Today, the Asia-Pacific Economic Cooperation (APEC) Summit commenced in San Francisco, California, kicking off with a four-hour meeting between U.S. President Joe Biden and General Secretary Xi Jinping. CNAS experts Emily Kilcrease and Jacob Stokes weigh in on the implications of the summit and offer insights into the anticipated meeting.
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Emily Kilcrease, Senior Fellow and Director, Energy, Economics, and Security Program:
Is U.S. trade policy hitting rock bottom? With the failure to reach agreement on the Indo-Pacific Economic Framework (IPEF) in time to announce outcomes at this week’s APEC Summit, it appears so. The IPEF disappointment comes on the heels of the United States needlessly gutting its own position on key digital trade provisions at the World Trade Organization. The administration has been clear that it wants to make a decisive break with what it views as the broken trade policies of the past, yet recent events show there is no persuasive vision for what comes next. And time is running out to do so.
The United States has touted IPEF as its signature initiative to transform U.S. trade policy and deepen economic integration with the massively important Indo-Pacific region, which accounts for 40 percent of global trade. Yet, IPEF was always a gamble. It was designed to be a looser form of coordination, and certain areas of U.S. commitments (such as market access) that previously were used to induce other countries to sign up to hard commitments were off the table. With this week’s bust, it is becoming increasingly clear that the United States will not be able to convince negotiating partners to make meaningful commitments in U.S. priority areas, such as labor and environment, without offering something meaningful in return. Outcomes like the agreement to enhance coordination on supply chain resiliency are solid wins, but too small to overcome this fundamental flaw in the IPEF strategy. This challenge will only get harder as the United States approaches the presidential elections, as negotiating partners will become more hesitant to make hard concessions in advance of a possible political transition.
The administration is not wrong in its assessment that U.S. trade policy needs a revamp. For too long, the United States did a poor job in accounting for the losses that can come from trade. Recent events, such as the pandemic and the increasing geopolitical challenges presented by China, rightly demand a rethink of whether U.S. trade policy—and the current structure of the global trading system—is fit for purpose. But there is a danger of letting the pendulum swing too far to the other side and retreating within our own economic borders. Predictable and open markets, paired with guardrails to allow the United States to regulate in its national interest, have always been and will always be a competitive advantage for the United States. IPEF tried a new way to achieve this, but in the aftermath of its likely failure, the United States needs to think hard about what is next and how it can incentivize partners to join in its (to-be-defined) vision of a new global economic order. Trade rules need a rewrite and the United States should be the lead author, but it cannot dictate its terms to the rest of the world. Trade discussions are always a give and take based on each nation’s political priorities, and the United States needs to reconsider what it can put back on the table to achieve the bigger strategic goal of resetting the global economic order.
Jacob Stokes, Senior Fellow, Indo-Pacific Security Program:
The first meeting in a year between President Joe Biden and General Secretary Xi Jinping provides an opportunity for the world’s two most powerful countries to manage their deepening geopolitical competition. Biden comes into the meeting with a strong hand, having spent years revitalizing Indo-Pacific alliances and partnerships.
This in-person interaction will allow Biden to send clear signals of both deterrence and reassurance to Xi across a range of issues, from Taiwan to semiconductor controls. Conveying those messages is particularly important given upcoming presidential elections in Taiwan in January and the United States next November. Both are likely to spike U.S.-China tensions. Talking face-to-face also matters given Xi’s personalization of power at home, which has likely left him operating in an information bubble that distorts his perceptions of world events.
No matter what outcomes are listed in the readout, it will not be immediately clear whether the meeting produces sustainable progress. Beijing’s actions over the coming weeks and months will ultimately prove the value of this engagement one way or another. In other words, at best the meeting marks the beginning of a tenuous process of stabilization, not its end point.