US announces major economic deal with Asia to raise profile

US announces major economic deal with Asia to raise profile and counter China

U.S. President Joe Biden, pictured here, launched the Indo-Pacific Economic Framework for Prosperity (IPEF) with a dozen initial partners on Thursday, April 21, 2022.

Yuri Gripas | Abaca | Bloomberg | Getty Images

To raise its economic profile and provide another counterweight to China in Asia, the United States on Monday announced the Indo-Pacific Economic Framework with Asian partners including Australia, Japan and the Republic of Korea.

It is a comprehensive plan designed to help expand US “economic leadership” in the Indo-Pacific region. The group wants to set international rules for the digital economy, supply chains, decarbonization and regulations for workers.

US President Joe Biden said tackling inflation is a priority and this framework aims to help bring down costs by making supply chains more resilient over the longer term.

It is important that the IPEF is not a free trade agreement. Biden faces political pressure from both the left and the right in the United States to avoid free trade deals.

It is also not a security pact and is separate from the Quad Defense Group, which includes the United States, Japan, India and Australia, US National Security Adviser Jake Sullivan told reporters on Sunday.

Biden is in Tokyo this week to meet regional leaders about IPEF and the Quad.

increase competitiveness

Despite avoiding trade deals, the United States wants to raise its profile in the Asian economy, where China is the dominant country, despite American allies Japan and South Korea with large economies, and India, a member of the Quad, growing by leaps and bounds.

According to Ali Wyne, senior analyst for global macro at Eurasia Group, the United States needs to “improve its economic competitiveness in the region.”

“Even those countries that have significant and growing concerns about China’s foreign policy and strategic objectives appreciate that they cannot meaningfully decouple from China’s economy in the short term,” Wyne said, “so the Biden administration will work to maximize traction.” to obtain for India. Pacific Economic Framework.”

US officials have been careful not to mention China in discussions about IPEF and have denied that it is a “closed” group, as China has claimed.

Chinese state-controlled media outlet Global Times said Saturday, “The main objective of Biden’s trip to South Korea and Japan is to try to forge a new political stance towards China by building an alliance around Washington in the Asia-Pacific region.”

Sullivan told reporters Sunday he was not surprised “that China has concerns about the number of countries and the diversity of countries that have expressed interest and enthusiasm for IPEF.”

A hard sell?

Speaking to CNBC’s Capital Connection Monday before the IPEF details were released, Yuki Tatsumi, a senior fellow at the Stimson Center in Washington DC, said the plan would be hard to sell in the region.

She said it’s similar to the Trans-Pacific Partnership, which the US withdrew from during the Trump administration as countries in the region struggled to qualify to participate.

In addition, Tatsumi said the US has sharpened its rapprochement with China under the administrations of former Presidents Donald Trump and Barack Obama.

“So, whatever new policy initiatives come out of Washington, US-China strategic competition will intensify,” she said, adding that the new framework is likely to only accelerate this trend.

– CNBC’s Vicky McKeever and Ravi Buddhavarapu contributed to this report