In One Sentence

• USTR Katherine Tai said that the Biden administration is advancing a “new story” on trade, reiterating the administration’s “vision” of a resilient, inclusive and sustainable trade agenda.
• A major element of this approach is that “industrial policy and trade policy must work hand-in-hand” to address supply chain issues spurred by the COVID-19 pandemic and geopolitical tensions.
• USTR Tai also expressed a need for flexibility and regionalization, with “different outcomes…in different contexts,” rather than a ‘one size fits all’ approach.
• Undergirding this trade agenda is a sensitivity to sustainability and workers’ rights.
• USTR Tai also touted the Biden administration’s consistent preference for multilateral approaches to complex trade problems through fora like the Indo-Pacific Economic Framework (IPEF), the Asia-Pacific Economic Partnership (APEC), and the World Trade Organization (WTO).
• On the Indo-Pacific Economic Framework (IPEF), the next negotiating round is set to take place from May 8-15 in Singapore.
• The U.S. Chamber of Commerce expressed its “profound concern” to the White House regarding the Department of Justice and the Federal Trade Commission’s objections to the competition and digital trade texts tabled by the USTR within the IPEF talks. 
• The U.S.-EU Trade and Technology Council, meanwhile, has an upcoming meeting scheduled in Sweden from May 30-31.
• The European Union passed the European Chips Act to mobilize 43 billion euro of public and private investments to bolster Europe’s semiconductor industry.

Mark the Essentials

• Commenting on transatlantic economic engagement so far via the Trade and Technology Council (TTC), European Commission Executive Vice President and Trade Commissioner Valdis Dombrovskis said that the U.S. and EU must “deliver more on the trade side” and that the TTC should “be even bolder in its ambitions.” He pointed to the need for more efforts on digital and sustainable trade and for “clear trade deliverables” coming out of the next TTC meeting. 
• Dombrovskis added that a U.S.-EU deal on the U.S. electric vehicle tax credits is a “necessary step” to demonstrate the United States’ “seriousness about removing unnecessary trade obstacles.” According to the Vice-Chair of the American Chamber of Commerce to the European Union (AmCham EU), Kaarli Eichhorn, the U.S. tax credits could be viewed as “distortive” under the EU’s Foreign Subsidy Regulation and lead to “structural or non-structural” countermeasures.
• U.S. businesses have again called for more transparency and deeper stakeholder engagement with regard to the on-going IPEF negotiations. Industry representatives have expressed concerns on the lack of clear benefits to justify U.S. private investment in IPEF member states as well as the Biden administration’s refusal to negotiate market-access provisions despite calls from other IPEF participants. 
• The Wall Street Journal characterized the Department of Justice and the Federal Trade Commission’s intervention in the IPEF talks as an attempt by the Biden administration to lean on foreign governments to implement its “anti-business” antitrust agenda, given that the administration is falling short on this count on the Hill and in the courts. 
• Meanwhile, U.S. officials “applauded” a new biofuel policy by Japan, which expands U.S. biofuel producers’ access to the Japanese market. The U.S. and Japan also concluded a deal on critical minerals in the same week, which the U.S. Department of Treasury cited as an “example” of a “free trade” deal that would allow industries in a U.S. ally state to benefit from U.S. electric vehicle tax credits. 
• Under the recently passed European Chips Act, the EU plans to mobilize more than 43 billion Euro of “policy-driven,” public and private investment until 2030 to strengthen Europe’s technological leadership and bolster competitiveness and resilience in the EU’s semiconductor industry.

Keeping an Eye On…

• May 2023 promises to be a busy and critical month for U.S. Trade Representative Katherine Tai. She will host both the APEC and IPEF ministerial meetings in mid-May, followed by a trip to Sweden in late-May to engage her European Union counterparts within the Trade and Technology Council. To lay the groundwork for progress at these meetings, she has been racking up the air miles, visiting Japan and the Philippines this week. Three weeks earlier, she was in South Korea. Her most serious IPEF and TTC-related challenges might be closer to home, though. Within the past week, it has come to light that the Department of Justice (DOJ) and the Federal Trade Commission (FTC) have leant on the Office of the USTR and enjoined it to revise the digital economy and competition enforcement provisions in the United States’ IPEF texts. The specifics are not known. With prior digital economy chapters in trade agreements being a veritable laissez-faire giveaway to U.S. corporate interests, presumably the view of the Biden administration is that the time has now come to carve out wider policy space—in terms of worker-centric as well as consumer protections—to regulate dynamic and fast-paced digital markets. Presumably, the DOJ and FTC missive is also the reason why USTR has failed to release even a plain-vanilla summary of IPEF’s second negotiating round in Bali; a full month after its conclusion. Bali is, after all, where USTR had tabled the digital economy text. Critics have castigated the DOJ and FTC intervention as a backdoor attempt to foist the administration’s anti-trust agenda via international agreements, given the roadblocks on this front in the domestic court system and on Capitol Hill. Be that as it may, the DOJ and the FTC’s unseemly intervention has shone a spotlight on a cardinal truth: that it is difficult to lock down international trade rules in fast-evolving policy areas where underlying domestic regulation is itself in flux. Without regulatory certainty at home, it is hard to negotiate purposefully abroad. That the U.S. is at the back of the queue among the major economic actors in terms of digital economy regulation—be in terms of anti-monopoly protections, privacy and data protections, fintech-related financial stability risk management, review of liability protection for intermediary service providers, development of rules for artificial intelligence (AI) applications or, for the matter, requiring the transparency of the structure, use, and impacts of algorithmic systems—is an added and untimely complication for the USTR. Stay prepared for further twists and turns in the digital economy and competition policy negotiations within IPEF’s trade pillar.

Expanded Reading

• The FTC Is Working With the EU to Hamstring U.S. Companies, The Wall Street Journal,  April 19, 2023 [Paywall]
• EU takes on United States, Asia with chip subsidy plan, Reuters, April 18, 2023 [Paywall]
• European Chips Act, European Commission, April 18, 2023
• Stalled Chinese investment deal set to return to EU agenda next month, South China Morning Post, April 18, 2023 [Paywall]
• EU’s Dombrovskis sees some progress on steel, battery minerals talks with U.S., Reuters, April 14, 2023 [Paywall]
• Highlights from the Semafor World Economy Summit, Semafor, April 14, 2023
• Indonesia to propose limited free trade deal with US on critical minerals, Reuters, April 10, 2023 [Paywall]
• Remarks by Ambassador Katherine Tai at American University Washington College of Law, Office of the U.S. Trade Representative, April 5, 2023
• Making the Foreign Subsidies Regulation work, AmCham EU, April 4, 2023
• Factbox: Economic reliance on China that EU wants to ‘rebalance’, Reuters, April 4, 2023 [Paywall]
• Sweden to host Transatlantic Ministerial Meeting in May, Government Offices of Sweden, April 4, 2023
• United States to Participate in Third Indo-Pacific Economic Framework (IPEF) Negotiating Round in Singapore, Office of the U.S. Trade Representative, April 3, 2023
• U.S. grants free trade status for Japan under new EV tax credit rules, Kyodo News, April 1, 2023 [Paywall]
• Japan’s New Biofuels Policy Allows for Increased Exports of U.S. Ethanol, Office of the U.S. Trade Representative, March 31, 2023