Pressing foreign policy matters remain top of mind—the war in Ukraine, the looming climate crisis, a global economic slowdown and possible recession. At the same time, the Biden administration and Congress must find opportunities for economic growth and job creation.

Following the Global Financial Crisis and economic recession, the Obama administration looked to trade as a path to economic growth and prosperity, as well as shoring up alliances with key allies—particularly in the Indo-Pacific. The famous “Pivot to Asia” was grounded in negotiating a regional free trade agreement (FTA) in the Pacific, the Trans-Pacific Partnership (TPP). TPP would have been the largest FTA, encompassing 40 percent of world trade. However, since the United States formally withdrew, the China-led Regional Comprehensive Economic Partnership (RCEP) is now the world’s largest FTA, covering 30 percent of world trade.

The Biden administration has stated its intention to reimagine trade—moving away from traditional market access and tariffs, to cooperation, transparency, and inclusivity. The strategy includes labor rights and new areas such as supply chain resiliency and decarbonization. These new ideas are the hallmark of IPEF, which commenced negotiations last December in Brisbae.

Unlike a traditional trade negotiation, it’s not clear whether the four pillars (trade, supply chains, clean energy and decarbonization, and tax and anticorruption) of IPEF will include binding commitments. New areas such as supply chain and clean economy are especially murky, as well as trickier areas such as anticorruption. However, very much like a traditional trade negotiation, the first few rounds of negotiations included formal discussions on the four pillars. There were exchanges of text and white papers, and engagement from key stakeholders including business, labor, and civil society.

The overall sentiment in Bali was positive and constructive, with many of the IPEF member countries excited to see the United States engaged in the region again. However, it left many wondering—why not just rejoin the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which evolved from TPP and retained much of its structure?

Follow the data

China’s total trade with ten of its neighbors in Southeast Asia, including Indonesia, Malaysia, Singapore, and Vietnam, has grown significantly. It has increased 71 percent since July 2018, when the United States first placed tariffs on a range of Chinese goods, to $979 billion in November 2022. Chinese trade with India grew 49 percent over the same period. Total trade exports between the United States and the same ten countries reached $450 billion in the twelve months through October 2022, compared with $262 billion in mid-2018. The gap between China’s trade with the region and the United States’ trade with the region can be explained as simple as this: China has a trade agreement with the region and the United States does not. RCEP lowered trade tariffs, but more importantly, its changes to rules of origin will likely forge stronger regional supply chain networks among the fifteen Indo-Pacific countries.

The Biden administration has stated it is giving countries a choice between the United States and China. However, without incentives such as tariff liberalization or market access, many IPEF countries will find it difficult take on new commitments the United States is pursuing, namely on labor and the environment. The United States could offer a real alternative—a renegotiated CPTPP with new areas in IPEF including supply chain resiliency, clean energy, and inclusivity.

FOMO of CPTPP

The fear of missing out—or FOMO. Allies want the United States back in CPTPP. China wants in, but the United States remains out. Now with the accession of the United Kingdom to CPTPP, the orientation of the trade pact transforms from regional to global.

While China’s CPTPP application will face serious scrutiny and substantive procedural hurdles, it nonetheless magnifies the serious risk the United States faces of being left behind. Without joining, the United States loses the chance to spread American democratic values and rules for the modern economy.

Amidst regional trade integration, the United States has largely been left on the outside looking in. The United Nations Conference on Trade and Development found that RCEP will shrink US exports by over $5 billion as trade is diverted away from US firms and toward foreign competitors subject to lower tariff rates under the agreement. It has been six years since President Trump withdrew from TPP, and US losses have been both economic and geopolitical. At a time when industrial policy and national security dictate how and where supply chains should develop, US and Asian firms are looking for alternatives that offer stability, predictably, security, and commercial viability.

Time is running out for the United States to seriously reconsider rejoining CPTPP—while allies, partners, and competitors including China, South Korea, and Taiwan are lining up to join CPTPP. Importantly, CPTPP addresses many of the administration’s highest priorities, including moving supply chains away from China. The best way to incentivize the shift in supply chains is to have a tariff preference from other countries. Whether there is bipartisan support for trade and rejoining CPTPP remains to be seen, but the effort to reexamine the options must begin now.

Sahra English is a contributor to the Atlantic Council GeoEconomics Center. She serves as a member of the U.S. Government’s Industry Trade Advisory Committee (ITAC).  

To read the full blog post, please click here.

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The CPTPP is what was left of the original U.S.-led 12 nation deal the Trans-pacific Partnership (TPP) that was a priority under Presidents Bush and Obama, but which President Trump pulled the U.S. out of in his first week in office.

