America and Asia: two continents, the same difficulties

(To Enrico Magnani)
16/06/22

The visit of the Chinese foreign minister, Wang Yi, who in the second half of May touched several small states in the South Pacific, ended with much less positive results than those expected from Beijing (and feared by the other states in the region). In fact, only East Timor has concluded an agreement with China, moreover of limited impact on economic and security policies. This alarm bell has further strengthened the fears of many states in the region, starting with the US, of Chinese pressure in the area, which if it finds a small stop, it will not subside.

To cope with the pressure from Beijing, President Biden, during a five-day visit to Asia (in reality South Korea and Japan only) launched a new economic initiative, but which should indirectly also have an influence on architecture. of the Indo-Pacific macro region.

Washington launched the IPEF (Indo-Pacific Economic Framework for Prosperity, also using terminology that should find attention in local partners) a "multilateral partnership for the 21st century", should help "economies to take advantage of rapid technological transformation, including in the digital economy, and to adapt to the next energy and climate transition".

The push for a new economic pact in Asia with an anti-Chinese function has become a priority for Biden, who on May 23 announced the adhesion to the IPEF of 13 nations, which together with the USA represent 40% of world GDP (Australia, Brunei, South Korea, Fiji, Philippines, Japan, India, Indonesia, Japan, Malaysia, New Zealand, Singapore, Thailand, Vietnam, while the EU, France, Great Britain, Germany, Spain would be interested in being part of it even if nothing official has yet to emerge on the matter).

Such a vast and articulated area sees different responses; Japan, (Taiwan, ghost participant, but very important) and South Korea want to work with the United States, particularly on emerging issues such as the digital economy, and help set a standard for future business. India also reacted favorably to the initiative; Australia, New Zealand, Singapore are easy adherents, while for Vietnam, the Philippines, Thailand, Cambodia and Indonesia the context will be more difficult as they are in the midst of the environmental transition. As White House Indo-Pacific coordinator Kurt Campbell noted, the financial commitment is "an area where the United States, in effect, must step up their game".

Unfortunately for Washington, this idea seems unlikely to have a significant impact. While partners in Asia appear eager to join any US-led economic initiative as an anti-Chinese shield, the framework proposed by Washington lacks the incentives that the region's economies are seeking. Indeed, it does not offer partners greater market access in the United States or tariff reductions (and the Biden administration, although the ideological antipodes of the Trump administration, which dismantled the region's network of bilateral and multilateral economic agreements, does not seem at all. willing to go back to the concerns that the return to globalization would have on the US economy and labor market).

The plan doesn't even take into account the effect China has on regional supply chains and appears to be focused on what the US can unilaterally achieve instead of finding mutual benefits for all potential members.

Poorly designed in this way, there is a risk that the initiative will remain a dead letter.

Biden's Indo-Pacific drive lacks strength and strategic vision

In addition to the intention to protect themselves from China, many Asian nations want closer economic ties with the United States. But if the allies of the United States are critical of the lack of incentives and ambitions in the Indo-Pacific economic framework, they remain doubtful about the security initiatives, which although more numerous (AUKUS, ANZUS, RIMPAC, Shangri-La Dialogue, Quad, several bilateral agreements), seem disconnected from the economic dimension and therefore make Washington's action not as effective as the Biden administration hopes. The perplexities of the regional partners, beyond the accession (formal act that must be filled with contents) are also due to the fact that large regional agreements are already functioning without the participation of the United States such as CATTP and RCEP. (Note)

The IPEF is structured around four pillars: (1) supply chains, (2) infrastructure and clean energy, and (3) taxes and anti-corruption, (4) and fair trade pillar, but as the agreement is not a trade agreement, there will be no negotiation tariff reductions, something that the partners insist on.

While the details of these pillars are still being negotiated, the White House wants high standards, particularly in labor and environmental provisions. As many advanced economies in Asia are already committed to fighting climate change and have strong labor protections, meeting these high standards shouldn't be difficult. However, given the amount of political investment the Biden administration has invested to restore American diplomatic relations, these standards could make it difficult for some developing economies to join. And the Biden administration would prefer to have as many members as possible to present, in the US tradition, one global crusade against evil, in this case, China.

