Claude Barfield
As I wrote recently, the Biden administration has for months promised to advance a robust and comprehensive policy for the Indo-Pacific to counter China’s growing economic and strategic power in the region. A digital trade pact stands at the heart of that initiative. At this point, however, it’s “promises, promises” with no concrete results. Meanwhile, China has applied for membership in both the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the Digital Economic Partnership Agreement, which have the most advanced e-commerce provisions of any global digital trade deal.
China’s move may be a head fake, as it certainly could not sign up for these agreements’ legal obligations today. But the move does starkly illumine how US leadership on digital international rules has faltered in recent years. Two recent Chinese actions further underscore this point: Beijing just published a five-year digital economy plan to expand its global reach and enacted a cybersecurity law that will broadly regulate and restrict data generated by domestic and foreign companies within its boundaries.
While details of the Biden administration’s Indo-Pacific framework are still being negotiated internally, it is clear that digital policy has presented particularly difficult substantive and political challenges. From the outset, differing voices both inside and outside the administration have been divided on the goals and actual content of a US-led regional digital agreement. For brevity within this blog space, the progressive wing of the Democratic Party (both elected officials and interests groups) see a digital trade pact as furthering the interests of Big Tech, with whom they are at great odds. Within the administration, US Trade Representative Katherine Tai has been a conduit for these views, pitting her agency against the urgency pressed by officials of the State Department and National Security Council (A personal confrontation between Tai and National Security Adviser Jake Sullivan spilled out into the press last summer.)
For Tai and the progressives, a digital agreement should carry forward the aims of a “worker-centric” trade policy with strong provisions on labor rights, inclusion and equity mandates, special incentives for small and medium-sized businesses, trade adjustment assistance, and strong privacy protections, among other social reform advances. Last-minute internal interagency deliberations are focused on some fusion of traditional digital rules (free flow of data, no localization) and progressive demands for social justice requirements as part of any US proposal.
The administration has described the upcoming Indo-Pacific plan as a “framework,” and Tai has suggested that the US-EU Trade and Technology Council (TTC) could serve as a model for the institutional portion of the administration’s upcoming plans — including the digital rules. But therein hangs a fundamental flaw in the US response: The TTC is an advisory body with no binding rulemaking authority. Ironically, both the US business community and the progressives want binding rules, though in very different areas and for very different reasons.
Fearing a political quagmire, however, the Biden administration has no plans to ask Congress to renew presidential authority to negotiate legally binding, enforceable trade agreements. A memo to US diplomats stated, “To be clear, this initiative will not include new market access commitments.” The fallback must be executive agreements which cannot change existing US law and can be amended or negated at will by future presidents. US trading partners in the Indo-Pacific will certainly be reluctant to commit to important advances on digital trade (or on other key areas) on such terms.
Clearly, there is a lot to be decided both substantively and politically, though at this point, the prospects of a game-changing US response in the Indo-Pacific appear dim. We will follow this as the Biden administration reveals the details of its long-awaited Indo-Pacific framework.
Courtesy: (AEI.org)
