Biden should nix his Indo-Pacific economic plan and start from scratch

Who told President Joe Biden that 13 other Indo-Pacific countries would be willing to raise their labor and environmental standards when conducting trade without receiving more access to the United States market for their products in return? And why have they not yet been asked to retire to the consolations of private life?

The president’s hopes for announcing the trade terms of the proposed Indo-Pacific Economic Framework as a counter to the aggrandizements of China at the Asia-Pacific Economic Cooperation meeting in San Francisco recently collapsed. In what would be his modest answer to former President Donald Trump’s withdrawal from the Trans-Pacific Partnership on trade, Biden’s first “new model” trade agreement has now been pushed back for conclusion until 2025, after the upcoming U.S. presidential election, when its prospects for enactment are far from certain.

This is evidence of trade negotiating malpractice. It is proof that at least some among the American negotiators have forgotten the first lesson for concluding any trade agreement, which is that every country party to it must go away from the negotiating table feeling that they have benefited from what was agreed there. Every country’s negotiators must have something tangible they can take home to help secure final approval of the agreement by their country.

Contrary to what former President Trump thinks, international trade negotiation is not a straight win-or-lose endeavor or a zero-sum game, which helps explain why he did not conclude any new trade agreements while he was president. He simply gave the NAFTA with Canada and Mexico a few new provisions and a new name and told everyone it was a new agreement. His other trade negotiations failed. 

But President Biden, with his decades of experience, surely knows better. So, how did he and his administration allow the crumbling of his much-vaunted and long-anticipated Indo-Pacific Economic Framework to occur?

It should have come as no surprise to the administration that the initiator of the Democratic congressional rebellion against the framework, Senate Banking Committee Chair Sherrod Brown (D-Ohio), would oppose any trade agreement that does not include strong provisions protecting labor and the environment. That has been his consistent position since he and I served as Democrats in the House of Representatives together several decades ago. He is unlikely to change his mind — especially on the eve of an election year.

Nor should it have been a shock that other Democrats quickly echoed Brown’s opposition. His position has essentially been the congressional Democratic position for decades — since the original NAFTA featured only non-enforceable side agreements on labor and the environment and they promised never to accept such a compromise again.

Of course, the Biden administration could point out to Brown and his colleagues that the so-called trade “pillar” in the Indo-Pacific Economic Framework is not actually a trade agreement. But that would be acknowledging publicly what the president and his trade negotiators have spent two years trying to conceal — that, apart from some largely aspirational promises to mutually recognize standards and smooth out cogs in supply chains, the proposed agreement negotiated by United States Trade Representative Katherine Tai and her cohorts would do little to advance trade.

Besides, the president and Ambassador Tai promised upfront that higher labor and environment standards would be part of the agreement. Of course, the better labor and environmental standards that are sought by Brown would not only benefit the United States. They would also benefit those other 13 countries — Australia, Brunei, Fiji, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand and Vietnam.

But this overlooks another basic lesson of trade negotiation — countries rarely agree to changes in trade solely because it would be in their best interest to do so. If they did, we would have global free trade. In trade negotiation, something more is needed — what trade negotiators call a “concession” that creates “reciprocity” in the agreement.

There is no reciprocity in the Indo-Pacific framework in exchange for the higher standards sought by the United States. Trade would be advanced — and higher labor and environmental standards could be secured — if the United States agreed to cut tariffs on imports of products of importance to its negotiating partners in the Indo-Pacific, or somehow otherwise provide them more market access within the bounds of world trade rules. But that is not going to happen.

Predictably, it has been reported that the negotiations on improving labor and environment standards have encountered resistance from some of the other Indo-Pacific countries. In the continued absence of tariff cuts, in the end, there will be no strong and enforceable labor and environment standards in the IPEF. More likely, to save negotiating and political face, there will be aspirational and other relatively weak provisions that fall short of being firm and enforceable commitments. Brown and other Congressional Democrats would likely vote against such an agreement.

Why not cut the tariffs? To be sure, one reason is that Brown and other Democrats would also be unlikely to vote, now or later, for an agreement with the higher labor and environment standards they seek if it also contained tariff cuts. The Democratic Party needs to learn anew the economic and other reasons that justify freer trade. But the main reason is because President Biden and his administration are, to put it bluntly, afraid to do so.

They fear that, if it includes tariff cuts, Trump will use the framework as an issue against Biden in the upcoming election in the same way he used the TPP so effectively against Hilary Clinton in 2016, which would further heighten his vulnerability in the midwestern swing states critical to his reelection, where a recent poll shows him trailing Trump.

Evidently, this apprehension is warranted. Speaking in Iowa following the collapse of the president’s expectations at the APEC meeting, Trump, as usual not bound by the facts, said, “Under the next administration … the Biden plan for ‘TPP Two’ will be dead on day one. It’s worse than the first one, threatening to pulverize farmers and manufacturers with another massive globalist monstrosity designed to turbocharge outsourcing to Asia.” That’s quite a sharp criticism for a proposed agreement that is reportedly still a bit light on text and substance, with neither a trade chapter nor a dispute settlement mechanism.

Notably, Trump seems to be planning to oppose the Indo-Pacific Economic Framework whether it contains tariff cuts or not. Shying away from negotiating reductions in tariffs as part of the deal certainly may seem, superficially, to be the best political position for Biden. But if both Trump and his fellow Democrats seem bent on opposing the current conception of the agreement anyway, why not change course and negotiate a real trade agreement with both tariff cuts and higher labor and environment standards and then try to get congressional approval for that much better agreement after some of the political dust settles in 2025?

As it is, the current U.S. approach is denying American businesses, workers and consumers the benefits they could derive from such a real trade agreement. Furthermore, it is denying Biden the chance to strengthen American economic ties to other Indo-Pacific countries, in part to create more mutual prosperity but also to reassure them that the U.S. remains a presence in the region on which they can rely at a time when they are facing intensifying economic pressures from China. If we offer our allies and other trading partners in the region a deal that gives them next to nothing, then they will be pushed farther into the economic embrace of the communist Chinese government.

Why not do what is best for the country and then make it work politically? That is supposed to be what presidential leadership is all about. President Biden has led admirably on other fronts. He should lead on this one, too. 

In the meantime, a new approach to these negotiations could benefit from having new negotiators. Why not ask that a resignation or two be placed on the President’s desk to mark a new start for the Indo-Pacific Economic Framework? 

James Bacchus is a former Democratic Member of Congress, from Florida, and a former trade negotiator for the United States. He is an adjunct scholar at the Cato Institute and a professor of global affairs at the University of Central Florida. His most recent book is “Truth About Trade: Reflections on International Trade and Law” (World Scientific Publishing).