World Economy

U.S. partners in Asia may not wait around as Biden prioritizes domestic issues

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Key Points
  • Biden has indicated that trade talks are not high on his agenda for now — but that may be what the U.S. needs to get closer to partners in Asia, said two former American trade officials.
  • Asia-Pacific countries have in recent years signed two mega trade agreements that exclude the U.S.: The Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership.
  • That suggests that the region won't wait around for the U.S., said Wendy Cutler, a former U.S. trade negotiator.
President Joe Biden speaks to staff of the US State Department during his first visit in Washington, DC, February 4, 2021.
Saul Loeb | AFP | Getty Images

President Joe Biden's administration has indicated that trade talks are not high on its agenda for now — but that may be what the U.S. needs to get closer to its partners in Asia-Pacific, said two former American trade officials.

Trade is important for Asia-Pacific because many economies in the region are exports-dependent. Improving trade relations with those countries will be critical for the U.S. to raise its standing in the region, where China's influence is growing, the officials said during a Wednesday panel discussion at The Economist's Asia Trade Week event.

In recent years, Asia-Pacific countries have signed two mega trade agreements that exclude the U.S. — suggesting that the region won't wait around for Washington, said Wendy Cutler, a former U.S. trade negotiator.

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"Asia's just moving on with their trade agreements," said Cutler, who's now vice president at think tank Asia Society Policy Institute.

"While Biden talks about improving relations and strengthening ties with allies and partners and working in multilateral institutions, for sure our trading partners in Asia are going to be asking for things on trade," she added.

The two mega trade agreements that exclude the U.S. are the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or CPTPP signed in 2018, and the Regional Comprehensive Economic Partnership or RCEP signed last year.

CPTPP is a renegotiated and renamed version of the Trans-Pacific Partnership that the Obama administration had sought with 11 Asia-Pacific countries. But former President Donald Trump pulled the U.S. out of the deal, leaving the remaining countries to form CPTPP.

Meanwhile, RCEP is the world's largest trade deal and involves China and 14 other Asia-Pacific economies. The agreement covers a market of 2.2 billion people and $26.2 trillion in output — roughly 30% of the world's population and economy.

Ironically, RCEP was "in some ways" conceived as China's response to the then U.S.-led TPP, said Charlene Barshefsky, who was U.S. Trade Representative from 1997 to 2001 under former President Bill Clinton.

We've helped to create this system in Asia, the fastest-growing region in the world, the locus of economic power as we look ahead from which the U.S. is excluded ...
Charlene Barshefsky
senior international partner, WilmerHale

But the U.S. ended up excluding itself from the region when it pulled out of the TPP, said Barshefsky, who's now senior international partner at law firm WilmerHale.

"We've helped to create this system in Asia, the fastest-growing region in the world, the locus of economic power as we look ahead from which the U.S. is excluded, not because Asia is excluding us — we've excluded ourselves," she said.

What's next for U.S.-Asia relations

U.S. absence from deals such as RCEP means it will not be present when major Asia-Pacific economies meet, said Cutler.

She explained that leaders from TPP countries used to meet on the side of events such as the Association of Southeast Asian Nations (ASEAN) summit. Now, such meetings will involve RCEP participants instead, she said.

"We're not going to be there, we're not going to be invited. And you don't just talk about the agreement itself, you also talk about new issues, you talk about new challenges — and we're not going to be at the table for that," said Cutler.

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Some observers said the U.S. could build a new trade deal with Asia-Pacific countries — or even join the CPTPP — to raise its position in the region. But the Biden administration has said several times it wants to prioritize investing in American workers and infrastructure before signing any new trade agreements.

Joining the CPTPP will also be difficult politically given the "tarnished view" that Americans have of its predecessor, said Barshefsky. The TPP was widely criticized in the U.S. and never approved by Congress. Detractors said the deal would accelerate the decline of U.S. manufacturing and hurt American workers.

But the U.S. could feel the urgency to participate if major partners such as South Korea, the U.K. and the European Union want in on CPTPP, she added.

"That may provide a very significant jolt to the United States that it is affirmatively losing ground with the countries on which it hopes to depend. And that I think might change the equation," Barshefsky said.

I don't think CPTPP is the only avenue for U.S. engagement in the Asia-Pacific.
Wendy Cutler
vice president, Asia Society Policy Institute

Until then, Biden could pursue narrower deals focusing on specific sectors, said Cutler. In many instances, such deals may not need congressional approval and could be easier to negotiate, she added.

"I don't think CPTPP is the only avenue for U.S. engagement in the Asia-Pacific," Cutler said, adding that the Biden administration could focus on issues such as climate change, digital trade and making supply chains more secure as a start.

"I think that's the way we should be looking at the region now because I think it's a way to get us back in there without trying to pursue a big comprehensive agreement that we're not prepared to do for domestic reasons," she said.