To address these problems, the IPEF is an open structure and "à la carte"; in fact, to be considered as a member, a state can join at least one of the four pillars of the initiative.

A big hit could be a digital trade deal. The CAPTPP - with Japan, Australia, Vietnam, New Zealand and Singapore as members - already has a digital chapter in place. The US and Japan have a similar deal, and Singapore and Australia have a separate digital economy deal. Singapore also supported its partnership agreement for the digital economy. This topic is likely to prove to be one of the few areas of IPEF success.

As mentioned, the difficulty related to effectiveness is that the Indo-Pacific countries want to talk about market access (USA) and tariff reduction, which, as mentioned above, Washington does not want to discuss. Removing regulatory barriers is good, but it can have a limited impact on the grand scheme of supply chains.

In addition to the lack of ambition that US partners see in the picture, there are also concerns and skepticism about its functional architecture, as the management of the IPEF is shared between the Department of Commerce and the Office of Foreign Trade Representative (tiny body, with fewer than 500 officials), while the Department of State has so far played a secondary role.

The picture might seem more of a diplomatic victory than an economic one from this result. Meanwhile, all ASEAN members (such as Cambodia, which is considered a Chinese protectorate but is a small economy) are unlikely to join the IPEF, given their inability to meet higher standards or their animosity. against the United States. Of course, it is doubtful that China will be invited to join.

A basic ambiguity, valid for everyone

These lines, which underline the complexity of the international scene and the very close links between economy and security (understood as a set of foreign and defense policies), also recall a series of elements of analysis and reflection; in addition to the willingness of the US to maintain global and pan-regional leadership, there is an underlying ambiguity that affects all members of the IPEF, including Washington. While everyone is afraid of Chinese pressure, be it political, military, economic, at the same time there are doubts in reducing the economic or commercial ties with partners of this weight and, in some states, such as Australia (one of the most concerned about the push from Beijing) represents a very important percentage of the national GDP.

Therefore, if Washington aspires to have its partners in the Indo-Pacific macro region apply the 'decoupling' with China, for itself, it wants to be an exception and maintain a dialogue, on its own terms.

Beijing is well aware of these ambiguities, and despite the not small internal / external difficulties (economic slowdown, environmental reconversion, impact of the pandemic, a difficult CCP congress, relations with Russia, Hong Kong situation and civil rights) plays all its cards with ruthlessness, starting with the fact that it owns a considerable part of the US public debt, aided in this, unwittingly, by the structural weakness of the IPEF.

The other end of the thread

This situation presents itself in very similar terms in the western hemisphere as well. Here, too, the United States came empty-handed to the IX Summit of the Americas of Los Angeles; now Washignton is surpassed by a China which today is the first trading partner of Brazil, Chile and Peru, and the second of Argentina and Colombia and this makes one ponder how much time has passed since the Monroe Doctrine and that of Theodore Roosevelt.

In December 1994, Bill Clinton had brought together 33 heads of state and government from Canada to Chile, all except Cuba, for the first Summit of the Americas in Miami. The context seemed conducive to achieving the goals set by George HW Bush in his so-called Initiative of the Americas, especially the most ambitious: the creation of a free trade area from the Bering Strait in Alaska to the Strait of Magellan in Patagonia. Democratic advances and economic liberalization in Latin America and the Caribbean have generated expectations of greater and lasting political and economic consensus, because the end of the Cold War also included the end of the Cuban model for the left and military dictatorships for the right.

However, it was a clearly premature burial, as revealed by the Joe Biden administration's difficulties in having the presence of several heads of state on the continent, where the rift between many Latin American countries and the United States was evident.

The US decision not to invite Cuba, Venezuela and Nicaragua led the presidents of Mexico and Honduras to stay home in protest, while the presidents of El Salvador, Bolivia and Guatemala refused to attend for other reasons.

