What to expect from APEC?

What to expect from APEC?

Ecology

November 7, 2023 • 12:05 PM ET

What to expect from APEC?

by
Niels Graham

On November 15, US President Joe Biden, along with the leaders of twenty other Pacific economies, will head to San Francisco to attend the 30th Asia-Pacific Economic Cooperation (APEC) forum. The primary goal of the Biden administration’s 2023 host year for the Asia-Pacific Economic Cooperation (APEC) forum was to “demonstrate the United States’ enduring economic commitment to the Indo-Pacific region.” On the sidelines of the forum, President Biden is also widely expected to meet with Chinese President Xi Jinping for a conversation that is likely to help set the tone for the economic and political relationship between the world’s two largest economies for the coming year. While a successful meeting with Xi could advance key economic and political priorities in the short term, the most impactful economic announcements coming from the Asia-Pacific Economic Cooperation (APEC) will likely not involve them sitting down.

This is because the United States is expected to make several major announcements on its Indo-Pacific Economic Framework (IPEF) as well as a number of bilateral investment deals with member economies of the Asia-Pacific Economic Cooperation (APEC). These announcements will highlight the economic dimension of the US pivot to Asia and will cover a range of topics related to US economic security. Here’s a summary of what to expect.

IPEF background

Launched in the spring of 2022, the IPEF is designed to re-establish US economic engagement in the region and provide an alternative framework for China. This agreement is Washington’s first attempt to put forward a positive economic agenda in Asia since its withdrawal from the Trans-Pacific Partnership in 2017 (the Trans-Pacific Partnership later collapsed). The IPF includes all the Asian members of the Trans-Pacific Partnership plus South Korea, as well as India, Thailand and Indonesia – three large emerging economies responsible for much of the region’s expected growth. The United States is betting that these emerging markets will support Washington’s efforts to reduce its dependence on Chinese trade and facilitate the development of new supply chains in friendly economies – a policy Washington has called “friendshoring.”

IPEF provides a platform for the United States and its negotiating partners to agree on “trade barriers behind borders,” such as disparate rules and regulations, or ambiguous compliance regimes. IPEF also provides an opportunity to create a unified, multilateral set of rules and standards for vital economic issues such as worker protection, supply chain resilience, and the green transition.

IPEF is designed around four distinct chapters or “pillars”: Trade; supply chains; Clean energy, decarbonisation and infrastructure (clean economy); Taxation and anti-corruption (just economy).

With the supply chain agreement already published earlier this year, it is widely expected that the United States will use the Asia-Pacific Economic Cooperation (APEC) forum to officially launch the Clean Economy and Fair Economy chapters. Elements of the trade pillar may also be published during the APEC summit, although negotiating officials have indicated that it is the most lagging behind of all the pillars, so it is unlikely that they will be able to publish the final text. Across the pillars, commitments that help align regulations and facilitate trade between the US economy and the large, fast-growing economies of Indonesia, Vietnam, and Thailand will be paramount.

The “just economy” and “clean economy” pillars developed by IPEF

While details on the final arrangement have been scarce, angering Congress, IPEF’s Fair Economy Chapter is likely to aim to make progress in combating corruption and financial crimes and improve tax administration and information-sharing among IPEF economies. The United States has proposed to do this by encouraging its IPEF partners to make a series of non-binding commitments to:

  • Adopting and enforcing the necessary measures to prevent bribery and related corruption crimes.
  • Increase transparency regarding measures to identify, trace and recover proceeds of crime.
  • Establish confidential systems for reporting corruption in the public and private sectors.
  • Implementing international transaction standards developed by the Financial Action Task Force.
  • Enforce labor rights and ensure respect for migrant workers.
  • Promoting better tax administration practices and capabilities through increased cooperation and information exchange.

To achieve these goals, the United States has offered technical support and capacity building. Given the wide range of development levels enjoyed by IPEF members, strong exchange of information and technical support across the framework can significantly improve the economic prospects of its members. If implemented effectively, such anti-corruption and anti-tax measures could boost trade and investment among GEF economies.

