In a Critical Region, a Missed Opportunity on Trade
November 30, 2023
In today’s rapidly transforming economy, comprehensive trade agreements help keep the U.S.—including the domestic auto industry—competitive on the global stage. When we enter into free trade agreements with partner nations, the goal is to give American manufacturers access to markets outside the United States, where 95 percent of the world’s consumers are located.
Unfortunately, President Biden’s administration has taken a hands-off approach when it comes to trade, and it’s preventing the U.S. auto industry from reaching its full potential.
The United States has comprehensive trade agreements with just 20 countries—a mere 6% of the world’s population. And missing from this list of nations are key regional allies and frequent trading partners like Brazil, India, Japan, and the European Union. It would benefit the U.S. economy for the Biden administration to negotiate agreements that have tangible benefits for American manufacturers and their workers and reduce barriers to exporting products made or assembled in the U.S.
So, it was disappointing to see this month that the Biden administration failed to reach an agreement on the Trade Pillar of the Indo-Pacific Economic Framework (IPEF). While the Department of Commerce was able to complete Pillars II, III, and IV—the sections covering supply chains, the climate transition, and anti-corruption—USTR could not reach a consensus on the Trade Pillar, leaving a void in an important economic region.
IPEF was initially launched last spring and includes more than a dozen other nations like Australia, Fiji, Indonesia, Japan, Korea, Singapore, Thailand, and Vietnam. Altogether, the IPEF nations make up more than 40% of the world’s GDP. U.S. foreign direct investment in the Indo-Pacific has nearly doubled in the last decade, and the region is projected to be the largest contributor to global growth over the next 30 years.
But by its very nature, the “framework” lacks enforceable provisions and doesn’t require member nations to live up to the provisions the same way a comprehensive trade agreement, like the USMCA, does. Without market access provisions, it is difficult to undertake any sort of meaningful enforcement in areas like labor, environment, or anticorruption.
USTR’s failure to finalize the Trade Pillar represents a tremendous missed opportunity for the U.S. The nation that authors the central tenants of the Trade Pillar directs key policies that will set the course in the region for years. Critical areas like trade facilitation, technical assistance and economic cooperation, the digital economy, labor, and environment—policies that would create greater certainty in a region being pulled in two directions – have been abandoned. However, without meaningful market access, the U.S. is ceding leadership and lacks the ability to enforce.
At Autos Drive America, we advocate for trade policies that open new markets, create level playing fields for competition, and contain enforceable provisions to support the ongoing domestic manufacturing boom. While we welcome the Commerce Department’s conclusion of Pillars II, III, and IV, and believe that they could play a valuable role in future chain disruptions, it does not make up for the fact that we are effectively letting others take the lead on trade in a critical region.
By forgoing efforts to forge meaningful trade agreements in Asia, the Biden administration is ceding critical influence and economic power to adversarial actors in the region that will no doubt fill our void—and in many ways, have already begun to do so.