India, Philippines, South Korea, Indonesia, Thailand and 6 TPP Countries Will Negotiate IPEF

A half-dozen countries that negotiated the Trans-Pacific Partnership -- including two that never ratified it -- and Korea, the Philippines, Indonesia, Thailand and India agreed to start negotiating agreements with the United States on trade, supply chains, digital standards, anti-corruption, and tax and investment from the U.S. for decarbonization and infrastructure.

The TPP, which the U.S. quit before ever taking a ratification vote and which came into force through Japan's leadership under the new name Comprehensive and Progressive Agreement for TPP, looms large over this effort, which is called the Indo-Pacific Economic Framework.

U.S. Trade Representative Katherine Tai told reporters on a call over the weekend that the TPP could not get through Congress, which is why it never came up for a vote. "I think that there's a very, very strong lesson there: that TPP, as it was envisioned, ultimately was something that was quite fragile and that the United States was not able to deliver on. And that informs very much our thinking about bringing the Indo-Pacific Economic Framework, as it's designed here, to the region -- which is that trade is an important component of this, but not the only component," she said.

U.S. Chamber of Commerce Vice President Myron Brilliant welcomed the opening of the IPEF, but also said that it's "disappointing that the IPEF does not currently provide new access to foreign markets for American workers, farmers and companies, and it’s hard to see how it can be enforceable without such a provision. This framework seems bound to fall short of the high standards and robust benefits of the U.S. trade agreements negotiated with several regional economies [participating in IPEF], including Australia, Korea, and Singapore. In some instances, the administration is trying to use trade policy tools to achieve goals that would be better addressed by domestic policy reforms."

Tai addressed that criticism, that countries will not be willing to offer much, because the U.S. is not lowering its tariffs, and that there won't be much benefit for exporters because the IPEF countries also won't lower theirs.

Tai said the average bound tariff in the U.S. is 2.4%. "In terms of where the value is that is left to be unlocked in the global economy right now, it is in the areas where we are engaging through this framework," she said. She said the U.S. will ask countries to accelerate their compliance with the World Trade Organization's Trade Facilitation Agreement. "We will see commitments with IPEF partners that facilitate agricultural trade through science-based decision making and the adoption of sound, transparent regulatory practices," she said. She gave the example of the non-tariff barrier U.S. potatoes faced in Mexico until earlier this month.

National Security Adviser Jake Sullivan, on the same call, said the fact that this is not a traditional free trade agreement is a feature, not a bug. He said the range of countries who want to be in the IPEF shows that countries are interested even without tariff liberalization, "including some with whom we haven't had meaningful economic negotiations before."

"We and our partners in the region agree that much in the coming decades will depend on how well governments harness innovation, especially the transformations underway in clean energy and the digital and technology sectors, while at the same time fortifying our economies from a range of threats from fragile supply chains, to corruption, to tax havens," he said.

New Democrats Chair Rep. Suzan DelBene, D-Wash., said her state has much to gain from the negotiations. "This is a welcomed departure from the Trump administration’s misguided withdrawal from the Indo-Pacific and damaging unilateral trade war against China. The framework can bring together like-minded countries to collectively put pressure on China’s unfair trade practices and human rights abuses," she said. That was also the argument for the TPP. "The framework can construct more resilient supply chains, raise labor standards, facilitate digital trade, open new markets for American farmers, ranchers, and fishers, and bolster regional efforts to combat climate change."

A reporter asked Tai if, since the TPP failed because of lack of support in Congress, that means that the IPEF has been designed so that a vote wouldn't be necessary? The Japan mini-deal lowered some tariffs, but at a small enough scale that it didn't require congressional approval.

Tai didn't answer directly, though she said she would be engaging with stakeholders in the business community, in labor unions and in environmental nonprofits, as well as Congress. When pressed on the question a second time, she said, "Let's see where these negotiations take us, and let's see where the discussions go. But ... regardless, we have to keep Congress close, and Congress needs to be a part of shaping what we do with our partners here."

The top Republican on the House Ways and Means Committee and the ranking member of its trade subcommittee -- Rep. Kevin Brady, R-Texas and Rep. Adrian Smith, R-Neb. -- rejected that ambiguity. "The Indo-Pacific Economic Framework is a strong opportunity for the United States to raise standards and open markets for American-made products and services, but the Administration’s current plan isn’t nearly ambitious enough," they said in a statement. "They need to do more than simply include some Republican priorities, such as eliminating barriers to digital and agricultural trade, and they must obtain congressional approval as the Constitution requires."

Some business stakeholders both praised the opening of negotiations and signaled what their messages would be to U.S. government negotiators.

“The Indo-Pacific holds vast promise as the region’s dynamic economic growth is allowing millions to join the global middle class. The U.S. Chamber of Commerce previously provided the Biden Administration with several priorities that American companies would like to see addressed in the Indo-Pacific Economic Framework, including digital trade, customs reforms, sustainability, and supply chains. We are engaging closely with the administration and regional economies to advance these goals," Brilliant said. "Some questions remain. Regardless, it’s a positive step toward strengthening economic ties in the region, and we are rolling up our sleeves to work with the administration to maximize the IPEF’s potential.

The Pharmaceutical Research and Manufacturers of America (PhRMA) said they will ask for decreased trade barriers to promote supply chain resilience and "stronger pro-innovation policies," which is code for fewer cost constraints by foreign government purchasers of drugs, or longer patent exclusivity for biological drugs. The latter was removed from the USMCA, with Tai leading the charge, as she worked for the Ways and Means Democrats at the time.

Sun Kim, director of South Korea's Research Center on Global Solidarity, People’s Health Institute, was suspicious the U.S. might advance such priorities. "Any international negotiation, especially the ones that would heavily impact the people’s health and living, should engage the people that will be affected, and their voices must be heard and included," Kim said.

Taiwan was not invited to participate, despite congressional requests for them to be included. A reporter asked why, and Sullivan said choosing to deepen economic engagement with Taiwan one-on-one rather than including them in IPEF "puts us in the best position for us to be able to enhance our economic partnership with Taiwan and also to carry IPEF forward with this diverse range of countries."

Analysts from the Center for Strategic and International Studies wrote May 23, the day of the announcement, "Perhaps the most surprising element of the launch is that the administration ultimately chose weaker language in exchange for a higher number of participants."

Sullivan said the fact that not every country has to sign on to every pillar of the IPEF allows the U.S. to accommodate a diversity of countries, advanced economies and emerging economies.

The CSIS analysts noted "these countries only committed to attending an initial scoping round of discussions, and whether this broad initial enthusiasm for the framework continues once negotiations commence remains an open question." They also said there's hope for early wins, particularly in trade and supply chain issues, and a goal to conclude negotiations in all areas within 18 months.