The polarization was also evident in the summit's civil society forum. Many local activists have complained about the missed opportunity to demand that governments engage productively with their respective oppositions and ensure free and fair elections. Local groups working with migrants have also called for attention not only to those arriving at the US border, but rather to the millions of Venezuelan refugees and elsewhere who have fled to other countries in the region. Here too Biden presented a kind of IPEF clone, to which is added the pillar migration control (a burning issue for the USA and for the impact it could have on internal political dynamics, increasingly polarized in a tough democratic-republican ideological confrontation). But the situation is even worse, in fact even though many nations, albeit ruled by left-wing leadership would have been willing to strengthen economic ties with Washington, and have access to US markets, but the supply is weak and uncertain (as acknowledged, privately , by senior US executives) and clashes with the accelerating Chinese presence, with massive investments in infrastructure projects.

So far, Chinese pressure is less strong in the field of security, but there is an increase in infiltration attempts, especially through the fight against drug trafficking and illegal fishing control (sic) by proposing the use of the Beijing coast guard in help to local forces. Up to now, these offers have not received positive responses, but for the future it is difficult to bet, given that old dynamics are being re-proposed, such as Nicaragua's readiness for the Russian military presence, just expressed.

Conclusions

Despite a praiseworthy vulgate, mainly due to the rejection of what was dismantled and made conflictive by the Trump administration, the action of Biden's overall remains not up to par for several reasons, starting with the priorities of internal policies (economic and social) for leave the external ones dominated by the security approach, with all the weaknesses of a sectoral vision in the face of global problems.

Note

The Trans-Pacific Partnership (TPP), or Trans-Pacific Partnership Agreement, was a proposed trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the United States signed on 4 February 2016. Then, after taking office, newly elected President Donald Trump withdrew the US from the TPP in January 2017; as a result, the agreement could not be ratified as planned and did not enter into force. The remaining countries negotiated a new trade agreement called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPATPP), which incorporates most of the provisions of the TPP and went into effect on December 30, 2018. The TPP started as an expansion of the Transpacific Strategic Economic Partnership Agreement (TPSEP or P4) signed by Brunei, Chile, New Zealand and Singapore in 2005. Since 2008, other countries have joined the discussion for a broader agreement: Australia, Canada, Japan, Malaysia, Mexico, Peru, USA and Vietnam, bringing the countries involved in the negotiations to twelve. As mentioned, in January 2017, the United States withdrew from the deal. The other 11 TPP countries agreed in May 2017 to restore it and reached an agreement in January 2018. After ratification by six of them (Australia, Canada, Japan, Mexico, New Zealand and Singapore), the agreement entered in force for those countries on 30 December 2018. Great Britain signed up to join the CPATPP in 2021; Taiwan, Philippines, Colombia, Thailand, and Indonesia, Bangladesh, India South Korea, Sri Lanka and China (sic) have expressed interest in joining the CATPP.

The Regional Comprehensive Economic Partnership (RCEP) is a free trade agreement between the Asian and Pacific nations of Australia, Brunei, Cambodia, China, Indonesia, Japan, South Korea, Laos, Malaysia, Myanmar, New Zealand, Philippines , Singapore, Thailand, and Vietnam. The 15 member countries represent approximately 30% of the world's population (2,2 billion people) and 30% of global GDP ($ 29,7 trillion), making it the largest trading bloc in history. Signed in November 2020, RCEP is the first free trade agreement between major Asian economies, including China, Indonesia, Japan and South Korea. The RCEP was conceived at the 2011 ASEAN Summit in Bali, Indonesia ( on Japanese initiative), while negotiations were formally launched during the 2012 ASEAN summit in Cambodia. India, which took part in the initial negotiations but later decided to give up, has been invited to join the bloc at any time. Any other country or separate customs territory of the region can join the pact from 18 months from the date of entry into force of the pact ie from 1 July 2023. The treaty was formally signed on 15 November 2020 at the ASEAN Virtual Summit hosted by the Vietnam. As of January 17, 2022, seven of the ten ASEAN signatories and all five non-ASEAN signatories have deposited their RCEP ratification instruments with the ASEAN Secretary General. For the top ten ratifying countries, the trade pact entered into force on January 1, 2022. The RCEP includes a mix of high, middle and low income countries and plans to eliminate around 90% of import tariffs among its signatories within 20 years of entry into force and to establish common rules for e-commerce, trade and intellectual property.

Photo: US Air Force