The U.S. Chamber of Commerce is representing America’s business community at the 2023 Asia-Pacific Economic Cooperation (APEC) Summit in San Francisco. The Indo-Pacific region remains a key geostrategic priority for policymakers in both political parties and for the U.S. business community. This dynamic region—stretching from Japan, Korea, and China to Southeast Asia and India—is set to account for two-thirds of the world’s middle-class consumers within a decade.
U.S. businesses need immediate access to these growing markets. So as world leaders and CEOs gather for this year’s APEC Summit, here’s what’s important to know:
America is falling behind in the Indo-Pacific.
One reason the U.S. has lost market share in the Indo-Pacific region is that some countries maintain steep barriers against U.S. exports. In fact, many of the countries in the region impose tariffs on U.S. exports that average five times higher than the tariffs the U.S. imposes (and much higher for agricultural products). Non-tariff barriers, a lack of transparency around government decision making, and subtle protectionism hurt the U.S. as well.
Trade agreements are how governments overcome these barriers.
Governments across the Indo-Pacific region have struck more than 100 new trade agreements among themselves since the turn of the century. Meanwhile, it has been more than a decade since the U.S. added to the list of 20 countries where we have genuine, comprehensive trade agreements in place. As a result, workers, farmers, and companies in other countries have privileged access to all these growing markets while Americans are at a disadvantage.
The Trans-Pacific Partnership (TPP) is a case in point.
The U.S. led the way in negotiating this 12-country trade pact, but when Washington withdrew in 2017, the other countries moved forward without us. Modified slightly, the other 11 countries renamed it the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and brought it into force—and they’re now benefitting. Others, including China, are seeking these benefits through CPTPP membership while the United States stands idly by.
Other nations are rapidly moving ahead of us in other ways too.
An EU-Japan trade pact entered into force in 2019, which means that Europeans are also benefiting from tariff cuts along with improved market access in Japan. Additionally, China and most of the East Asian economies are moving ahead with their own mega-agreement, the Regional Comprehensive Economic Partnership (RCEP). It may lack many of the modern features of a U.S. trade agreement—such as rules on worker rights, environmental protection, and intellectual property—but it promises preferential treatment to workers and companies on the inside while leaving Americans on the outside.
Questions remain about the Indo-Pacific Economic Framework (IPEF).
The Chamber has supported the goals of the IPEF, which is a commercial framework with 14 regional economies. But the Biden administration pointedly refuses to call it a trade agreement. The U.S. Commerce Department has been leading on separate "pillars" addressing issues such as supply chains. On November 16, 2023, the Commerce Department and more than a dozen regional partner governments concluded talks for three of the four IPEF pillars. Our SVP for International Policy John Murphy released the following statement regarding the IPEF conversations:
"The U.S. Chamber of Commerce greatly appreciates the leadership of Secretary Raimondo and the Commerce Department on the IPEF. The recently concluded supply chain pillar negotiated by the Commerce Department was welcomed by American businesses, a number of whom commented that it could play a valuable role in the event of future supply chain disruptions such as those seen in the recent pandemic. We look forward to reviewing the text of the just concluded pillars. We are heartened at reports of binding anti-corruption measures, among other points, and we are committed to continuing to work closely with the administration to strengthen America’s economic engagement with our friends and allies across the region.”
Some have called on USTR to abandon the IPEF trade pillars, but that would send the wrong signal. IPEF governments that have dedicated substantial resources to these negotiations would view such a move with dismay as it would compound the narrative of U.S. withdrawal from leadership in the region.
USTR’s capitulation on digital trade is a big problem for IPEF.
The IPEF trade pillar’s key deliverable should have been strong digital trade rules like those in the United States-Mexico-Canada Agreement (USMCA). When the IPEF was launched, the White House set that as the bar. But last month, USTR announced it was abandoning that model, drawing opposition from other agencies and bipartisan anger in Congress. The Chamber led a coalition of nearly 50 of the nation’s largest business groups decrying the move. This capitulation to a narrow fringe of political opinion directly harms American workers, invites unfair treatment of U.S. companies, and threatens our competitiveness.
Strong digital trade rules are essential.
American businesses of all sizes and sectors have benefitted from the digital trade revolution, and their leadership in harnessing data to create and transform products and services has made them the envy of the world. These digital trade rules prevent other countries from using regulation to lock out American companies and their workers from their markets. In no way do they impede fair regulation. Abandoning strong digital trade rules undermines efforts to keep authoritarian governments in check and creates a vacuum that cedes leadership to other nations. The Chamber is urging USTR to reverse course.
One of the biggest factors in these shifting trade dynamics is China.
When the U.S. isn’t leading on trade, we cede ground to competitors like China. The challenge for the U.S. is to find a balanced approach to commerce with China that addresses the harmful effects of its non-market economic policies; guards against technology-related risks to U.S. national security; and supports job-creating commerce for the large majority of products, companies, and sectors where national security concerns are absent. Striking this balance will be greatly aided by forging a bold, market-opening trade agenda with allies and partners.
In the end, maintaining America’s innovative edge depends on our trade leadership.
The path forward will require U.S. officials to use all of the tools of statecraft to advance our interests and our values. In addition to the coercive and normative tools—the Pentagon and the State Department—trade is a powerful tool as well. We need to get back in the game on trade and work more closely with our allies. Our standing in the world and our standard of living depend on it.
