After years on the sidelines, the US needs an Indo-Pacific economic strategy

Five years after it withdrew from the Trans-Pacific Partnership (TPP), the United States is losing ground in Asia. China, Japan and other major countries are moving ahead with writing the rules of the road for the global economy, while the United States largely sits on the sidelines.   

Global rules on trade, finance and the digital economy are critical to long-term U.S. prosperity. They will largely be shaped in the Indo-Pacific region, which accounts for roughly half of the world’s population and economic activity. Washington must get back in the game.  

The Biden administration recognizes this problem. It has heard loud and clear from allies and partners in the Indo-Pacific that the U.S. military and diplomatic presence in the region is welcome but not sufficient. These partners also expect the United States to be an active, reliable and durable participant in regional economic affairs.   

Nothing would reassure partners — or advance U.S. strategic and economic interests — more than a U.S. return to a high-standard, comprehensive regional trade agreement like TPP. The Biden administration has made clear that it is not yet ready to take that step.  

Instead, it has offered the outlines of an “Indo-Pacific economic framework” as the primary vehicle for U.S. economic engagement in the region. The details appear to be still under development, but the administration has signaled that it views the framework not as a single undertaking, like a trade agreement, but as a platform for separate negotiations with willing partners on topics such as digital standards, clean energy, infrastructure and supply-chain resilience.   

The Biden framework holds promise. The topics identified by the White House cover many policy priorities for the United States and regional partners. However, if the framework is to advance U.S. economic and strategic interests, become a credible alternative to other regional initiatives, and be seen by allies and partners as a durable U.S. commitment to the region, it must be well engineered and managed.   

There are four essential keys to success. First, the framework should seek to advance binding rules and hard commitments that go beyond broad principles and goals. This is important to advance U.S. economic interests in concrete ways and to win the public support necessary to sustain the framework.   

A second, related point is that the framework must produce tangible benefits for Indo-Pacific partners. Most of these countries will be reluctant to sign on to U.S.-preferred rules unless they see something in it for them. This is especially true if the administration hopes to win support — as it should — from countries beyond close partners like Japan, Australia and Singapore, including important Southeast Asian economies such as Indonesia, Thailand and Vietnam.   

In a traditional trade agreement, the United States would offer market access concessions to win trading partners’ support for U.S.-preferred rules. But the Biden administration is reluctant to seek congressional approval for any agreements reached under the framework, ruling out a reduction of U.S. tariffs or other changes to U.S. law. This means the administration will have to sweeten the pot with other things desired by Indo-Pacific trading partners, such as credible offers of infrastructure investment, capacity-building assistance and clean-energy solutions.  

Third, an effective and durable framework will require rigorous coordination by the White House. What has been proposed will be a complex undertaking involving multiple strands of work, U.S. government agencies and regional partners, and it is likely to fall apart if not tightly managed by a senior White House official or cabinet officer designated by President Biden.   

Finally, the administration will need to take an open and inclusive approach to consulting with all relevant U.S. stakeholders: labor, small and large businesses, consumers and civil society groups, as well as the U.S. Congress. All these groups have valuable inputs to make on various substantive elements of the framework and must feel included in the process if they are to be effective contributors to its success.  

An effectively structured and managed Indo-Pacific economic framework could advance U.S. interests in a critical region and convince partners there that the United States is reliably and durably committed to regional economic affairs. Indeed, success in this endeavor is imperative, or the United States will fall further behind in the race to set the world’s economic rules and norms. 

Matthew P. Goodman is senior vice president for economics at the Center for Strategic and International Studies (CSIS) in Washington, D.C. William Reinsch holds the Scholl Chair in International Business at CSIS. This article highlights research from a CSIS paper by the co-authors.