Since Donald Trump's presidency, signing new free trade agreements has become an operation U.S. leaders tend to avoid. Free trade agreements, and most trade agreements in general, are seen by many voters as detrimental to U.S. interests and a reducer of American jobs. Trump immediately withdrew the U.S. from the Trans-Pacific Partnership (TPP) upon taking office and criticized the North American Free Trade Agreement, which had been in effect for over 20 years, for causing job losses in the U.S. This led to the replacement of NAFTA with the United States-Mexico-Canada Agreement, which has higher thresholds.
Considering voters' attitudes, Joe Biden has also been cautious about signing new trade agreements since taking office. During this week's APEC meeting, the U.S. did not sign any trade agreements with any country.
In May last year, Biden introduced the "Indo-Pacific Economic Framework" (IPEF) as an alternative to the TPP and a counterbalance to China. The framework, which includes 14 participating countries, is built on four pillars: trade, supply chains, a green economy focusing on clean energy, and a fair economy involving taxation and anti-corruption.
During this week's APEC meeting, ministers from the 14 countries of the Indo-Pacific Economic Framework held a two-day meeting. On Nov. 16, leaders of the 14 countries issued a statement on the outcomes of the ministerial meeting, announcing agreements on three pillars but no agreement on the most crucial pillar of trade.
U.S. officials revealed that concerns about next year's election votes among Democratic lawmakers were the main reason why an agreement on trade issues was not reached.
Agreements were reached on three pillars, as announced in a statement by the White House on Nov. 16. The ministers of the 14 countries signed agreements on supply chains, green economy, and fair economy.
In terms of supply chains, the 14 countries launched a "Critical Minerals Dialogue" mechanism to strengthen cooperation on critical mineral supply chains. The content of the supply chain cooperation agreement was finalized by the ministers of the 14 countries in May this year, and the agreement was formally signed during the APEC meeting.
Media reports at the time pointed out that less than 1% of the world's nickel comes from the U.S., but Indonesia accounts for more than half of the global nickel supply. Australia and Southeast Asian countries also supply cobalt, lithium, and other critical minerals, creating conditions for the 14 countries to share critical minerals when needed.
The 14 countries also established a "Crisis Response Network" for supply chains, providing early warnings to each country when potential supply issues arise. When supply issues occur, there are emergency communication channels among the 14 countries to provide timely support.
The 14 participating countries of the Indo-Pacific Economic Framework are the U.S., Australia, Brunei, Fiji, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. These 14 countries contribute 40% of the global GDP and account for 28% of global goods and services trade.
Regarding the green economy pillar, according to information published on the U.S. Department of Commerce website, the 14 countries committed to strengthening research and development and commercialization of clean energy technologies in each country; enhancing interconnectivity through collaboration in infrastructure, technology, and standard setting; and increasing investment to promote the development of clean energy infrastructure and technology.
U.S. Commerce Secretary Gina Raimondo announced the establishment of a $30 million "Catalytic Capital Fund" to encourage private investors from the 14 countries to participate in the development of green energy products. The U.S. and Japan will each contribute $10 million, and Australia will contribute $8 million.
The 14 countries will also hold an annual "Green Economy Investment Forum" to encourage investment in the green energy sector. The first forum will be held in Singapore in the second half of next year.
In terms of the fair economy pillar, the 14 countries committed in the agreement to strengthen the transparency, rule of law, and fairness of the economy, intensify anti-corruption efforts, and improve the trade and investment environment in the Indo-Pacific region.
To implement the agreements reached, the 14 countries have established a ministerial committee that will hold talks annually starting next year, with leaders of the countries meeting every two years.
The statement of the 14 countries also specifically pointed out that 13 countries have made progress on trade issues and will continue negotiations to achieve mutually beneficial results in the trade pillar.
Difficulty in Reaching a Trade Agreement
When the Indo-Pacific Economic Framework was first introduced, its trade content sparked controversy. Unlike free trade agreements, the Indo-Pacific Economic Framework does not involve market access and tariff reductions, significantly reducing its attractiveness to various countries.
At the time, the Associated Press cited analysts questioning what practical benefits the Indo-Pacific Economic Framework could bring to various countries if they could not enjoy low tariffs and better access to the U.S. market. This also made the Indo-Pacific Economic Framework less attractive than the TPP, which the U.S. had withdrawn from.
Even without involving market access and tariff reductions, negotiations on the trade pillar of the Indo-Pacific Economic Framework encountered difficulties. The other three pillars of the Indo-Pacific Economic Framework were negotiated by the U.S. Department of Commerce, while the trade pillar was negotiated by U.S. Trade Representative Katherine Tai.
Earlier this month, Tai said in an interview with U.S. media that she would announce "exciting" results related to the four pillars of the Indo-Pacific Economic Framework during the APEC meeting.
However, last week, U.S. officials revealed that an agreement related to the trade pillar could not be reached. An informed official told Axios news network in an interview that Democratic lawmakers preparing for next year's congressional elections expressed concerns about the U.S. government reaching trade agreements with other countries.
Since Trump linked trade agreements to the loss of American jobs, trade agreements have become a sensitive issue for many voters. Senate Majority Leader and Democrat Chuck Schumer warned the Biden administration of the political risks of reaching trade agreements less than a year before the election.
Senator Sherrod Brown, a Democrat from Ohio, issued a statement directly opposing the trade part of the Indo-Pacific Economic Framework, calling it "unacceptable." Brown, who will participate in next year's reelection, is only within a 5 percentage point gap with four Republican candidates in the polls.
Informed officials said that it was due to pressure from Democratic lawmakers that the White House asked U.S. negotiators to slow down negotiations on the trade pillar of the Indo-Pacific Economic Framework.
Agence France-Presse described the obstruction of trade pillar negotiations as a "setback" for the U.S., which could further weaken the U.S.'s reliability as a trade partner. The article pointed out that for decades, the U.S. government has established cooperative relationships with countries around the world through free trade agreements, but now, influenced by domestic politics, the U.S. has moved towards an "isolationist" mode.
Bloomberg also expressed a similar view. Wendy Cutler, vice president of the Asia Society Policy Institute and former U.S. deputy trade representative, said in an interview with the media that the U.S.'s failure to reach an agreement on the trade pillar with 13 countries has "shocked our trade partners."
Cutler said that trade negotiations have ups and downs, and it is now clearly a low point, a "major setback" encountered.
