The administration of U.S. President Joe Biden has pulled out all the stops in pushing its regional economic initiatives since May.
In Asia, Biden announced the Indo-Pacific Economic Framework during his trip to Japan, with a follow-up ministerial meeting of participating countries in early September. In Latin America in June, he unveiled the Americas Partnership for Economic Prosperity at the Summit of the Americas in Los Angeles. And in South Africa in August, following U.S. Secretary of State Antony Blinken’s launch of what was billed as a reset of relations with the continent, Washington announced a U.S.-Africa summit for December, when an African version of the IPEF is expected to be made public.
These regional initiatives, the outcome of more than a year of internal debates in Washington, represent what is some call the Biden administration’s economic blueprint for the developing world that purports to transform economic prospects on the three continents.
The areas in which the U.S. wants to engage other countries vary somewhat from one initiative to another. The four pillars of the IPEF include trade, supply chains, clean economy, and fair economy. The APEP, on the other hand, covers climate change, labor rights and supply chains. However, Biden’s regional initiatives share quite a number of features. To start with, they are all intended to serve as a geopolitical tools. They are, first and foremost, part of Washington’s effort to contain the rise of China, which the U.S. views as the major threat to its global hegemonic power.
Since the turn of the century, China’s economic and commercial ties with other developing countries have continued to expand, dwarfing those of the U.S. with the global south. China is now the major trading partner for more than 100 countries. And as China has poured nearly $1 trillion into infrastructure development in poor countries, its Belt and Road Initiative is enjoying immense popularity, with more than 140 countries having signed up.
But the developments have caused considerable concern in Washington. In this context, the IPEF is intended to serve as the economic tool for the U.S. Indo-Pacific Strategy or, in the words of Biden, to provide an “alternative to China.” Meanwhile, the White House is using the APEP to build a united front to counter China’s growing influence in what it considers its backyard.
Under its initiatives, the Biden administration seeks to cut off — or cut back as a minimum — the economic and trade links of other countries with China and make them dependent on the U.S. instead. The so-called “resilient and safer supply chains,” for instance, are meant to dismantle the current ones, in which China plays a large role, and replace them with new ones that orbit around the United States.
The initiatives’ geopolitical calculations can also be seen in the White House’s approach to countries participating in the scheme. Rather than being open to all who are willing to join, as with an inclusive agreement, participation in the initiatives is by invitation only and based on ideology. Consequently, in Southeast Asia, the IPEF excludes Cambodia, Laos and Myanmar, which splits the member countries of the ASEAN into two camps. Meanwhile, in Latin America, the APEP locks out Cuba, Nicaragua and Venezuela. Clearly, as with its other measures, the Biden administration’s regional initiatives are ideologically driven, imbued with geopolitical considerations.
Second, the initiatives place heavy emphasis on writing rules and setting standards, underscoring Biden’s demand that the U.S., rather than China or other countries, should “write the rules of the road” for trade.
Writing rules and enforcing them worldwide over the decades has been instrumental in ensuring that the U.S. has enjoyed privileges that the rest of the world envies. Doing so for the 21st century will, the White House believes, entrench its vested interests, thus going a long way toward maintaining its dominant position globally. The Biden administration is at pains to push its rules and standards as the central focus of its initiatives. If it succeeds, it will have the best of both worlds. The IPEF would function as a truncated Trans-Pacific Partnership — one without improved market access to the U.S.
For developing countries, though, there is danger that America’s rules and standards will keep them down, perpetuating their underdevelopment. While those rules and standards will make American multinationals unrivaled competitors, or even monopolies, on the home fronts of developing countries, poor countries risk being placed in a disadvantageous competitive position because of their inability to reach the high bar. U.S. labor standards, for instance, are expected to raise the cost of labor in developing countries, rendering their products uncompetitive in international markets. As India has found out, the environmental standards under the IPEF discriminate against developing countries.
Participating ASEAN countries would also find themselves compelled by the exclusivity clause in the IPEF to revise upward their commitments under the Regional Comprehensive Economic Partnership and the Comprehensive and Progressive Trans-Pacific Partnership. ASEAN’s standards for the digital economy, labor, environment and anti-corruption are not comparable with those of the U.S. Apparently, the “rule trap” will become a serious challenge to many participating countries.
Washington’s intent to use the APEP to support democracy in Latin America should ring an alarm bell for those countries. The White House may relish the success of its color revolution in the Middle East in overthrowing governments it disliked and molding societies and political systems to be pliable to its wishes and whims. However, the U.S. move may well mean economic deprivation and social unrest for the continent, if history is any guide.
Finally, America’s regional initiatives pay little attention to the real needs of developing countries. Areas identified for engaging others reflect Washington’s own strategic objectives and agenda. For all its pitching about the initiatives as boosting the economic growth prospects and prosperity in various regions, Washington has largely ignored the aspirations and concerns of participating countries.
As a result, the initiatives are not about concluding free-trade agreements. There are neither tariff concessions nor trade facilitation on offer. To use a Chinese saying, the White House is trying to catch a white deer with a bare hand — which means getting valuable things for nothing. India, for one, has opted out of the IPEF’s trade pillar precisely because, according to Indian Minister of Industry and Commerce Piyush Goyal, it did not see any real economic benefit in the scheme.
Indeed, promoting economic prosperity in the developing world does not seem to be a priority for the Biden administration. The White House pledged $252 million for the IPEF, in sharp contrast with the $14.5 billion of aid it has pledged to Ukraine.
Worse still, the initiatives will work to undermine the interests of developing countries. Cutting economic and commercial ties with China will economically bleed many developing countries, blighting their economic prospects. On the other hand, boarding Uncle Sam’s boat would place developing countries at the mercy of the White House. Reliance on the U.S. market, technology or components — and even mere association with the U.S. scheme — could subject them to coercion by Washington, as shown by the wrenching experience of semi-conductor manufacturers in South Korean and Taiwan, who are now under pressure from the White House to shift some of their manufacturing facilities to the U.S. despite significant cost increases.
In addition, Washington’s initiatives will probably sow discord and create conflicts between developing countries, and undercut the existing regional economic mechanism. In Southeast Asia, the IPEF looks to give birth to a parallel and competing body to ASEAN. Analysts say this is sure to raise questions about the integrity and centrality of the bloc in the region.
All these things are concerning but not surprising. Given the Biden administration’s continued “America first” policy orientation, it’s only natural that its multinational engagement amounts to a Greek gift. To expect otherwise would be wishful thinking.