Washington Wednesday - Dissecting Biden’s new trade deal

MARY REICHARD, HOST: It’s Wednesday the 1st day of June, 2022.

Glad to have you along for today’s edition of The World and Everything in It. Good morning, I’m Mary Reichard.

NICK EICHER, HOST: And I’m Nick Eicher. Up first: the importance of the new Indo-Pacific trade deal.

President Biden recently made his first trip to Asia (as president), returning with a new trade deal in hand—or at least, the framework for one.

The president said he huddled with a dozen Indo-Pacific partners.

BIDEN: To work together to ensure a free and open Indo-Pacific that creates opportunity and prosperity for all the people in the region.

REICHARD: If you add the economic output of those Indo-Pacific countries with that of the United States, you’re talking about 40 percent of the world’s gross domestic product.

The partnering nations still have to hammer out the details of the pact, which is no small task. But the president said it’ll reap long term rewards.

EICHER: The hope is also to counter China’s growing power in the region.

So, will this deal accomplish what the White House says it will?

Joining us now is Zack Cooper. He is an expert on U.S. strategy in Asia. He has served as an adviser at the Defense Department. He teaches at Princeton and Georgetown Universities.

REICHARD: Good morning, Zack.

ZACK COOPER, GUEST: It’s wonderful to be with you.

REICHARD: Zack, could you summarize for us what this agreement does and does not accomplish.

COOPER: It is really the beginning of a negotiation. So in fact, we're not going to see any trade deal anytime soon. This is really a framework for discussing now with 14 different countries some basic rules of the road. And there are four different areas in this economic framework. Countries are going to be allowed to sign up to any of those four that they desire. So, if they want to join on issues like intellectual property, or supply chains, they can do that. But that doesn't necessarily mean that they have to sign up to some of the digital standard that the agreement would regulate. But it's important to note here that it's not actually what a lot of the countries in the region wanted. What most of them want is for the United States to come back to the Trans Pacific Partnership, or the Comprehensive and Progressive Agreement for Trans Pacific Partnership, as it's now known. And this is not that. This is really just a framework for discussing trade and investment. It doesn't go much beyond that.

REICHARD: So this is an alternative to the Trans-Pacific Partnership, and that moved forward without the United States after President Trump pulled out. China is looking to join the Trans-Pacific Partnership. How would this deal differ from that deal, the TPP?

COOPER: Well, the TPP would have relaxed some trade and investment restrictions. That's unlikely in this economic framework. So this is not a trade deal as we would typically think of it. We're not going to see trade liberalization. So we're not going to see tariff rates decreasing. Instead, this is really sort of a framework for, I think, regulation in certain areas, and standards in others. So the downside of this approach is that we're not going to see greatly increased trade and investment across the region as a result of this deal. That's really what TPP was for and it's not what the Indo-Pacific economic framework is likely to do.

REICHARD: You’ve referenced this already but I’ll ask it more directly. Critics say the framework for this deal has gaping shortcomings. For example, it doesn’t offer incentives to prospective partners by lowering tariffs, it doesn’t provide them with greater access to U.S. markets. And for those reasons, they say it may not be an attractive alternative to the TPP. Do you think those are fair criticisms?

COOPER: I do. And you, in fact, hear them from many in the region. We now have 13 other countries signed up. But I'll tell you, in talking with officials from most of those countries, there's not a lot of excitement about this arrangement. There is a feeling that countries need to sign up both to continue encouraging the U.S. to have some forward looking trade deals in the region, and also to avoid the ire of Washington. But when you talk to foreign leaders, they're not really excited about this economic framework because, exactly as you noted, what they really want is they want trade liberalization. They want the restrictions on trade to go down and that's not really what's going to happen in the Indo-Pacific economic framework. So I think we're going to hear a lot of countries quietly expressing some degree of disappointment, even as they sign on to this new framework.

REICHARD: President Biden said the deal would help to protect supply chains and lower costs in the long run. Is he right or wrong about that? And why?

COOPER: I think we’ll have to see. We really don't yet know exactly what's going to be in the deal. And, in fact, there had been some talk that there might be more specifics released when Biden rolled this effort out. But in an effort to get more countries on board to get up to the 14 we have now, the Biden administration, they got away from a lot of the specifics, and instead, really just announced the economic framework without any of the details. So, first, we don't know which countries are signing up to which parts of the framework. We don't even know exactly what the framework is going to look like in certain areas. So there are just a huge number of details that still need to be worked out. We're really just at the very beginning of trying to figure out how this framework is going to work.

REICHARD: Given all that uncertainty, how effective could this deal be to counter China’s reach in the Indo-Pacific region?

COOPER: I do think it's important. And the reason it's important is because regional states, what they want most from the U.S.—especially countries in Southeast Asia—is U.S. investment and trade. And it's really that economic pillar of U.S. engagement with the region that's most prized. And so when the United States comes to the table, at least trying to talk about an economic framework, it reinforces the view in the region that the U.S. is actually trying to give the region what it wants. Of course, many countries would prefer the U.S. just rejoin CPTPP. But that doesn't look like it's in the cards. So I do think this is an important signal about U.S. engagement. And some people do talk about this as a possible ramp to a CPTPP membership for the United States. So there's a little bit of hope that this might turn into something more substantial and trade and investment oriented in the long term. I think we'll have to wait and see. That really depends on what the domestic environment looks like in Washington.

REICHARD: Final question here. You say that one of the most important things that happened during President Biden’s recent trips to Asia is something that didn’t get much attention: A maritime domain awareness program. Zack, briefly explain what that is and why it matters.

COOPER: Well, right now, if you’re a country in the Pacific Islands or even Southeast Asia, you've got thousands and thousands of foreign fishing vessels, which are sometimes encroaching on the territory that you're allowed to fish in, which is called your exclusive economic zone. But at the moment, it's very hard for countries to actually monitor all of these areas. They go out basically 200 nautical miles from the shore. So, if you imagine in the Pacific, which is just vast, these are huge areas, and they're very hard to monitor. And what the U.S. did, along with Australia, Japan, and India, is to announce a new maritime domain awareness framework. And what this will do is allow those countries to provide tracking data to countries in the Pacific and Southeast Asia, and that will help them to monitor illegal fishing. And this is really important in the region. A lot of people get a huge amount of their food from fish. It's also critical to livelihoods in much of the Pacific and Southeast Asia. And so I think this is going to be maybe one of the more lasting contributions from the president's trip to Asia.

REICHARD: Zack Cooper is a senior fellow with the American Enterprise Institute. Professor, thanks so much!

COOPER: Thank you for having me.

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