Digitrade Digest #56
Some new developments on IPEF front, UK working of trade deals with Pacific bloc and more
Indo-Pacific Economic Framework
Joe Biden waters down Indo-Pacific Economic Framework to win more support
Financialtimes: Joe Biden has decided to water down his Indo-Pacific Economic Framework in an eleventh-hour move to attract more countries to join the deal that he will unveil in Tokyo on Monday.
Biden is using his first trip to Asia as US president to launch the IPEF, which is intended to respond to criticism from allies and partners that his strategy in the region has been too focused on security and lacked an economic component.
Six people familiar with the situation said the US and other countries had agreed to change the language in the two-page statement that will accompany the unveiling of the IPEF.
An early draft obtained by the Financial Times said the countries would “launch negotiations”. But the Biden administration has since agreed to dilute the language to convey that the countries were starting consultations aimed at later negotiations.
Several people familiar with the talks said Tokyo had urged Washington to be more flexible to maximise the chances of having a deal that would include more south-east Asian nations.
US officials were still negotiating the content of the statement on Thursday as Biden flew on Air Force One to South Korea, the first stop on his five-day, two-country visit to Asia. The White House National Security Council did not respond to a request for comment.
Countries across the Indo-Pacific have spent the past year urging Biden to develop an economic strategy to help counter China, which is rapidly increasing its power and trade presence in the region. Critics have accused Washington of having an “all guns and no butter” strategy, which they said had given China an opportunity to use its economic clout to pressure other countries.
The US started talks with Indo-Pacific countries late last year. But Biden’s team struggled early on to convince many south-east Asian nations and India to join. Several of the people familiar with the discussions said some countries were reluctant because they did not see much value for them, particularly since the IPEF will not include access to the US market.
The IPEF will contain four pillars that will tackle issues such as infrastructure, supply chain resilience and clean energy. It will also include discussions about creating a digital trade agreement, which Tokyo has urged the US to prioritise.
American officials have argued that the IPEF is more suited to the 21st century than traditional trade deals that cut tariffs. They have also made clear that conventional agreements have become politically toxic in US politics, making it difficult to sign deals that grant market access.
Japan and other US allies in Asia remain frustrated that then-president Donald Trump withdrew from the Trans-Pacific Partnership, a 12-nation deal, in 2017. But Hillary Clinton, his Democratic opponent in the 2016 election, had also come out against the TPP due to the souring on trade deals among some voters.
“The trade-off all along with IPEF has been between inclusiveness and participation — a more demanding launch commitment would mean fewer participants, since the US is not offering to discuss new market access,” said Kurt Tong, a partner at consultancy The Asia Group and a former US ambassador responsible for economic issues.
“The price for attracting more participants in initiatives like these is to be less heavy-handed on substance, inviting others to help shape it,” she said.
Myron Brilliant, head of international policy at the US Chamber of Commerce, said the IPEF was “not CPTPP clearly”, referring to the regional trade accord that the US abandoned.
“The US business community welcomes the IPEF as it gets us back in the trade game,” he added. “But its impact will be most felt only if countries like Vietnam, Malaysia and Korea sign up for a high standard digital framework.”
One additional challenge for the launch of IPEF is that Australia will hold a general election on Saturday. If a new cabinet is not sworn in by Monday, the government will not have a formal mandate to start “negotiations”.
Malaysia touts trade access as U.S. Indo-Pacific plan only a 'good beginning'
Reuters: Malaysia also is touting access to another regional trade bloc, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which includes a number of RCEP countries other than China and adds Canada, Mexico, Peru and Chile.
The IPEF plan was a key topic of discussion at a Washington leaders summit of the Association of Southeast Asian Nations (ASEAN), though it is not expected to be formally launched until Biden travels to Japan next week.
Malaysian Prime Minister Ismail Sabri Yaakob on Thursday called for Washington adopt a "more active" trade and investment agenda with ASEAN countries. read more
Azmin said IPEF "is not a TPP 2.0," referring to the pan-Pacific trade deal that former U.S. President Donald Trump quit in 2017, but said it represents a first-ever formal economic engagement between with the United States.
"It is a good beginning for us to engage on various issues, including the non-traditional elements like environment, climate change, labor practices, governance," Azmin said.
Malaysia still needs to decide which of the so-called IPEF pillars to join, he added. Vietnam's prime minister also on Wednesday said more time was needed to study IPEF.
U.S.-EU Trade and Technology Council
U.S.-EU Trade and Technology Council Establishes Economic and Technology Policies & Initiatives
Whitehouse: TTC working groups are deepening U.S.-EU cooperation by expanding access to digital tools for small- and medium-sized enterprises and securing critical supply chains such as semiconductors. They are collaborating closely on emerging technology standards, climate and clean tech objectives data governance and technology platforms, information and communications technology services’ (ICTS) security and competitiveness, and the misuse of technology threatening security and human rights. The TTC working groups are also coordinating on export controls, investment screening and security risks, and a range of global trade challenges, including countering the harmful impact of non-market, trade-distortive policies and practices on technological development and competitiveness in sectors of shared priority. To ensure that the government dialogues are informed by the broad perspectives of the U.S. and EU communities inform their work, the TTC working groups are continuing robust engagement with a diverse range of stakeholders, including those in industry, labor organizations, think tanks, non-profit organizations, environmental constituencies, academics, and other civil society members.