Like the Fair Economy Chapter, the Clean Economy Chapter is likely to consist of a series of non-binding commitments. It expands on existing APEC commitments towards clean energy transitions, decarbonisation, and scaling up and reducing the cost of green infrastructure development. Although little has been released regarding the text of the final agreement, the United States has proposed to do so by:

  • Strengthening cooperation in the field of research, development, marketing and dissemination of clean technology in priority sectors.
  • Promoting demand for low- and zero-emission goods and services.
  • Identify and improve access to public and private investment and financing for climate-related projects.
  • Managing risks for IPEF’s citizens and economies against future impacts of climate change.
  • Enforce labor rights and ensure respect for migrant workers.
  • Promoting better tax administration practices and capabilities through increased cooperation and information exchange.

The United States aims to achieve these goals by sharing experiences with its IPEF partners on laws, regulations, and policies that will help economies reduce greenhouse gas emissions and promote the green transition. The United States also aims to turn the clean economy chapter into a platform for IPEF partners to collaborate on mutually beneficial initiatives and projects that advance shared climate goals.

Bark or bite?

Announcements by the United States and its IPEF partners on the clean energy and fair economy pillars will provide a good indication of the policy directions these economies plan to take in the future, but will have little immediate impact. Without binding commitments, the declarations will serve as starting points for future action that countries may pursue. More important is the readiness and ability of the International Fund for Organ Transplantation countries to follow up. The same applies to any new updates regarding the already published Supply Chain Chapter which aims to address supply chain disruptions proactively and as issues arise, by encouraging shared value chains and creating a crisis response network.

The most immediate implications for companies operating throughout the Indo-Pacific region will likely stem from disclosures around the trade chapter, which, according to US Trade Representative (USTR) Katherine Tai, will include binding commitments on some of the issues it covers such as agricultural trade. cross-border trade in services, and customs and trade facilitation. Because it will contain at least some binding provisions, agreement on the text of the trade pillar could be seen as an end in itself. This is in contrast to the other three pillars of IPEF whose impact will be determined by their implementation.

IPEF is the first trade agreement between the United States and four of its five fastest-growing trading partners in the Indo-Pacific region. Across all pillars of the framework, IPEF can help align the United States with these economies.

In addition to trade announcements for goods and services that will largely be led by the International Environment Forum, the United States will also seek to highlight the impact of private sector investments in the region through the Asia-Pacific Economic Cooperation (APEC) CEO Summit.

In contrast to goods trade, which has risen between the US and APEC economies, according to data from the US Bureau of Economic Analysis, US investment in APEC countries (excluding Canada and Mexico) has been stagnant in the past five years. . Excluding China, investment actually fell by just over 1%. This is largely due to the significant decline in US foreign direct investment in the region’s advanced economies such as Japan and South Korea. In contrast, many emerging economies have outpaced the growth of overall global FDI in the United States. For example, US foreign direct investment in Malaysia, India, and Vietnam increased by 12, 14, and 40%, respectively, from 2017 to 2022. Many US companies are increasingly looking to partner economies like India and Vietnam as an alternative hub to China for goods. Production and transfer of new investments there.

Implementing the IPEF program would greatly support the United States’ friendship efforts. It would make it easier for companies to trade and invest with partner economies, and encourage efforts to shift supply chains from China to emerging economies such as India, Vietnam and Indonesia. An ambitious forum with high standards — and incentives for countries to implement them — could help codify America’s preferred standards and rules on a range of issues such as labor, environmental protection, and digital privacy.


Niels Graham is Associate Director of the Atlantic Council’s Center for Geoeconomics, where he supports the Center’s work on the economy and trade in China.

At the intersection of economics, finance and foreign policy Center for Economic Geography It is a translation center that aims to help shape a better global economic future.

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Image: US President Joe Biden walks on the South Lawn with leaders of the Association of Southeast Asian Nations (ASEAN) for a group photo as Biden hosts a special US-ASEAN summit at the White House in Washington, US, May 12, 2022 REUTERS/Leah Millis

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