The latest disputes between Washington and Beijing show how trade relations between the world’s two largest economies continue to deteriorate as their competition for influence over trade in Asia, which is expected to drive global growth for decades to come, intensifies. And it comes as the Biden administration takes a more confrontational stance, generally, in its dealings with China, an issue that was largely on the back burner during Biden’s first year in office, as the White House focused on the fight. against the Covid-19 pandemic. and its economic benefits. Experts in the region expect China to respond in kind.
“We will also see China redouble its efforts to strengthen existing trade relations in the region and continue to build its own influence, fearing that one of the main motivations of the United States is to marginalize them or limit in a way or else their ability to operate as they want in the region,” said Anna Ashton, senior researcher for trade, investment and innovation at the Asia Society Policy Institute.
Among other things, China could offer other countries in the region economic sweeteners that could undermine the latest US initiative. China’s trade with Southeast Asian countries already exceeds that of the United States, and it could now accelerate plans to further expand those relationships through existing trade pacts. It could also increase its foreign direct investment in companies and increase funding for infrastructure or clean energy projects, thus strengthening its economic ties throughout the region.
Secretary of State Antony Blinken is expected to shed light on Biden’s broader China strategy in a highly anticipated speech on Thursday. Blinken’s remarks follow Biden’s first trip to Asia as president, which included stops in South Korea and Japan. It was in Tokyo that Biden announced the 12 countries that have agreed to participate in negotiations on the Indo-Pacific Economic Framework, a non-traditional trade pact the administration hopes will restore the United States as a trade leader. In the region. The deployment and the long list of countries in the region that have expressed interest in participating have upset Beijing, but not as much as Biden’s other comments on Monday that the United States would militarily defend Taiwan in the event of a Chinese invasion.
The president’s trip to South Korea and Japan was ultimately a test of his efforts to provide a compelling vision for a US-led regional alliance to counterbalance China’s growing economic, diplomatic and military power. The Indo-Pacific economic framework, in particular, is about countries “writing the new rules of the 21st century economy,” Biden said — without China at the table.
“What we see is a hardening of positions,” said Scott Kennedy, senior adviser at the Center for Strategic and International Studies.
“We no longer have an agreed overarching framework for anything, and so we see a panoply of alternative, overlapping, competing, sometimes complementary initiatives,” he continued.
The United States and China have been at odds over trade since former President Donald Trump launched a tariff war in 2018, and the relationship has remained largely unchanged since Biden took office last year. Tariffs on billions of dollars worth of goods remain in place, though the administration is currently revising tariffs on Chinese imports, and attempts to discuss differences over industrial policy and labor rights have failed. of results.
Industry groups and unions have demanded clarification on Biden’s trade approach with Beijing, especially as he has indicated in recent months that tariffs on Chinese imports could be cut to help curb inflation. A wide range of businesses and many U.S. lawmakers have called on Biden to reinstate expired tariff exemptions, or simply drop Trump-era duties altogether. And many have implored Biden to tone down hostilities that make it harder to do business in both markets.
Even the Indo-Pacific Economic Framework — the administration’s flagship economic initiative in Asia — raised more questions than answers. The arrangement is expected to seek voluntary commitments from countries to strengthen supply chains, root out corruption, implement digital regulation and invest in clean energy, but details remain unclear, as do incentives to participate. Countries that eventually accept the framework will not gain increased access to the US market, but may attract increased US investment or simplified regulations, for example.
The White House has repeatedly insisted that the framework is not designed to force trading partners to choose between the United States and China, although a senior administration official said it offered “an alternative to the approach that China is taking in the region”. Almost all of the framework’s negotiating countries are already party to a separate trade pact with China called the Regional Comprehensive Economic Partnership.
The reality is that China remains a critical trading partner for many Indo-Pacific countries that will participate in Biden’s economic framework, not to mention a key source of infrastructure funding and business investment. As the United States and China remain locked in their economic rivalry, countries in the region have no choice but to appease the two.
“The accusation that the United States is calling on countries in the region to choose sides is misplaced,” Kennedy said. “The United States is not asking countries to choose the United States or China. They ask countries to choose the kind of global economic system they want. »
Nevertheless, it is clear that Beijing sees the Indo-Pacific economic framework as an attempt to force a choice between countries. Wang warned that efforts to decouple economies, restrict technology or disrupt supply chains “will only inflict grave consequences on the world, including the United States itself.” China has fiercely opposed the tariffs that Trump installed and Biden has maintained, and argued that the cost of those tariffs has been borne by American consumers.
“The United States should reflect on its mistakes and correct them, instead of repeating them,” Wang said.
In addition to its existing trade deal with regional partners, China has also sought membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, an 11-nation trade pact that the United States helped broker but did not failed to pass through Congress and later dropped under Trump. Beijing is already a key player in international bodies such as the World Trade Organization, Asia-Pacific Economic Cooperation and the G-20.
Japanese Prime Minister Fumio Kishida told reporters this week in Tokyo that China is “demonstrating a significant economic presence” in the region, but questioned the “substance” of that commitment if Beijing fails to adhere to international standards.
“They have a big responsibility,” Kishida said. “Even in the economic sphere, they must live up to this responsibility.”
Phelim Kine contributed to this report.