Dhe best thing that can be said about President Joe Biden’s new Indo-Pacific economic pact is that it keeps the United States firmly in the region not only in terms of security but also in terms of trade. That’s not a little. But it’s not enough. The worst thing that can be said about the pact is that it won’t work. Should it nevertheless lead to significant agreements between the 13 participating states, it would jeopardize free trade in the region and in the world.
Since Biden’s predecessor, Donald Trump, took America out of the Transpacific Trade Pact five years ago, Washington has been absent as an important voice in multilateral trade policy in Asia. China is increasingly filling the gap. In January, the free trade agreement RCEP came into force, which includes China and 14 countries, but not America. China has also applied for membership in the 11-country Trans-Pacific Trade Pact, which Biden does not want to join because he fears voter wrath. As an alternative offer, the American is now presenting its Indo-Pacific Economic Framework in Tokyo.
departure from a liberal idea
The chances that the initiative will develop any impact are slim. Above all, this is because Biden does not offer further opening of the American market. He is not concerned with reducing tariffs and quotas, but with rules for fair and resilient trade, resilient supply chains, clean energy and infrastructure, rules for taxes and against corruption.
The alliance could most likely achieve more international division of labor by focusing on digital trade and reducing bureaucracy. But Biden is not aiming for more trade. He wants to subject free trade to political rules and enforce American ideas about working hours, environmental protection and fair taxes in order to increase American sales opportunities in the region. This is an advance that one can reject in good conscience without giving anything in return. And which many countries should actually reject in order not to impede their own economic development with higher costs. Many are still taking part, also in the hope of being able to influence the outcome of the upcoming negotiations. So far, Biden has only announced intentions.
Climate protection and employee rights are already being negotiated in international forums. It cannot be seen where the added value of the Biden initiative lies. The biggest design flaw in the pact is that Americans distrust the power of free markets.
Example of secure supply chains: The most important lesson from the pandemic and from the dependence on autocratic states such as Russia or China is not to put all your eggs in one basket. Companies have understood that as many and widely spread suppliers and customers as possible are the best protection against torn supply chains. This requires open and free markets. This is the only way companies can develop long-term, trusting business relationships at the grassroots level, which ensure stability in the event of a crisis. This does not require political agreements from above about safe and trustworthy supplier countries, which by their very nature exclude other countries. This contradiction is inherent in the pact and weakens it.
Don’t fool yourself. Policies and warning systems, such as Biden is now proposing, could not have prevented the shortages of masks and semiconductors, wire harnesses and transportation that have disrupted and are disrupting supply chains in the pandemic. Such measures will probably not prevent governments from restricting foreign trade in emergencies in the future either. Even in the European Union, the political promises of free trade were not kept during the crisis. Biden’s thrust is actually different. It is aimed at China’s growing influence in the region. It’s about political, not economic dependencies.
The idea of trading and investing exclusively in clubs in friendly and trustworthy states as a protection against political dependencies is not only circulating in America. Biden’s framework for the Indo-Pacific looks like a precursor. Geopolitically, this is accepted against China and Russia as a departure from globalization. Above all, however, it is a departure from the liberal idea of prosperity-generating free trade from below in favor of patronizing regulation from above.
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