Government Watch / Instagram / Politics

New Indo-Pacific Economic Framework May Be the Death Knell for Globalization

AMAC Exclusive – By Daniel Berman

 Indo-Pacific Economic Framework

President Joe Biden is the last person we have come to expect boldness from over the past year, yet he sprung something of a surprise when flanked by the Prime Ministers of Japan and India. Biden announced a new Indo-Pacific Economic Framework for Prosperity (IPEF) late last month. The agreement includes 13 countries: the U.S., Japan, India, South Korea, Australia, Indonesia, Thailand, Singapore, Malaysia, the Philippines, Vietnam, New Zealand, and Brunei. The IPEF is, in many ways, a continuation and extension of the Trump Indo-Pacific Strategy, and the announcement represents the fulfillment of the previous administration’s efforts to bring the Indo-Pacific nations into economic alignment with the United States against China.

In launching the initiative, the Biden administration seems to have stumbled onto a different model for economic cooperation, one which does not rely on removing borders and then waiting for capital to do the rest. Furthermore, the participation of so many nations in the region represents a vote of no confidence in China’s willingness or ability to anchor any sort of economic system in which these countries would wish to partake. Of course, all of this is conditional on the Biden administration or a future Republican president turning aspirations into reality.

Let’s first get out of the way what IPEF is not. It is not a revival of the late Trans-Pacific Partnership, the wide-ranging free-trade agreement which emerged as a major issue in the 2016 election, highlighting the disparity between Hillary Clinton’s championing of globalization and Donald Trump’s American economic nationalism. The TPP was in many ways the culmination of the program launched by Bill Clinton in the 1990s of pursuing a globalized economy under which national and regional economies and supply chains would be supplanted by a single global supply chain. This model was based on the assumption that the greatest scale would produce the greatest efficiency.

Already, the defects of that approach were apparent, and Donald Trump’s warnings now appear prescient, given the collapse of global supply chains following COVID-19. The Trans-Pacific Partnership and its premise that eliminating as many borders as possible was the path to economic progress are dead.

The IPEF does not grant members tariff-free access to the U.S. market. In part, this is a concession to political expediency. Joe Biden would likely meet resistance if he opened the US market to the outside competition when Americans were already feeling insecure. But it would be a mistake to call the Framework limited as a result. Rather, the countries involved are trying something different. The Framework suggests that cooperation does not require abandoning national interests or borders. Rather, in a departure from orthodoxy, it suggests that cooperation can occur between protected economies with strong borders—a point that the former president made often in international forums.

At the heart of the Framework is recognizing that there are two types of trade barriers. One type is zero-sum barriers. These include the sort of tariffs and regulations that globalization sought to avoid. Tariffs impose costs and benefits. Lifting tariffs on imported goods might allow Americans to buy manufactured goods more cheaply or Filipinos to have access to cheaper American food, but in turn, put American factory workers and Filipino peasant farmers out of business. By contrast, even if countries decide to protect their domestic workforces, they will still wish to trade some goods and they will still wish to protect the supply of others. That means ensuring that ports are capable of loading and unloading goods, that trade lanes are protected, and energy supplies are secure.

The Framework represents a second approach to international economics—more statist, nationalist, and almost Trumpian. Rather than removing barriers to trade, and then watching as one country specializes, it is interested in security rather than efficiency. At the heart of the framework is a commitment to ensure that within the 13 member states, there is at least one major supplier of every good (one reliable supplier of energy, one reliable supplier of microchips, one reliable supplier of foodstuffs, etc.). The agreement does not try and suggest that there should only be one, nor does it prohibit any member from subsidizing their own producers of these goods, or protecting them from competition from others. Rather, it seeks to ensure that if any member needs to access any product, they will not have to approach a state outside the framework.

This is where the rhetoric about how the Framework is a challenge to China derives from. Each of the agreement’s four pillars – digital trade and trade facilitation, clean energy and decarbonization, supply chain resilience, and anti-corruption and taxes – is a direct challenge to China. The first, digital trade and trade facilitation, targets China’s efforts to take control of ports and extend its digital firewall beyond its borders. The second, clean energy and decarbonization, can either be read as fluff or as a commitment to energy security for member states, something the United States can provide if regulators allow it. The third, supply chain resilience, is self-explanatory. The fourth, anti-corruption and taxes, is a commitment to an integrated financial system to counter the one Russia and China are seeking to construct.

