Evaluating U.S. Trade Leaders' Asia Trip

Simon Lester -

Last week, U.S. Trade Representative Katherine Tai and Commerce Secretary Gina Raimondo both visited a number of countries in Asia, meeting with their counterparts in various governments and putting forward a "framework" for an Indo-Pacific economic strategy that clearly has China in mind. The details of the framework have not been fleshed out, so how effective this proposal will be as a tool to counter China is difficult to evaluate at this point.

Raimondo gave a number of interviews during her trip, in which she offered the clearest articulation to date on the U.S. strategy, although many questions remain open. In addition, during the trip, the U.S. Trade Representative's Office announced some key new initiatives that will have an impact on U.S.-Asia trade relations, and the role and influence of China in the region.

As part of her speeches and her responses to media questions, Raimondo gave a rough picture of the new "Indo-Pacific economic framework" that the Biden administration has been touting. She laid out some key aspects of the administration's approach in various fora, including an interview at a Bloomberg event and a press briefing with reporters.

As explained by Raimondo, this new framework will not be a trade agreement along the lines of either the CPTPP or earlier U.S. FTAs, and the administration does not envision it "to require Congress to be involved." Rather, the new framework will focus more on investment in particular sectors and coordination of specific policies.  

The project is in its "very nascent stages," and Raimondo noted that "the President asked me to come to the region this week to start to lay the groundwork to hear from our allies and start to coalesce around what a framework might look like, what issues it might cover, what countries might be included," and "this week’s discussions were really, very much preliminary and beginning the discussion."

When asked "whether it means that it will be more like an initiative with no binding commitments or treaty obligations," Raimondo replied that "it is premature, too early, to say the precise legal structure that it would take or exactly which countries would be included." In response to a question, she agreed that the initiative is "a kind of coalition of democracies, this is America and its allies in Asia, getting together in an economic way."

In terms of the substantive coverage of the framework, in her various statements on the issue, she mentioned the following components: supply chains, semiconductors, digital trade, tech standards, interoperability, cybersecurity, privacy, infrastructure, export controls, clean energy, and decarbonization. She made the following specific points in this regard:

  • there was a meeting with the Malaysian trade minister "where we signed a statement of cooperation to work more closely together on semiconductors to strengthen our supply chains and look for more opportunities for cooperation";
  • "what [the framework] would entail maybe for supply chains would be working with our allies in the region to map ... the supply chain, to monitor the supply chain, to manage the supply chain, to coordinate in a strategic way our investments in this area";
  • "I’m also deeply focused on collaboration to expand our digital economy and set standards for emerging technologies";
  • "we can agree on principles and allow for more flexibility for public-private partnerships and investment in infrastructure".

One area of particular interest for the Biden administration appears to be critical minerals. Given China's dominance in the production of some key critical minerals, this focus is no surprise. After a meeting between Raimondo and Dan Tehan, Australia’s Minister for Trade, Tourism, and Investment, the Commerce Department issued a press release noting that "they discussed the crucial role that critical minerals play in driving the clean energy transition, highlighting the importance of cooperation between partners and allies to build resilient supply chains while upholding strong labor and environmental standards." They said that "U.S-Australia critical minerals cooperation is a practical demonstration of our shared ambition to work together to speed the adoption of low carbon, green technology that benefits the real economy and workforce." Raimondo and Tehan issued a statement that they "reaffirm our commitment to collaboration on supply chains" and "appreciate the investments made by Australian firms in the United States, especially with respect to those ventures supplying rare earth materials necessary for electric vehicles and the broader transition to a green economy that creates jobs for our people."  In particular, they will:

  • continue the work of the U.S.-Australia Critical Minerals Working Group;
  • cooperate on the establishment of new Environmental, Social, and Governance (ESG) and traceability standards to ensure responsible sourcing of critical minerals;
  • explore opportunities "to finance projects throughout the critical minerals value chain, drawing from Australia’s new Critical Mineral Facility as well as relevant USG financing mechanisms";
  • and engage with "extractive, processing, and end-user firms, such as producers of batteries and rare earth element magnets, in both countries."

The United States and Australia formalized their partnership on developing critical minerals two years ago, as noted in a Trump era U.S. Department of the Interior press release.

Beyond Raimondo's remarks on the new framework, the U.S. Trade Representative's Office -- in addition to the readouts of meetings with individual governments – announced three initiatives during the trip that could have an impact on the U.S. role in the region. First, there is a new "Partnership on Trade" with Japan. According to the USTR press release, "[t]he initial areas of focus for cooperation will include issues such as third country concerns, cooperation in regional and multilateral trade-related fora, addressing labor and environment-related priorities, a supportive digital ecosystem for all, and trade facilitation, among other issues." The first series of meetings will take place early in 2022. In October 2019, the United States and Japan signed both a trade agreement and a digital trade agreement. It is not clear what the role of these Trump era trade agreements is in the current U.S.-Japan trade relationship, and whether and how the new Partnership will incorporate them.

In addition, the U.S. Trade Representative's Office announced that the EU, Japan, and the United States had agreed "to renew their Trilateral partnership to address the global challenges posed by non-market policies and practices of third countries" (China, of course, is the big non-market economy country that this initiative is targeting).

Finally, there was a Joint Statement from the United States - India Trade Policy Forum that touched on a number of the issues noted above.

Whether anything concrete comes out of this new framework and these discussions remains to be seen. With regard to principles of global governance, such as on digital trade, it is possible that the Biden administration will sign on to a set of rules that are crafted as non-binding, by taking existing agreements in this area and softening any language that makes them binding. Beyond new international rules, another possible aspect of the framework is to spend money, through government loans, grants, investments, etc., on infrastructure and products such as critical minerals. The Biden administration is pursuing a domestic policy that involves ratcheting up this sort of spending, and bringing allies into the effort is certainly a plausible scenario.