Joe Biden halts plan for Indo-Pacific trade deal after opposition from Democrats

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Joe Biden’s plan to unveil a crucial part of his Indo-Pacific economic strategy has been derailed by opposition from Congressional Democrats just as the US president prepares to meet Chinese President Xi Jinping in San Francisco.

The US intended to conclude critical elements of its Indo-Pacific Economic Framework trade pillar at the Asia-Pacific Economic Cooperation forum this week. It would have signalled to China that the US and its partners could co-operate on a strategy Washington hoped would counter rising Chinese economic clout.

But the White House has abruptly reversed course following pressure from influential Ohio Senator Sherrod Brown and other Democrats who worry about the effect of a new trade deal on their election prospects next year.

“We just handed China a double victory,” said one former US official. “American politics is dysfunctional, and America has no economic agenda for Asia.”

Allies and partners were never that enthusiastic about the IPEF, partly because it does not offer any US market access, but they believed it was better than nothing. Some, including Japan, hoped that it would provide a bridge to the US joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a sweeping trade deal that was salvaged from the Trans-Pacific Partnership agreement that then-president Donald Trump withdrew from in 2017.

US trade representative Katherine Tai informed her counterparts about the decision over the past two days, according to one American official.

“It has shocked our trading partners, many of which have been lukewarm on IPEF from the get go, but nevertheless were willing IPEF participants in hopes that this would lead to more US economic engagement,” said Wendy Cutler, vice-president of the Asia Society Policy Institute. Dropping the IPEF was a “major setback”, she said.

Officials from the US and its partners have stressed that they have made significant progress on the trade negotiations, but the prospect of a deal over the next year looks increasingly dire with an upcoming election.

“It’s hard to see how the politics that have guided the Biden administration’s decision-making to date change as the US presidential election approaches,” said Jake Colvin, president of the National Foreign Trade Council, who added that he hoped the progress to date could serve as a building block for the future.

Brown, the Democratic chair of the Senate banking committee who has an outsized say on trade issues, praised Biden for not moving forward with the trade pillar which he said “lacks enforceable labour standards”.

A vociferous critic of trade deals, Brown is one of the Republican party’s top targets in 2024. His brand of politics has played well in Ohio, a Midwestern state that has turned more towards Republicans over the past decade as factory jobs have moved to developing countries.