in new initiatives announced late last year to expand its engagement with ASEAN nations.

With U.S. midterm elections fast approaching, global trade is a losing political issue for a Biden administration consumed with soaring inflation and an uneven labor market recovery. Members of his own party such as Senator Elizabeth Warren have warned that the IPEF must include strong and enforceable labor and climate commitments.

The summit this week follows pleas from key U.S. trading partners across the Asia-Pacific to do more to develop the region through trade, aid and badly-needed infrastructure investments.

Biden will likely announce the launch of talks for the IPEF agreement when he visits Asia this month, Japanese Ambassador to the U.S. Koji Tomita said earlier this week, with U.S. allies Japan, South Korea, Australia and New Zealand among nations set to join, the Sankei Shimbun reported.

Not everyone in the region is unhappy with the engagement from US companies, with Malaysian Trade Minister Azmin Ali telling local media he expects to bring home 14.6 billion ringgit ($3.3 billion) from his mission to the U.S.. That’s in addition to the $7.1 billion in new investment from Intel Corp. announced in December.

Both Tai and Commerce Secretary Gina Raimondo, who is co-leading the IPEF work for the U.S., have visited the region to discuss the initiative, as well as manufacturing and "friendshoring,” or the movement of production to allied countries. Nations are looking for more engagement.

For Deborah Elms, the Singapore-based executive director of the Asian Trade Center, an April trip to testify before the U.S.-China Economic and Security Review Commission in Congress was a wake-up call. While she spoke about why the US should get more involved in trade deals, she said, some members of Congress were more focused on how to restrict U.S. investment into China.

"The U.S. has taken a very long time to get organized to start to talk about economic issues with Asia. In the meantime, Asian governments have continued to embrace trade agreements as one key approach to greater resilience and source of economic growth in the post-pandemic period,” she said in a recent interview.

"This leaves the U.S. largely on the sidelines,” she said.