Xi-Biden summit at Apec: US expectations dip further over stalled Indo-Pacific Economic Framework

Janet Yellen touts ‘substantial progress’ negotiating trade section of Indo-Pacific Economic Framework, but says it ‘looks not to be complete’
Biggest impediment to IPEF trade pillar has come from Democrats in Biden’s own party, who argue it lacks enforceable labour standards

US-China relations

Mark Magnierin San Francisco

Published: 9:08am, 15 Nov 2023

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Already low expectations for “deliverables” at the Asia-Pacific Economic Cooperation summit in San Francisco took a further blow on the eve of Wednesday’s meeting between Xi Jinping and Joe Biden when the latter’s administration acknowledged that a key multilateral trade initiative was mired in American political infighting.

US Treasury Secretary Janet Yellen described “substantial progress” in negotiating the trade section of the Indo-Pacific Economic Framework on Monday, the knottiest of the four IPEF pillars touted by the administration. “But it looks not to be complete, like something that is likely to require further work,” Yellen said.

The news followed modest hopes that something of consequence could come out of the Xi-Biden meeting, given the many bilateral irritants, beyond some additional communication between the two militaries and a possible healthcare initiative.

The one political win the American president could emerge with this week amid his quest for re-election is a possible deal under which China would agree to crack down on producers of ingredients used to make fentanyl.

US President Joe Biden walks on the South Lawn of the White House in Washington on Tuesday. He is expected to meet Chinese President Xi Jinping at Apec in San Francisco on Wednesday. Photo: CNP/Bloomberg

Beijing has negotiated hard and is insisting on the lifting of sanctions on China’s forensic police institute and lab in return for such an agreement, sources close to the administration said. A deal, however, would likely elicit uproar among congressional Republicans quick to accuse Biden of being soft on China, they added.

Meanwhile, Apec as a whole is reportedly struggling to agree on watered-down language about the Israel-Hamas war, with Muslim-majority Malaysia and Indonesia pushing back on Washington’s more sympathetic stance towards Israel, a long-time ally.

For weeks, the administration has worked to dampen expectations for Apec and the Xi-Biden meeting, adding that simply meeting with China’s leader would be a win given the poor state of bilateral relations and the tone he sets in Beijing’s highly centralised system.

Much of the important work involving IPEF and Apec is done in working groups and committees, administration officials have argued, touting the likely success of the framework’s less contentious areas, such as supply chains, clean energy, technology and rule of law.

But the fact the administration will almost certainly not complete an IPEF agreement this week, which it hoped would counter China’s trade prowess in the Indo-Pacific while Xi was in town, is a blow, especially in view of who is leading the resistance.

The biggest impediment to the trade pillar has come from Democrats in Biden’s own party. They have called for killing off the trade pillar completely over its lack of enforceable labour standards.

Biden regards labour support as instrumental to his re-election bid, and the difficulty comes as Beijing increasingly heralds authoritarianism over democracy.

The more fundamental disconnect is that at a time when Association of Southeast Asian Nations countries and others seek tariff-cutting agreements and more access to US markets to balance out China, Washington faces trouble even passing voluntary, non-binding, consensus-oriented agreements.

Trade liberalisation has become politically toxic – opposed by liberals as a job killer, and by conservatives on sovereignty and national security grounds – to offer regional allies and partners an answer to Beijing’s many infrastructure, trade and lending programmes.

“Asean is not impressed with IPEF. In fact, I’ve never met anyone outside of the White House that is impressed with IPEF because it’s a nothing burger. Most is not enforceable,” said Murray Hiebert of the consultancy Bower Group Asia and author of Under Beijing’s Shadow: Southeast Asia’s China Challenge.

Supporters of Chinese President Xi Jinping stand outside the St Regis Hotel in San Francisco on Tuesday. Photo: AFP

“They’re joining it to humour the Biden administration because they know Biden can’t do anything on trade.”

Meanwhile, China is moving ahead with its Regional Comprehensive Economic Partnership, urging Japan, South Korea and Asean to accept Hong Kong as a member of the 15-member grouping and ease their ties with the US.

On other fronts, Japan keeps urging the US to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a successor to the US-led Trans-Pacific Partnership that imploded after nativist former president Donald Trump pulled the US out of it on his first day in office.

News of the IPEF trade pillar no-show this week was a “major setback for trade policy and those that recognise the importance of the US economically engaging in the Indo-Pacific region”, said Wendy Cutler of the Asia Society Policy Institute.

“Trade negotiations have their ups and downs, and this is clearly a down moment,” she said.

Many of the American trade, lending, infrastructure and regional grouping policies and initiatives also seem more aimed at countering China than helping members in their own right.

While Indo-Pacific nations say they appreciate the effort and attention, they would also like to avoid being caught in a battle between the giants.

“Our focus economically in the region is on the things that exclude China,” said Bonnie Glaser of the German Marshall Fund of the United States, a Washington-based think tank. “Southeast Asia feels like it just gets intermittent attention.”

The administration has sought to emphasise with the Apec’s 21 partners, whose ranks overlap with IPEF’s 14 members, that the Indo-Pacific benefits from their discussions on green energy, food security, disaster relief, innovation, inclusion and sustainability.

But analysts said the high-minded terminology only goes so far. At a time when multilateral trade integration is moving ahead on multiple fronts, Washington is seen as standing on the sidelines, no matter how many initiatives it proposes.

“The US is on the outside looking in and trying to come up with an agenda to demonstrate its leadership credentials on economic matters,” said Nicholas Szechenyi of the Centre for Strategic and International Studies, a Washington-based think tank.

“It seems difficult for the United States to credibly emphasise themes such as inclusiveness, interconnectedness – the themes of this year’s Apec summit – when the primary driver for US economic strategy in the Indo-Pacific is not economic cooperation, necessarily, but rather economic competition,” he added.