Joe Biden halts Indo-Pacific trade deal plan after opposition from Democrats

Stay up to date with free updates

Just register US trade myFT Digest – delivered straight to your inbox.

Joe Biden’s plan to unveil a crucial part of his Indo-Pacific economic strategy has been scuttled by opposition from Democrats in Congress, just as the US president prepares to meet with Chinese President Xi Jinping in San Francisco.

The US aimed to finalize key elements of its trade pillar of the Indo-Pacific Economic Framework this week at the Asia-Pacific Economic Cooperation Forum. It would have signaled to China that the United States and its partners could work together on a strategy that Washington hoped would counter China’s growing economic power.

But the White House has made an abrupt about-face under pressure from influential Ohio Sen. Sherrod Brown and other Democrats who are worried about the impact of a new trade deal on their election prospects next year.

“We just gave China a one-two punch,” a former U.S. official said. “American politics is dysfunctional and America has no economic agenda for Asia.”

Allies and partners were never keen on IPEF, in part because it does not provide U.S. market access, but they believed it was better than nothing. Some, including Japan, hoped it would provide a bridge to U.S. entry into the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership, a comprehensive trade agreement that grew out of the Trans-Pacific Partnership Agreement from which then-President Donald Trump withdrew in 2017.

U.S. Trade Representative Katherine Tai informed her counterparts of the decision over the past two days, an American official said.

“It shocked our trading partners, many of whom were cautious about IPEF from the start but were nevertheless willing IPEF participants in the hope that it would lead to greater U.S. economic engagement,” said Wendy Cutler, vice president for Asia Institute for social policy. The abandonment of the IPEF was a “big setback,” she said.

Officials from the U.S. and its partners have stressed that they have made significant progress in trade negotiations, but the prospect of a deal next year is becoming increasingly bleak as elections approach.

“It’s hard to imagine how the policies that have guided the Biden administration’s decision-making to date will change as the U.S. presidential election approaches,” said Jake Colvin, president of the National Foreign Trade Council, who added he hopes that the progress made so far could serve as a building block for the future.

Brown, the Democratic chairman of the Senate Banking Committee who has an outsized say on trade issues, praised Biden for not advancing the trade pillar because of what he said was a “lack of enforceable labor standards.”

A vocal critic of trade deals, Brown is one of the Republican Party’s top targets in 2024. His policies have performed well in Ohio, a Midwestern state that has leaned more toward Republicans in the last decade as factory jobs have moved to developing countries.