In One Sentence

• The Office of the U.S. Trade Representative (USTR) told Congress that new strategies are needed to address China’s harmful trade practices.
• The Pentagon called for a “whole-of-government response” to counter the impacts of China’s government subsidy programs in the microelectronic manufacturing sector.
• The White House considers the Indo-Pacific Economic Framework (IPEF) to be a central pillar of its Indo-Pacific Strategy to counter China.
• The Biden administration is looking beyond traditional free trade agreements in favor of a “bespoke, tailor-made approach” to trade policy. 

Mark the Essentials

• Calling domestic trade tools a “key focus of U.S. trade policy toward China,” the Office of the USTR said the administration will “strategically” use such tools, but did not elaborate on the specific choice of those tools. 
• According to the Pentagon, U.S. microelectronic manufacturing capabilities must be strengthened to reduce America’s reliance on Pacific Rim countries for the supply of critical military technologies. 
• Aimed at countering China’s influence by bolstering U.S. relations with “allies and partners” in the region, the IPEF, under the Indo-Pacific Strategy, plans to promote “high-standards trade,” catalyze investment in “transparent, high-standards infrastructure,” and “advance common approaches” to the digital economy and emerging technologies.
• A USTR official said the office is looking into ways to work with allies on “common challenges” from non-market economy practices on inclusiveness, workers rights, and other areas of “common interests.”

Keeping an Eye On…

• The Biden administration has a three-pronged approach with regard to its economic and trade strategies towards China. The first prong focuses on bilateral trade. In addition to holding China to its commitments in the Phase One trade deal, the administration presumably will seek to address and tackle fundamental issues, such as non-market industrial subsidy practices in any future trade negotiations with China. The second prong focuses on economically deepening region-wide partnerships with allies and partners in order to shrink China’s relative economic footprint in the region. The soon-to-be formally released Indo-Pacific Economic Framework is the key deliverable in this regard. The final prong focuses on enhancing industrial competitiveness at home and shielding domestic firms from the full brunt of Chinese competition, using existing and new trade policy tools. This third prong is frequently referred to as the administration’s ‘worker centered’ trade policies. The three prongs appear fine in theory. It is in their real-life application that the administration has so far found itself wanting. With the exception of the significant investments being made in U.S. industrial competitiveness, a common denominator across each of the three prongs is the administration’s lack of purposefulness and unwillingness to grapple with the hard challenges at hand. Top administration trade policy officials can barely sit across the table with China, lest the latter insist on the removal of the self-defeating tariffs. The administration’s regional consultation with allies and partners on the IPEF has been shallow, lest the latter insist on reciprocal access to U.S. markets. And the willingness to roll out new trade tools, as part of the worker centered philosophy, has been slow because the trade tools that the administration prefers will inevitably have a protectionist bent—and in some instances might even be WTO-illegal. Besides, not much intellectual or policy work has gone into the framing of these supposed new trade tools with partners, meaning tools like the IPEF and the U.S.-EU TTC will face difficulties delivering actionable blueprints in this regard. 

Expanded Reading

• ​​Defense Department Releases Report on Strengthening Defense-Critical Supply Chains, U.S. Department of Defense, February 24, 2022
• NOTEWORTHY: Indo-Pacific Strategy of the United States, Center for a New American Security, February 17, 2022
• USTR says new trade tools needed to fight China state-led trade, Reuters, February 17, 2022 [Paywall]
• USTR Releases Annual Report on China’s WTO Compliance, Office of the U.S. Trade Representative, February 16, 2022
• Joe Biden’s new Indo-Pacific Strategy: A view from Southeast Asia, Lowy Institute, February 16, 2022
• Navigating an Evolving Global Trade Landscape: What’s Ahead in 2022, LA Area Chamber of Commerce, February 16, 2022
• FACT SHEET: Indo-Pacific Strategy of the United States, The White House, February 11, 2022