Such a deal could begin returning the US to being an active trade player in the region and help lessen Chinese economic domination of the region. All seventeen House Ways and Means Committee Republicans are unanimous in calling for enacting Trade Promotion Authority (TPA) for the Democratic president so that trade deals can be expedited to promote American exports sales and jobs. Despite reported State Department and National Security Council support for a Pacific digital trade deal, USTR Katherine Tai, the president’s foot-dragging trade representative, is deferring to unspecified “worker” and Democratic politician opposition.
The August 2nd to August 8th, 2021 roundup of major trade developments, with L.C.
An Asia-Pacific digital agreement is the US trade negotiation with the most momentum at present. Digital services are likely to become the next frontier in competition between the US and China. US trade and other interests will suffer, it is argued, if the US doesn’t take the lead on shaping new rules and standards in the digital sector.
The idea of such an agreement has bipartisan support in Washington. Nevertheless, some foreign allies are worried about joining a US-led initiative that appears aimed against China. Australia, however, has already begun discussing the idea with other countries in the region. China, for its part, has begun to openly denounce the idea. That such an agreement might be a prelude to US entry into the CPTPP adds to Beijing’s alarm.
The proposal for an Asia-Pacific digital deal moved to the front burner in late June, after former US TPP negotiator Wendy Cutler told a congressional hearing that, failing to rejoin the CPTPP, Washington might begin reengaging in trade in the region by promoting something lighter, say, an agreement centered about digital trade and e-commerce. “I think a digital trade agreement would offer benefits” without the risk of drawn-out and testy negotiations, she said.
Lots of potential partners and TPA not required
Three weeks later, it was revealed that White House officials have been looking at a possible deal including Australia, Canada, Chile, Japan, Malaysia, New Zealand, Singapore, and perhaps others. Such an agreement probably wouldn’t require congressional approval and thus wouldn’t have to wait for renewal of the president’s Trade Promotion Authority (TPA).
Existing digital arrangements that could be models or a basis for a US-led initiative include the Singapore-New Zealand-Chile Digital Economy Partnership Agreement and the Singapore-Australia Digital Economy Agreement. Other existing agreements that could be helpful for a larger deal include the CPTPP, the US-Japan Digital Agreement, and the USMCA (which has strong digital provisions).
Using an existing arrangement among smaller open-trade countries is how the US developed the TPP. When the “Pacific-4” countries – Singapore, New Zealand, Chile, Brunei – reopened their small pact (officially known as the Trans-Pacific Strategic Economic Partnership Agreement) to expand it to services, the Bush and Obama administrations asked if the talks could be enlarged to include the US and other interested countries, thus forming a bigger deal based on an existing smaller one. Thus, using the Singapore-New Zealand-Chile digital deal as a core or framework wouldn’t be unprecedented.
Why China likely not interested and already opposed
Beijing would be unlikely to enter an Asia-Pacific digital deal led by the US because it would involve commitments that China wouldn’t want to make: no data localization, unimpeded cross-border data flows, privacy protection (no government access to data, no government surveillance), no censorship, no propaganda or government control of content, standardized digital payment rules, no taxes/tariffs on electronic products, and beefed up electronic customs procedures.
If China’s neighbors and trading partners do enter a broad deal that includes such provisions on elements such as data localization and flows, privacy, censorship, surveillance, and propaganda, it will be harder for China to influence and control online activity and exert broader influence and dominance in the region. Aware of the stakes, China’s Foreign Ministry spokesperson has called the plan a US plot to “gang up against China.”
Encouragement from Australian trade minister, Dan Tehan
This week, the Wall Street Journal endorsed the idea in a strong editorial on August 3rd (“A Digital Trade Opportunity in Asia”). Meanwhile, Australia is working to organize regional support for the idea, with the explicit goal of eventually bringing the US into the CPTPP. On August 4th, Australian Trade Minister Dan Tehan, speaking to the American Chamber of Commerce in Australia, reported that Japan, South Korea and Vietnam support the idea as a way to bring the US back to the region. “The overwhelming feeling for all four countries I visited… was that they are looking for US engagement and digital trade in a regional form, and that probably provides the best avenue for the US to re-engage.”
The Australian trade minister also discussed it with US Trade Representative Katherine Tai and the AFL-CIO. According to Tehan, the union “won’t stand in the way” of a digital trade pact.” That’s important point since organized labor — until the USMCA – has been the politically most significant opponent of trade agreements.
While a digital trade deal is likely to attract bipartisan support in Congress and support from much of the business community (including the high-tech online giants), the prospect has been facing mixed reactions within the administration. By most accounts, the State Department and National Security Council (especially NSC Indo-Pacific Coordinator Kurt Campbell) are eager for a deal because of its importance for US assertion of regional leadership, competition with China, and the strategic significance of having an open internet. But President Biden’s US Trade Representative Katherine Tai has reportedly been leading the opposition. She allegedly wants to first make sure that constituencies important to her (Beijing?) as well as congressional Democrats are on board.
Buy American? What about Sell American?
House Republicans made a major new push last week for the Biden administration to seek renewal of its Trade Promotion Authority, which expired on July 1st. All 18 Republican members of the House Ways & Means Committee, including Ways and Means ranking Republican Kevin Brady (R-TX) and Trade Subcommittee ranking Republican Vern Buchanan (R-FL), sent a letter to the president urging him “to begin consultations with Congress to renew TPA so that America can once again lead the world by negotiating strong trade agreements that create US jobs and open new markets for American goods and services while raising standards throughout the world. As you know, it’s not enough to Buy American, we need to Sell American throughout the world.”
The letter is notable for making arguments usually made by the handful of pro-trade/free-trade legislators, who were, in effect, shouted down during the Trump years. The letter was even signed by a close Trump ally, Rep. Devin Nunes – R-CA. That all committee Republicans signed onto the letter indicates a serious initiative.
Administration’s growth policy: grow debt, not oil, gas, or trade
Brady has been urging TPA renewal since Biden took office. In April he expressed concern that the new administration shows so little interest in new trade deals. But Democrats are not particularly receptive. Some, especially those close to organized labor and/or to the left-wing of the party, are anti-trade, while others have indicated that they don’t want to begin discussing TPA until the White House completes its still-ongoing overall review of trade policy.
The letter makes a clear case for trade expansion and for the US taking the lead in shaping trade rules, arguing that with the global recovery uneven, “We must ensure that our innovative manufacturers and service providers can access vital foreign markets on a truly level playing field… TPA is the foremost tool at our disposal to ensure that the US continues to have a leading role in writing the trading rules that regulate the global economy.”
“TPA,” the Republican letter continues, “signals to the world, including our competitors, that America is at the table, leading on trade policy, and capable of getting trade deals done. Our view is that every president, from either party, should have TPA in order to ensure America is best positioned for ambitious new trade agreements. Without TPA, America leaves a void on the international stage that malign actors, like China, seek to exploit, and that our allies may fill with policies that reflect priorities other than our own.”
Infrastructure bill is protectionist
Unfortunately, the five-year, $1 trillion so-called infrastructure bill that could be passed by the Senate this coming week includes some protectionist, trade-restricting provisions. The bill would bar federal funding for any infrastructure project “unless all of the iron, steel, manufactured products, and construction materials used in the project are produced in the US.” For iron, steel, and construction materials, all the processing, from the raw material up, must occur in the US. The Buy American requirements in the bill are endorsed by President Biden and USTR Tai.
US exporters will almost certainly face retaliation for these protectionist provisions and find themselves shut out of procurement sales to foreign governments that would otherwise have been open to them.
L.C. reports on trade matters for business as well as Founders Broadsheet.
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