Since the APEC CEO Summit in November last year, China had indicated its interest in joining CPTPP. Yet, this apparent interest was greeted with skepticism around China’s ability to undertake the economic reforms required to meet the high CPTPP standards, such as more competition for state-owned enterprises, freer flows of data across borders, and curbs on China’s industrial subsidies.

Yet, it is increasingly clear that China’s request to join CPTPP needs to be taken seriously and may happen sooner than expected. For one, China is the largest export market for nine of the current 11 CPTPP countries. Second, it may be less difficult than generally thought for China to meet many CPTPP standards. China could also lean into to the agreements broad exceptions to justify non-compliance. Where China has justified trade restrictions as being about national security, there is also a very broad national security carve out that China could rely on.

Second, in order for many developing countries such as Vietnam to join the agreement, full compliance with various rules needed to be delayed as these governments undertook domestic reforms. This sets the precedence for China to argue that where it is unable to meet CPTPP standards today, similar flexibilities should be extended to China and not delay it becoming a party to the agreement.

A key question for many governments will be whether they can be convinced of China’s eventual compliance with the CPTPP. The Australian trade minister when asked about China joining the CPTPP noted the need for China to demonstrate a track record of compliance with trade agreements. This speaks not only to China’s recent restrictions on Australia’s exports that are inconsistent with the China-Australia FTA, but also well-documented ways China has avoided its WTO commitments.

The announcement by the U.K. earlier this year of its interest to join the CPTPP likely hastened China’s decision to join. In part as U.K. membership in CPTPP would be another bulwark and hurdle to China joining, and it is harder for CPTPP governments to seriously negotiate U.K. accession, and to then not do the same for China. Taiwan’s request this week to also join the CPTPP will complicate the accession process, as China will oppose Taiwan joining as being at odds with its One-China policy.

So now the U.S. is faced with a flipped script—as China readies to join the CPTPP, it is left on the outside, still unsure how to show leadership on trade in the Indo-Pacific.

Should China succeed in joining CPTPP, this will foreclose the U.S. rejoining the agreement. The U.S. then having to negotiate with China to join the CPTPP is an irony that would be too much to bear. Indeed, re-engagement by the U.S. on trade in the Indo-Pacific region will require the U.S. to start the process again. However, after Trump’s withdrawal from CPTPP, getting other governments to agree to again make high standard trade commitments with the U.S. will be a big lift. In addition, with China party to CPTPP, the economic impact on China of a new U.S.-led trade agreement that excluded China would be significantly diminished. Indeed, China joining CPTPP will for the foreseeable future undercut the effectiveness of U.S. trade policy as a tool for achieving U.S. strategic goals with respect to China.

As President Biden made clear in his speech to the U.N. General Assembly this week, the U.S. needs to lead a collation of countries to counter China’s strategic challenges. To do this, the U.S. will need to continuously show up, lead and demonstrate consistency of purpose. This will require a renewed economic engagement strategy for the Indo-Pacific. The U.S. no longer has the luxury of spending precious political capital getting other countries to join a major international economic initiative like CPTPP and then decide to withdraw because it makes for good domestic politics. Leaving CPTPP was costly and China’s decision to join CPTPP has raised the stakes even higher.

Joshua Meltzer is a senior fellow in the Global Economy and Development program at the Brookings Institution.

To read the full commentary from the Brookings Institution, please click here.

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From the start, TPP was marked by tragic irony—with China always in a supporting role. The George W. Bush administration notified Congress of its intent to negotiate a high-standard trade agreement with Asia-Pacific partners on September 22, 2008—one week into a global financial crisis that would severely undermine U.S. economic leadership and embolden Beijing. While quick to embrace TPP and successful in concluding an agreement among the parties, President Barack Obama fatally delayed pushing for trade promotion authority from Congress in 2014—choosing instead to name the chairman of the relevant Senate committee, Max Baucus, as his ambassador to China. And in one of his first, catastrophic acts as president, Donald Trump withdrew the United States from the unratified TPP—not understanding that it was one of the most powerful tools he had to compete with his nemesis, China.

And now the People’s Republic of China has applied to join TPP’s successor agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Tragic irony, indeed.

Recall what the power of TPP was. It advanced U.S. interests along three lines: economic, by boosting U.S. and regional growth; strategic, by embedding the United States more deeply in Asia-Pacific affairs; and “strategic economic,” by updating and upholding U.S.-preferred rules and norms. Although Joe Biden supported TPP as vice president, his national security team argued during the presidential campaign that the economic benefits of TPP had been oversold and in any case went mainly to large multinational corporations. They also expressed determination not to be hoodwinked into supporting a trade agreement merely because of its purported “strategic” value. 

