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Biden Administration’s Trade Challenges on China’s Dependence

WASHINGTON

The United States is revising its foreign policy to reduce Beijing’s manufacturing capacity and also investing in its alternative options to break the habit of dependence on China. Used to be, According to The Wall Street Journal (WSJ).

US President Joe Biden has rejected pleas to join an agreement such as the Trans-Pacific Partnership (TPP), a pact between 12 Pacific Rim economies, or to use America’s market access as a tool of diplomacy.

Citing the reason, according to the WSJ, US Trade Representative Catherine Tai last week reiterated progressive criticism of free trade, arguing that China’s influence on the world’s production networks has increased rather than decreased.

The emphasis on efficiency and low cost in past trade deals, he said, “led to significant material coming from countries that are not even parties to the agreement.” “These rules only benefit those countries that have used unfair competition to become production hubs.”

But the question remains, how did China benefit from a free-trade agreement of which it is not a member? And the answer is “rules of origin,” which determine how much of a product’s value can come from outside a free trade area and still qualify for duty-free access.

That’s why the former US Trump administration renegotiated the North American Free Trade Agreement, as its rules of origin were so loose as to allow a growing share of auto materials to originate outside North America, particularly in China. Went.

As the WSJ reports, a similar argument against the TPP was seen when former President Barack Obama and former President Donald Trump rejected it.

Many Asian countries would like Biden to rejoin the TPP or transform its less formal Indo-Pacific Economic Framework into a free trade agreement that lowers trade barriers. But in any trade deal with the US, they aim to take advantage of their existing supply chains that are already tightly integrated with China. The result will be more, not less, dependence on Beijing.

Tai refrained from aiming at China in his remarks because Biden administration officials want to avoid unduly upsetting Beijing or confirming its allegations (and concerns of allies) that the US maintains a “Cold War mentality”.

It’s also because Tay, like Biden, sees free trade not just with China, but in general, as part of a discredited orthodoxy that has hurt efficiency and consumers while undermining workers, the environment and national security. Gave priority to Instead, they support industrial policy and buy-American incentives, a theory I have called “Bidenomics.”

“We’ve decided to replace this theory with what the press is now calling ‘Bidenomics,'” Biden said at a campaign-style event in Philadelphia on Saturday. “I don’t know what it is. But it’s working.”
From forging closer ties with India, which aspires to be an alternative manufacturing base to China, to negotiating key mineral deals with Europe, Biden is seeking to address weaknesses, the WSJ reported.

Recently, when Prime Minister Narendra Modi visited the US, the two countries signed agreements on the co-production of jet engines for the Indian Air Force, defence industrial cooperation, cooperation in the space sector, semiconductor supply chain and innovation partnerships, and emerging artificial intelligence. signed a cooperation agreement. technology.

According to the publication, Tai is right because trade agreements that increase the world’s dependence on a potentially hostile country undermine US security. Avoiding this should be the goal of future trade agreements. For example, the TPP’s rules of origin could be renegotiated to discourage inputs from non-market economies, ie, China.

For the US, flexible supply chains mean “having more options running through different sectors,” Tai said. Done correctly, trading can create those options.

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