Regulatory policy

Biden must strengthen his trade policy to compete with China

China’s growing political assertiveness and military ambition, fueled by decades of high-speed economic growth, now threaten to undermine U.S.-Asian economic relations. Companies in the region have already adjusted their business operations to offset the potential impact of the strategic economic decoupling between the United States and China. If current geopolitical tensions persist, the conventional supply chain network that has supported Asia’s economic growth for decades will be altered.

At the institutional level, China is actively working to expand its influence through bilateral and multilateral free trade agreements (FTAs). Beijing has signed the ASEAN-China Free Trade Area (ACFTA) and the Regional Comprehensive Economic Partnership Agreement (RCEP). China has also expressed its willingness to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a regional trade pact with higher standards than RCEP.

Unless the United States becomes active in the FTA arena, its economic position in the region will deteriorate severely. Indeed, if the United States stands still while China strikes more institutionalized economic deals, Beijing could gain enough clout to overhaul the regional economic order, using its influence to determine the rules and regulations of trade deals there. regional scale.

It is still unclear whether China will be able to do this, but it certainly would. After all, Beijing has become adept at abusing and sabotaging existing international trade and investment rules to advance its political interests. Notable examples include its imposition of economic sanctions against South Korean companies when South Korea deployed its high-altitude terminal area defense systems in 2017, its trade barriers on Australian products, and its import ban on several products. Taiwanese farmers.

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Why is China now so actively involved in making regional trade pacts? Two of its main objectives are to facilitate technology transfer and expand market access throughout the region. As Beijing intensifies its political confrontation with the United States, China needs alternative sources to continue its technological advance and reduce its dependence on the American market. Closer economic ties with other Asian countries through FTAs ​​will also strengthen China’s role as an “indispensable man” in the regional production network, thereby increasing its bargaining power on vis-à-vis political issues. to the United States and its allies.

The region has enjoyed peace and prosperity for nearly eight years thanks to a strong US military presence and private sector economic relations in the region. However, the region’s stability and development are undermined when the Chinese government uses its economic clout to gain political advantage, as it is currently doing. The region needs American leadership to check China’s bad behavior and restore order. Individual Asian countries cannot fight China alone. Neither Asia nor the United States can allow Beijing to sabotage mutual benefits built on decades of collective effort.

US military ties with Asia remain strong. It maintains its bilateral security treaties with its allies in Asia. About a third of all US arms exports in 2020 went to six countries in the region: Taiwan, South Korea, Japan, Australia, New Zealand and India.

Economic ties, however, have gradually diminished as China has become the factory of the world. Asian countries are increasingly exporting their raw materials and semi-industrial goods to China for final assembly, instead of exporting directly to the United States.

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The Biden administration’s Asia policy is disappointing not only because of its lack of substance, but because its empty economic commitments could drive Asia away from America’s safe harbor.

China is embedded in the global economy. Washington is not going to change that, at least not by itself. But Asia needs the United States to be both an important counterweight to China’s growing political influence and an economic cover to resist China’s economic coercion.

The Indo-Pacific Economic Framework is a starting point, but more concrete steps are needed to strengthen U.S.-Asian economic relations. Reviving a free-market American order is essential to maintaining US economic influence and regional prosperity and security.

This coin originally appeared in National Interest https://nationalinterest.org/blog/buzz/biden-must-beef-his-trade-policy-compete-china-204247