Self-sufficiency from China is not only politically desirable but, after the last few months, increasingly an economic imperative. Rather than exploiting COVID-19 to fill the vacuum left by the West, Xi Jinping’s reliance on domestic vaccines of dubious efficiency combined with a fanatical commitment to zero-COVID has plunged China’s largest cities into lockdown long after the rest of the world has moved on. The results have been catastrophic. For the first time since the 1970s, U.S. GDP growth is predicted to outpace China’s.

There are wider implications, and they lead directly to the Framework. Xi’s mismanagement of COVID-19 has not only harmed the Chinese economy but threatened the security of every country that relies on Chinese manufacturing. With Chinese factories closed, countries that shuttered domestic production on the globalist promise that it would be cheaper to rely on Chinese goods now find themselves unable to source products. It is not just that they may not want to rely on China for political reasons. They cannot afford to rely on China when the Chinese economy can shut down at any moment. That China’s problems are the result of erratic decisions from leadership, which seems increasingly irrational, is further reason to pull away.

It is significant that the Framework includes not just longstanding American allies such as Australia, Japan, New Zealand, and South Korea, but also Malaysia, Thailand, and the Philippines, which in recent years have drawn closer to Beijing. For them, this is a reversal of nearly a decade of policy, a clear sign that their experience with China has been an unhappy one. It also includes India, which historically has been close to Russia, and, as recently as this past month, was defying the White House by contemplating buying Russian oil. India’s decision to join is a sign that when it comes to long-term supply-chain security, it does not trust either Russian reliability or Chinese industry.

It is possible the Framework will not amount to much. None of the members except for Australia and the United States are energy exporters, and both currently have left-wing governments dedicated to reducing CO2 emissions. Yet, for the Framework to work, Australia and the United States will have to be the ones to supply the other ten with energy, as a failure to do so would force them to look outside the Framework, to Russia or the Middle East, defeating the premise entirely.

It is an odd move for a U.S. administration that killed the Keystone Pipeline to commit to a policy whose success relies on turning the United States into an energy supplier. Yet if Washington is willing to do so – and it may well take a future Republican administration to carry through on the promise – there is potential for a viable regional bloc to replace the system of globalization. The 13 signatories between them account for over 40% of the world’s GDP. That is a solid base upon which to try and build a new economic order. But it requires following through, not just promises.

Daniel Berman is a frequent commentator and lecturer on foreign policy and political affairs, both nationally and internationally. He holds a Ph.D. in International Relations from the London School of Economics. He also writes as Daniel Roman.    

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23 days ago

Rip Van Biden didn’t do this. The ONLY reason he felt “bold” is because he had two other leaders holding him up. Let Biden stand alone, and he’ll flop right on over like a limp dishrag! As for this agreement he supposedly “brokered,” he didn’t do that, nor does he understand it. I doubt he could balance his own checkbook if it had only one entry in it. He has enough trouble simply understanding that 1 1=2 while he’s trying to burn water!

Phillip Ridenour
24 days ago

Looks like it has some good points. Anything that promotes trade with countries other than China seems like a good idea. But the decarbonization provision is a waste. And why isn’t Taiwan included? They are a microchip powerhouse and a political/economic thorn in the flesh to the CCP, as well as a robust producer of miscellaneous consumer products. The CCP has done a pretty good job of shooting themselves in the foot, why not add insult to injury?

25 days ago

I wonder how something this intelligent slipped through from this admin.
Or, what is REALLY up their sleeves?

26 days ago

WELL, I said I wouldn’t write in the comments again, because AMAC was disappointing me with them constantly telling me that I ‘had already voted’ on a comment. But I can NOT let this one pass. This article sickens me, not because of the author, but because I don’t trust this administration AT ALL. biden administration is outright killing this country and doesn’t give one iota for Americans. So to see this article as “hopeful” is absolutely crazy and insane. (If anything, it is just because of elections coming up) Other than that how can we see this as hoping biden is HELPING this country in any way shape or form???? I personally do not believe ANYTHING “good” can come from this administration and have no false hopes of these socialistic morons HELPING our country or us. I just keep praying that God hears our begging and has mercy on our country and once again Blesses her before she is long gone.

