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Disagreements between US, Asian nations complicate IPEF negotiations

South China Morning Post | 23 May 2023

Disagreements between US, Asian nations complicate IPEF negotiations

by Su-Lin Tan

Snags in the negotiations for the US-led Indo-Pacific Economic Framework (IPEF) could impact Washington’s ability to meet the deadlines it had set for the Apec gathering it is hosting this week, trade experts and negotiators have said.
Launched in May last year and hailed as a revival of the US’ economic pivot to Asia, the IPEF was set to be a centrepiece at the Asia-Pacific Economic Cooperation (Apec) meeting. But the third discussion round in Singapore last week revealed challenges between the United States and the other 13 countries in the framework to agree on complex issues such as labour laws.
These roadblocks mean the US would likely not be able to offer Apec trade ministers preliminary material to endorse when they meet in Detroit at the end of this week, or to wrap up discussions by the time Apec leaders meet in November.

Analyst Amitendu Palit, who had followed the Singapore discussions, said the difficulties underscored the scheme’s ambitious nature and the “great difficulty in reaching agreements on standards among a very heterogeneous group of countries”.
“As of now, it does look like reaching ambitious outcomes in all pillars by the November Apec leaders’ meeting will be difficult,” said Palit, the research lead in trade and economics at the NUS Institute of South Asian Studies in Singapore. “If indeed outcomes are arrived at in haste, they might be shallow and suboptimal.”
The way things are developing could lead to disappointment for the US, executive director of the Asian Trade Centre, Deborah Elms said.
“I think it will be a real problem not only when it doesn’t come through but if it ends up being a very thin, weak and light agreement if it does come through – especially because it’s been sold as if it is the next most amazing thing ever,” she said.
The IPEF was the US’ comeback plan for the region after the Trump administration “withdrew” from the Asia-Pacific and exited the TPP mega free-trade deal – now known as the CPTPP.

Richard Fontaine, head of the Center for a New American Security, said at a public lecture in Singapore last week that the US’ pivot to Asia was “for real” and not an empty promise.
Under Secretary of State for Economic Growth, Energy and the Environment Jose Fernandez told the CSIS think tank in an interview in January that the US intended to complete the IPEF this year.

While not a free-trade deal, it convenes the US with 13 other member countries in the region including Malaysia, Thailand and Vietnam, on economic and trade matters, such as building resilient supply chains, made crucial by the pandemic.
But things went awry when expectations between the US and the other member countries did not line up, Elms said.
The US had not been clear with what it wanted when on the one hand, it had framed IPEF as a framework and on other occasions, it represented the pact as something far more substantial, for example when it told the Singapore meeting that the IPEF could have prevented Covid disruptions, Elm said.

“The other countries, they don’t want a framework. They want the US engaged in Asia,” Elms said.
The US decision to kick off IPEF discussions with a topic that was sensitive to Asia, labour laws, also proved problematic, Elms said.
“A big problem is the US’ insistence on starting with discussions on labour, which they mean workers’ rights. For a lot of the other governments, that’s a difficult one,” Elms said.
NUS’ Palit said some member countries were concerned that strong labour standards could “adversely impact comparative advantages of several countries in labour-intensive goods and services”.

Jayant Menon, a senior fellow at ISEAS–Yusof Ishak Institute who is also following IPEF closely, said developing countries were always “suspicious” when a developed country proposed labour standards in trade talks.
“They are often perceived to work against the main advantage that they hold, which is competitively-priced labour,” Menon said. “Therefore, the inevitable snag that IPEF discussions have hit on this issue is unsurprising. The US will have to come up with more carrots, which have been seriously lacking, for the many sticks that IPEF wields, if they are to reach agreement on this and other difficult issues.”
The “artificial” or tight deadline of having discussions closed by Apec has not helped, said Stephen Olson, senior research fellow at Hinrich Foundation.
“Negotiators are caught between a rock and a hard place … making meaningful progress on tough issues within the tight time frame will not be easy,” he said.

Moreover, without market access for example reduction in tariffs, the US has little leverage in getting different countries to come quickly to the table on issues like labour or digital trade.
If an outcome is forced by the end of the year, the group of 14 countries could end up with a “fairly shallow, low-ambition agreement consisting primarily of aspirational non-commitments”, Olson said.
There are other pressures that may also work against the IPEF, for example, the US may lose traction in negotiations with a change in government next year when the US goes to the polls, Elms said.
Member countries will lose interest if discussions become protracted, given the amount of taxpayers’ money they are spending on the deal, she added.
About 600 government officials from the region turned up for the Singapore meeting.

 source: South China Morning Post