How unilateralism is hurting US trade policy

The Biden administration likes to say that leaving market access commitments out of the Indo-Pacific Economic Framework (IPEF) is “a feature,” not a “bug.” In reality, it’s a bug precisely because it’s a feature.

Last week, Mary Ng, Canada’s minister of international trade, told the press that Canada’s exporters are thriving, despite the tough economic times. Why? Because they’re tapping markets access commitments in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The U.S. isn’t in on this action.

CPTPP is the trade deal formerly known as the Trans-Pacific Partnership (TPP). It’s the deal that President Trump quit and President Biden refuses to rejoin. The U.S. is paying dearly for exiting, and staying out of, TPP. And things are about to get worse.

Biden’s answer to CPTPP is IPEF. The deal’s provisions won’t be enforceable in the “traditional” sense. Instead, they’re supposed to be “self-enforcing” and “incentive-based.” For whatever this means, it will not compensate U.S. exporters for the fact that CPTPP gives Canadian rivals tariff-free treatment on 99 percent of goods, 94 percent of agricultural products and 100 percent of fish and forest products.

Adding insult to injury, India announced last month that it will not be joining IPEF’s trade “pillar.” At the same time, Canada and India went back to the negotiating table for a fourth round of talks, hoping to conclude a trade deal by 2023. The deal will have market access commitments like those under CPTPP, as well as those concluded between the European Union (EU) and India.

How will self-enforcing and incentive-based trade under IPEF measure up against the market access commitments in CPTPP and Canada-India? There’s no doubt IPEF has carrots to offer. Given the politics of “ally shoring” and “national security,” IPEF’s 13 other members are likely to work hard to placate Washington. They’ll also want to get in on U.S. industrial policies rolled out in support of IPEF’s four “pillars.”

Yet, IPEF also includes a big stick, one that only the U.S. has the market power to wield. In the absence of dispute settlement, Washington will be judge, jury and executioner when it comes to transgressions, both real or perceived. As Simon Lester speculates, for example, the U.S. might preclude a member from participating in “regional supply chains” to get it to comply with Washington’s worldview. That’s called unilateralism.

Unilateralism has political cache on both sides of the aisle, albeit for different reasons. It’s ironic but unilateralism fits with “America First” trade policies aimed at influencing others abroad, as well as with “progressive” trade policies aimed at closing markets at home.

Under Trump, an unwavering faith in the U.S.’s market power led to aggressive use of tariffs. The logic was that the cost of protectionism could be passed along to exporting countries. It didn’t work, least of all against China. Under Biden, this same logic anchors much of the talk about self-enforcing and incentive-based trade under IPEF. The interesting question is how much of this unilateralism will trigger litigation at the World Trade Organization, and damage U.S. foreign policy more generally.

Leaving market access commitments out of IPEF was no accident. It was a “feature” in the sense that it was meant to impede trade. It’s also a “bug” in that trade deals aren’t easy to design for this purpose, and IPEF doesn’t exist in a vacuum.   

Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at the Walsh School of Foreign Service, Georgetown University. Follow him on Twitter @marclbusch.