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U.S. seeks early results for Indo-Pacific trade initiative

  • September 28, 2022
  • , Nikkei Asia , 8:35 a.m.
  • English Press
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U.S. Trade Representative Katherine Tai speaks to Nikkei in an interview in Tokyo on Sept. 26. (Photo by Manami Yamada)

By Mitsuru Obe and Tomoyoshi Oshikiri, Nikkei staff writers


TOKYO — The U.S. is pursuing early concrete outcomes from the new Indo-Pacific Economic Framework trade initiative as it seeks to gain an edge over China in shaping the regional economic order.


“We are very motivated to build on the momentum coming out of Los Angeles and we are very focused on delivering concrete results,” U.S. Trade Representative Katherine Tai told Nikkei, referring to an IPEF launch meeting in the city earlier this month.


“We are entirely on the same page that in order to be responsive and relevant to the challenges we have today, we cannot wait three or five years,” Tai said in an interview in Tokyo. “We have to be delivering outcomes as we go on.”


Tai was referring to the supply chain disruptions and global inflation caused by the COVID pandemic and the Russian invasion of Ukraine.


In January, the Regional Comprehensive Economic Partnership, an Asian free trade pact, was launched without the U.S. In September last year, China made a formal application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, from which the U.S. withdrew in 2017.


The IPEF includes 14 Asia-Pacific nations, but excludes China. The goal, according to the USTR, is to deepen the trade relationship with these countries in their own right and create a framework to address shared challenges, not making the countries choose. But the initiative also reflects growing calls from businesses to have alternatives to China.


“What we are talking about is how we can bring our markets together to work on trade engagement between these 14 markets that will improve the quality of our trade,” Tai said.


The IPEF has yet to win over skeptics, and it is not clear how the countries would overcome differences without traditional incentives such as tariff reductions. Any agreements will not be legally binding and there isn’t expected to be an enforcement mechanism. India has opted out of the “trade pillar” of the IPEF talks, choosing to participate only in the other three pillars — supply chains, clean energy and ethical trade.


But Tai was optimistic about India’s direction. “Commerce Minister [Piyush] Goyal has expressed interest and so we will continue to talk to India about developments in the IPEF trade pillar,” she said.


Japan has a big stake in the IPEF, and sees U.S. economic engagement as being critical to maintaining regional order, promoting free and open trade, and bridging markets across the Pacific.


“I want to emphasize how important Japan’s partnership is in helping us to lead the IPEF to the success that we have experienced so far,” Tai said. “Japan has been a very strong partner in helping us to build momentum for the engagement with all 14 countries.”


Even friendly countries, however, are competing against one another. They all want to keep and attract business investment and develop domestic manufacturing capability, so creating a win-win solution will be a challenge.


America’s new Inflation Reduction Act offers tax credits to companies making electric vehicles in North America. Japan, South Korea and the European Union have voiced concern that it could be discriminatory against foreign producers and in breach of World Trade Organization rules.


“We will continue to talk to all three of these partners about their concerns,” Tai said. “But the main point is that there is so much space and opportunity for us to collaborate and to cooperate,” she said, noting that the Inflation Reduction Act is the largest legislation the U.S. has passed in 15-20 years to address climate change.


For most IPEF countries, China is their biggest trade partner. Some nations will have to walk a fine line between promoting the IPEF and engaging with China.


The Biden administration had been set to announce a reduction in Trump-era tariffs on China following a review of their effectiveness, but tensions flared up in the wake of U.S. House Speaker Nancy Pelosi’s visit to Taiwan last month.


Tai said that the review is ongoing for temporary and targeted tariff exemptions.


“We have gone through at least one cycle of exclusions and at the time, we said that we may consider more and that is true today,” she said. “We may consider more in the future.”

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