But as China’s application to CPTPP makes pointedly clear, the Biden team underestimated the rulemaking power of a U.S.-led trade agreement. Among its other useful provisions, TPP’s disciplines on state-owned enterprises (SOEs), digital governance, and labor—since upgraded in the U.S.-Mexico-Canada Agreement (USMCA)—committed a group of countries representing 40 percent of the global economy to aligning their economic policies with U.S. preferences. With the United States out and China prospectively in, CPTPP is now more likely to bend to Beijing’s preferences than to uphold U.S. ones.

Like Hillary Clinton when she renounced TPP as a presidential candidate in 2016, the Biden team no doubt fears the politics of trade. For decades trade was a toxic issue for Democrats, with their base of supporters—particularly manufacturing unions—opposed to trade because of its disruptive effects on jobs. (Certainly both parties have paid far too little attention to helping workers adjust to these and other economic disruptions.) But the tide may be turning, and the conventional wisdom on trade politics may need rethinking. Even as Donald Trump seized the protectionist ground, a growing number of Democrats have expressed support for trade—over two-thirds according to recent polls conducted by the Chicago Council on Global Affairs and Pew Research Center. A similar shift can be seen in Congress, where 193 House Democrats and 39 Democratic senators voted for USMCA, and where the pro-trade New Democrat Coalition in the House boasts nearly 100 members. All of this makes sense; Democratic voters are increasingly urban and global in their outlook, while the union movement today is dominated by government and service workers, who have less reason to oppose trade.

So there may be more political room for the United States to get back on the path to TPP than some Biden advisers believe. And there is certainly a pressing logic for the White House to reconsider its position. China’s application to join CPTPP comes just two months before the annual Asia summits in November, when new presidents typically lay out the broad outlines of their strategy in the region. A credible trade policy is an essential component of any serious U.S. strategy of engagement in the Asia-Pacific region. It is what allies and partners in the region want, for two principal reasons: it promises them greater access to the world’s largest market, and—unlike more fleeting initiatives the United States is wont to offer—demonstrates commitment to a long-term U.S. presence in the region. President Obama was quick to tack to this reality in his first year in office; while viewed initially as a trade skeptic, he used his first speech in the region in November 2009 to announce his intention to renegotiate the Korea-U.S. (KORUS) trade agreement and to launch TPP negotiations.

President Biden should consider his own version of Obama’s speech when he appears at the annual leaders’ meeting of the Asia-Pacific Economic Cooperation (APEC) forum to be hosted by New Zealand in mid-November. First, even if he is not ready to state his intention to apply for CPTPP membership, Biden should at least signal U.S. interest in eventually being part of a comprehensive, high-standard regional trade arrangement. Second, he should set out his conditions for the kind of agreement the United States could sign on to. This would presumably include the addition of USMCA-plus provisions on labor, the environment, and the digital economy, and the removal of ones seen to favor large corporate interests.

Third, Biden could announce other steps the United States is prepared to do now to get it back on the path to a comprehensive regional trade deal. He could state the U.S. intention to join Singapore and other Asia-Pacific partners in the Digital Economic Partnership Agreement (DEPA) and to build out APEC’s work on cross-border data rules. He could propose initiatives with like-minded partners in the region to build out rules in other critical areas such as SOEs and intellectual property. These could form the building blocks of a new and improved CPTPP.

Beyond trade, Biden should incorporate other valuable economic initiatives in his APEC speech, including cooperation with like-minded partners on clean energy, high-quality infrastructure (in line with the G7’s “Build Back Better World” initiative), and capacity building in less-developed economies. But again, a U.S. economic strategy in the Asia-Pacific region without a commitment to deeper integration on trade will not be credible to partners there.

In a recent opinion piece, Thomas Friedman called China’s application to join CPTPP a “tragic comedy” and a “deliciously mischievous ploy.” In fact, the Chinese bid is deadly serious, but not because of what it says about Beijing’s motivations or intentions. Rather, it shines a spotlight on the United States’ own tragic error in walking away from TPP and not replacing it with something equally powerful. In mid-November, when he is center stage at APEC, President Biden has a chance to open a new act.

Matthew P. Goodman is senior vice president for economics at the Center for Strategic and International Studies (CSIS) in Washington, DC.

To read the full commentary from the Center for Strategic and International Studies, please click here.

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