During their ministerial meeting, the U.S. and EU TTC co-chairs reviewed the outcomes generated by the joint working groups and announced key outcomes including:
Deeper information exchange on exports of critical U.S. and EU technology, with an initial focus on Russia and other potential sanctions evaders, coordination of U.S. and EU licensing policies, and cooperation with partners beyond the United States and the European Union;
Development of a joint roadmap on evaluation and measurement tools for trustworthy Artificial Intelligence and risk management, as well as a common project on privacy-enhancing technologies;
Creation of a U.S.-EU Strategic Standardization Information (SSI) mechanism to enable information sharing on international standards development;
An early warning system to better predict and address potential semiconductor supply chain disruptions as well as a Transatlantic approach to semiconductor investment aimed at ensuring security of supply and avoiding subsidy races;
A dedicated taskforce to promote the use of trusted/non-high-risk ICTS suppliers through financing for deployments in third countries;
A new Cooperation Framework on issues related to information integrity in crises, particularly on digital platforms, with a focus on ongoing issues related to Russian aggression, including Russia’s actions to manipulate and censor information;
A stakeholder-focused Trade and Labor Dialogue to discuss policy options to promote internationally recognized labor rights and to help workers and firms make successful digital and green transitions, remain globally competitive, and enjoy broad and inclusive prosperity;
An early dialogue on shared trade concerns regarding third-countries measures or initiatives and an early stage consultation mechanism regarding bilateral barriers that may disadvantage the transatlantic economy;
A policy dialogue aimed at developing responses to global food security challenges caused by Russian aggression in Ukraine; and
A U.S.-EU guide to cybersecurity best practices for small- and medium-sized companies, whose business is impacted disproportionally from cyber threats.
UK
UK hopes to conclude deal with Pacific trade bloc this year
Financialtimes: The UK is hoping to conclude talks on joining a major Pacific trade bloc by the end of this year, as London pursues new commercial opportunities around the world post-Brexit.
Anne-Marie Trevelyan, international trade secretary, told the Financial Times that the UK had already completed the first part of the accession to the 11-nation Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a process she likened to “sitting exams”.
Trevelyan added that she was working through the rest of the negotiation. “It’s not unrealistic that we might get there by the end of the year,” she said.
“They’re very enthusiastic about our application and everyone’s working really hard to try and . . . plough through the complexity that is trade language and detail to get there. So I’m hopeful that by the end of the year we should see that crystallise.”
The CPTPP includes fast-growing Asian economies such as Malaysia and Vietnam along with established Pacific players such as Japan, Australia, Mexico and Canada. The UK opened talks last June and would be the first nation to accede since the bloc was launched in 2018.
Trevelyan was speaking as the UK started negotiations with Mexico on an enhanced trade agreement to replace the one carried over from its EU membership days, which is more than 20 years old.
“Mexico has a really strong and growing market . . . young population and with a high growth curve overall so we want to be making sure we can . . . harness those relationships and grow them.”
Total bilateral trade is currently tiny at about £4.2bn and Mexico is the UK’s 44th largest trading partner. Commerce between the nations is less than 1 per cent of Mexico’s $661bn annual goods trade with the neighbouring US.
London hopes a new agreement focused on services and the digital economy will grow trade with Mexico by 30 to 40 per cent in the next few years, Trevelyan added. It is the third set of trade talks launched by the UK this year, after those with India and Canada.
Latin American nations complain that Britain has paid them little attention in recent years, despite the region’s wealth of natural resources and human talent. Total trade between the UK and Latin America was £18.1bn in 2021, down 4.5 per cent from a decade earlier, according to official data.
Trevelyan said the UK viewed Latin America, which together with the Caribbean has a gross domestic product of $4.7tn, as “integral and important” for trade. She is pursuing talks with Brazil on extending an existing trade partnership and her team is also speaking to Colombia.
Mexico was chosen as a priority along with Canada for a new agreement because both nations are CPTPP members. “We want to . . . get those extra layers of potential trade opportunities beyond the CPTPP,” Trevelyan explained. Clean energy and fintech were among the exports that the UK could offer.
As foreign secretary, William Hague tried in 2010 to boost trade and investment with Latin America by opening new embassies, appointing a regional trade commissioner and boosting trade visits.
A report from the Canning House think-tank concluded 10 years later that “in terms of UK exports to the region, the results have been poor”. The UK accounted for less than 1 per cent of Latin America’s trade by 2018, well behind its main European competitors.
Britain launches free trade deal talks with Mexico
Reuters: Britain on Friday said it was launching talks over a free trade deal with Mexico, looking to add services to its current agreement as well as aiming to increase trade in the financial and digital sectors.
Britain and Mexico agreed a continuation trade deal before Britain left the sphere of the European Union, but that arrangement is based on an EU-Mexico trade agreement negotiated over 20 years ago.
A free-trade agreement with Mexico would also boost Britain's foreign policy tilt towards the Indo-Pacific. Mexico is a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which Britain wants to join.
The free trade area, established in 2018, is now made of Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.
Britain's trade relationship with Mexico is currently worth over 4 billion pounds ($5 billion), the trade ministry said.