Perla Mercado
26 days ago

Excellent News !!
Thank you !
All news coming out is leading to Dictatorship Communist Style . Now there is Hope with President Trump leadership !????

26 days ago

I don’t trust this or Obama Bin Biden. The resident Biden has no cognitive skills at all. Someone is doing this for him.

26 days ago

dems are killing everything before that can ever be determined..

27 days ago

If only Biden had continued Trump’s other policies the world would be a much more prosperous and safer place.

28 days ago

Canada? Mexico? Taiwan cannot be a member, but observer status?

28 days ago

Wow, the Biden administration did something good for the country. Where am I?
BUT we need to open more factories and make our country self-sufficient. We must take care of our own needs without external assistance. Good BY CHINA…….!

H L Howell
27 days ago
Reply to  BAE

You should call him, Don Biden, the leader of the Biden Outfit.

Patrick McClurkin
28 days ago

I have to wonder if Jumbled Joe and the rest of his totally incompetent administration even understand what they have committed to! While the framework is still being worked out, even agreeing to these policies, must surely have the far left wing of the dems squirming in their seats! Thank you for an excellent article! We’ll all be watching closely to see how this develops!

28 days ago

I’m HIGHLY “skeptical”.
Joe Biden hasn’t spoken a “true truth” in his entire lifetime.

28 days ago

Hmm, this smacks of an Obama/Soros double cross. Sounds like old Boy Barry is getting TOO big for his britches. Careful little one, Daddy Georgie Porgie might put you in “Time Out”.

28 days ago
Reply to  Steve

It “smells” of a switcharoo” to me!! The “left” believes that they won’t lose and this is a bait trick that they will turn on. It’s to pacify….until they take power and then squash!
Don’t TRUST them one MINUTE!!!

28 days ago

Much of this is very unlike the Biden administration. It must be the result of some major outside pressure. It may suggest that we will be closing our southern border (Yay) and restarting our petroleum production.

28 days ago
Reply to  porterv

Not Bold enough he left Out Twain because he’s afraid of China

28 days ago
Reply to  porterv

DON’T HOLD YOUR BREATH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Larry W.
28 days ago

The global market is too volatile, always will be.. Let’s just make as many things here in the USA as we possibly can. Less chance of being cut off by other countries. Shipping time is better and cheaper. Creates jobs here and adds to our tax base. Why would we want to be dependent on other countries with unstable or unfriendly governments and policies?

28 days ago
Reply to  Larry W.

Business went overseas due to TAXES on business. Also the cost of employment and benefits is higher..Will Americans settle for lower wage and benefits? Trump made deals with companies and they were willing to return but the Democrats want to BLEED them dry w/ taxes!

Larry W.
28 days ago
Reply to  Lizzy

Good point Lizzie. We have to be competitive. And we need corporations that aren’t so greedy that they put profits ahead of what’s good for America.

Allan E Brem
28 days ago

The East is democratic and the West is socialist. Looks like playing both sides as a precaution against sure and sudden failure.

28 days ago

Why isn’t Taiwan on the list of countries included? Are the politicians afraid to tweak Xi’s nose? Taiwan is a critical source of computer chips to the tech world. As such Taiwan should be included…the CCP be damned!

28 days ago

so… Biden will continue & extend Trump’s policy?

28 days ago
Reply to  Momcat

I wouldn’t bet on it.

James R Stewart
28 days ago

I love the structure outlined in this report on unity of the U. S. with an Indo-Pacific group of nations.
I love the idea that there are not very specific demands as yet made on members, but broad commitments of support in economic manners toward securing supply lines and economic viability as a response to possible China-Russia collusion and disruption in the world economy. I pray the “details” of such an agreement do not “mysteriously” alter the intent [“the devil is in the details”].

28 days ago

Didn’t see Taiwan included, maybe just an oversight.

Jay H.
28 days ago
Reply to  Mlars10

Great point! Why is Taiwan being left out of this agreement? No doubt, Bite-me is bending the knee to China!!!

28 days ago
Reply to  Jay H.

He has to. China owns him lock, stock, & family. However, I don’t thing he can bend his knee without falling down.

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