Home Japanese values Time Biden team turned rhetoric into action on trade deals – News

Time Biden team turned rhetoric into action on trade deals – News

0

In December, Biden invited more than 100 world leaders to a virtual Democracy Summit to discuss challenges posed by authoritarian states, primarily China and Russia. Under these conditions, why does his administration not rush to join the CPTPP?



By Takatoshi Ito

Published: Mon Jan 24 2022, 11:17 AM

The isolationist and protectionist policies of former US President Donald Trump “America First” have seriously damaged America’s global leadership role. Rising tariffs on imports into the United States – especially from China – have only succeeded in inducing other countries to impose reciprocal tariffs on American products. So Trump’s trade policy ended up hurting most Americans, from farmers to middle-class consumers.

Under Trump, America also unilaterally abandoned its global role, which would have allowed the United States to swing international rule-making around trade and the handling of the climate crisis to its advantage. The United States withdrew from the 2015 Paris climate accord, the World Health Organization and the Trans-Pacific Partnership (TPP) trade deal and launched a scornful assault on the World Organization trade by refusing to accept any appointment to the WTO Appellate Body.

Trump’s isolationism has been particularly painful for America’s key allies in Europe and Japan. When the United States abandoned the high moral principle of free trade and rules-based multilateralism, it also threatened its values.

President Joe Biden’s administration swiftly reversed many of Trump’s economic, environmental and Covid-19 policies, including the U.S. return to the Paris Agreement and the reversal of the U.S. withdrawal from the WHO. But Biden was very slow to undo his predecessor’s protectionist trade measures. Nearly a year into Biden’s term, some of Trump’s tariffs remain in place. There is no question of America joining the TPP’s successor, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). And while the Biden administration is talking about reviving the WTO, it has yet to turn the rhetoric into action.

Biden’s inaction is baffling. He has been clear about his policy goals regarding China, which he sees as America’s most serious competitor. In December, Biden invited more than 100 world leaders to a virtual Democracy Summit to discuss challenges posed by authoritarian states, primarily China and Russia. Under these conditions, why does his administration not rush to join the CPTPP?

The original TPP was signed in 2016 by 12 Pacific nations, including the United States under President Barack Obama, and notably excluded China. It was designed as a regional economic alliance to promote comprehensive free trade and investment, protect intellectual property rights, regulate digital commerce, and prevent signatories from gaining an unfair competitive advantage through the actions of their public enterprises (EP). The pact was a thinly disguised attempt by major Pacific economies, with the exception of South Korea, to compete more effectively with China. And its successor, the CPTPP, has become increasingly influential in the Asia-Pacific region, despite the refusal of the United States to join it so far.

It’s not hard to see why. Many countries that depend on the Chinese market have long had to swallow China’s trade and investment terms. For example, Chinese authorities often require foreign companies investing directly in China to form a joint venture with a local partner rather than establishing a wholly owned subsidiary. And China’s rapid export growth has been made possible by state-owned banks financing state-owned enterprises, prompting complaints from other countries about excessive subsidies. The TPP was supposed to expand free and fair trade and rules-based investment among its members, but also establish rules of engagement to prevent China from taking unfair advantage of its trading partners.

After Trump withdrew the United States from the TPP in January 2017, then-Japanese Prime Minister Shinzo Abe took the initiative to forge the CPTPP, or TPP11, among the remaining members of the pact. Some of the clauses that the United States had insisted on during the original TPP negotiations have been dropped, but they could be reintroduced if America decides to join the treaty. The TPP11 works well but nevertheless lacks the American presence.

Moreover, as the United States wasted the past five years turning away from the new Asia-Pacific trade and investment framework, two other important developments have occurred. First, China, Japan, South Korea, Australia, New Zealand and the ten member states of the Association of Southeast Asian Nations (ASEAN) have signed the Regional Comprehensive Economic Partnership (RCEP). (India dropped out of the deal during the final phase of negotiations.)

RCEP, which came into effect on January 1, trades $2.5 trillion among its members, or about 13% of global merchandise trade, and its 15 signatories account for 30% of global GDP. This is the first free trade agreement between Japan and China, and it is expected to deepen their bilateral trade relationship. But to accommodate emerging ASEAN economies, average tariffs under RCEP will remain higher than under the TPP11 deal, and investment coverage is tighter.

The second development is that China and Taiwan have separately applied to join TPP11 in September 2021, which poses huge challenges for the Japanese government. For starters, can current TPP11 members negotiate with China to keep the bar high for the deal, or could they end up divided on how hard the line should be taken?

Moreover, while China would take a hard line against Taiwan joining the deal, TPP11 countries might think that welcoming Taiwan – one of the world’s leading manufacturers of high-end semiconductors – would bring benefits. additional economic security benefits. This could elicit harsh reactions from China.

Given the uncertainty over Japan’s willingness to play a tough political and economic game with China and Taiwan over TPP11, strong American leadership is needed more than ever. Early U.S. accession to the deal would bolster U.S. trade with major Asia-Pacific economies and bolster their efforts to compete with China. Biden should make it an urgent priority. — Project syndicate

Takatoshi Ito, Japan’s former deputy finance minister, is a professor at Columbia University’s School of International and Public Affairs and senior professor at the National Graduate Institute for Policy Studies in Tokyo.