IPEF's Commercial Worth and Fate of Trade Negotiations Unclear, Panelists Say

Asian countries in the Indo-Pacific Economic Framework and businesses that export to those countries had low expectations for IPEF, and trade experts said it will take years to see if IPEF will have any commercially meaningful outcomes.

Yeo Han-koo, a former South Korean trade minister and senior fellow at the Peterson Institute for International Economics, made the analogy that the Comprehensive and Progressive Trans-Pacific Partnership (as it's known after its rebranding following the U.S. withdrawal from negotiations for the pact) is like "cash in hand" while IPEF is like a "promissory note." Yeo said if the countries -- which include Korea -- engage in the working groups, councils and other methods of coordinating on supply chains and the clean energy transition, IPEF could be both worthwhile and a possible stepping stone to more trade liberalization.

Yeo was one of the panelists speaking on a program called "What's Ahead for IPEF" co-hosted by the Washington International Trade Association and the Asia Society Policy Institute.

ASPI Vice President Wendy Cutler, also on the Nov. 30 panel, said it was incredible that the U.S. recruited 13 countries to participate in IPEF, even though it is not as attractive economically to them as a traditional free trade agreement. Yeo said the region would like to see the U.S. rejoin the CPTPP, but understands it's not feasible.

Cutler said this administration wanted to promote a new approach on trade, different from an FTA, that addresses current problems like fragile supply chains, and that includes only trade issues that would be noncontroversial.

However, even the trade pillar's avoidance of opening the domestic market was not enough to avoid controversy, as Sen. Sherrod Brown, D-Ohio, said, nothing in the trade chapter should be rolled out without a binding labor chapter.

Cutler said the U.S. had thought an early harvest on trade facilitation, capacity building, good regulatory practices and making trade inclusive would be noncontroversial. But she said advocates were concerned, "if you harvest those, are these other countries really going to sit down and slug it out with us on labor, environmental, digital?"

"In hindsight, some of the trade facilitation provisions should have been moved to the supply chain pillar," she said, since that part of IPEF is definitely becoming a reality, and the trade pillar might never come to fruition. "A lot of good work was done on trade facilitation."

She said it wasn't that substantive that the U.S. backed away at the last minute from an early harvest announcement, "but I think this does contribute to a view that we’re just an unreliable partner. That our domestic politics aren’t any better since we left the TPP on these issues."

Panelist Eric Gottwald is a policy specialist on trade at the AFL-CIO, and the unions fought against the Trans-Pacific Partnership and have been pushing against continuing past digital trade policies as the administration negotiates IPEF. Gottwald, who said approvingly that IPEF is in no way like an FTA, said it's hard to say where the trade chapter negotiations go from here.

"Ambassador [Katherine] Tai tabled a very ambitious labor chapter. It’s not going to be easy to close the gaps on these outstanding chapters," he said. "We don’t want a cosmetic, watered-down labor chapter just to get one. This could go into 2025. The politics are going to be tricky."

Cutler said that while it's promising that IPEF countries did not complain publicly about the U.S. backtracking, "My view is I think it’s going to be nearly impossible to make progress on any of these politically sensitive issues in 2024."

Panelist Marc Mealy, senior vice president for policy at the US-ASEAN Business Council, said Southeast Asian countries, many of which are in IPEF, are fast-growing economies, and therefore attractive to U.S. firms, but they're challenging places to invest in or export to. He said U.S. exporters face market access hurdles, intellectual property protection issues, and problems with digital trade.

"USABC saw IPEF as the first of what needed to be many steps," he said. He said the Southeast Asian countries that joined IPEF welcomed the initiative; but he added: "I can say maybe it wasn’t their first, second or third option." Yet, he said, they saw how U.S. politics affected TPP, so they understood why IPEF does not offer market access to U.S. consumers.

All the panelists said the Commerce-led chapters on supply chain, climate change and anti-corruption will prove their worth over the next several years, as we see if governments and companies participate in the data sharing, problem-solving and incentive structures in the agreement.

Gottwald said the Commerce chapters, too, focus on labor rights and the Labor Rights Advisory Board, which will include unions, governments and employers, could change the culture for unions in some countries. He said that advisory board may identify sectors with labor violations, such as critical minerals or solar panel manufacturing.

"There is a facility specific complaint mechanism," he said. "This is a very light touch version of the USMCA’s rapid response labor mechanism that could be achieved in this non-binding framework" (See 2309080050).

Mealy said ASEAN country trade officials were also pleased with the labor elements of the supply chain chapter. He said they had a "sense that the provisions around labor and provisions around environment that were woven into that effort were pragmatic and realistic for the partners."