Yves here. The Biden new and improved Trans Pacific Partnership, when the TPP was meant to be an “everybody but China” deal, is worse than a dud. Not only does it offer little in the way of benefits, but the US is so distracted by domestic politics (impinging on the Indo-Pacific Framework for Prosperity) that the US is showing itself to be unreliable.
By Ong Kar Jin, an independent researcher and writer focusing on the socio-political dimensions of technology and omo Kwame Sundaram, former UN Assistant Secretary General for Economic Development. Originally published at Jomo’s website
US President Joe Biden’s Indo-Pacific Framework for Prosperity (IPEF) is the economic arm of his administration’s Indo-Pacific Strategy, aimed at countering China’s influence in the region.
Despite its lofty pronounced goals, IPEF’s shortcomings expose a disconcerting lack of political will, inconsistent trade policies, and US inability to match China’s infrastructure initiatives.
Bull in a China Shop?
Launched in Japan in May 2022, IPEF was widely touted as the Biden administration’s better follow-up to Trump’s withdrawal from Obama’s Trans-Pacific Partnership (TPP).
Many had anticipated a robust reply to China’s growing economic influence in the region, particularly following US depiction of the Regional Comprehensive Economic Partnership (RCEP) as an instrument of Chinese expansion.
China may well stand to benefit most from RCEP by virtue of its size and economic relations with the region. But outside the US echo chamber, RCEP is seen as truly East Asian led. It has involved not only ASEAN leadership, but also Japan, South Korea, Australia, New Zealand and Singapore, all long-term US allies.
In sharp contrast, IPEF has disappointed many. It seems to be little more than a half-hearted economic cooperation appendix to the Biden administration’s Indo-Pacific strategy.
The alternative US infrastructure initiative – coordinated with NATO allies in Europe – is small potatoes compared to the Asian Infrastructure Investment Bank, which – unlike most of its allies – the US has attacked from the outset.
Also, the US has no answer to China’s flagship ‘Belt and Road Initiative’ (BRI) – which succeeded ‘One Belt One Road’ (OBOR) and earlier Chinese Silk Road initiatives. BRI ostensibly focuses on critical transport and communications infrastructure like internet cables, roads, ports and railways.
These projects are seen as directly contributing to economic development, making them highly attractive to developing nations. In contrast, IPEF offerings appear more like diplomatic gestures with little for infrastructure development.
The chasm between IPEF’s lofty rhetoric and its actual content shines light on modest US capacities and commitment. US inability to offer substantial benefits through IPEF not only jeopardizes its standing, but also cedes influence to China.
Domestic Quagmires Bog Down IPEF
The hasty negotiations are seen as catering to the Biden’s re-election campaign. This is a far cry from what US allies were expecting, to signal greater commitment to the region. In its current form, IPEF offers little in tangible benefits.
As a Biden White House initiative without Congressional support, IPEF is dismissed in some circles – especially in the US – as part of Biden’s re-election strategy. It will most certainly be dropped if he does not secure a second term.
The irony is palpable: while there is bipartisan agreement to ‘contain’ China, US politics is so mired in partisan squabbles that it fails to act, even when interests are aligned. This lack of political will is not just a domestic failing; as a result, the international community sees the US as unreliable.
No More Trade Liberalization?
Despite decades of ‘free trade’ rhetoric from the US, its NATO allies, the Bretton Woods institutions and others, US commitment to trade liberalization has long not been taken seriously, especially since the Trump administration.
Before that, the Obama White House had blocked appointments to the World Trade Organization’s dispute settlement panel, effectively rendering the WTO’s most important component dysfunctional.
IPEF’s modest content is largely due to increasingly hostile US public sentiment on trade liberalization. By 2016, most presidential candidates seeking to succeed Obama – from both major parties – opposed the TPP.
While most US voters know nothing about IPEF, ‘outsourcing’ manufactured imports is widely seen as behind the decline of US manufacturing, as well as related ‘good’ jobs and incomes.
While many initially expected a more Obama-like approach from the Biden administration, policy developments so far suggest Trump’s ‘America first’ rhetoric and policies are here to stay.
Unsurprisingly, the White House has promised IPEF would “ensure American workers, small businesses, and ranchers can compete in the Indo-Pacific”. US domestic re-industrialization efforts have already triggered more blatant protectionism since Trump.
Biden’s Inflation Reduction Act denies Hyundai, the Korean industrial conglomerate, as well as other foreign automotive brands, the significant tax credits available to domestic electric vehicle manufacturers.
Outdoing Trump, the Biden administration has broadened technology bans and restrictions, e.g., in its ‘microchip war’ with China. US allies – notably the Netherlands and South Korea – have largely agreed to restrict chip technology exports to Chinese companies.
Ceding Regional Hegemony
While initially welcomed despite qualms, IPEF has not been attractive to the region, especially to developing countries, including India. It does not even offer US market access, a staple of earlier free trade agreements. Instead, it mainly seeks to impose new standards associated with the new US protectionism.
IPEF’s lack of tangible benefits is unlikely to be of much interest to member governments and prospective members, let alone their publics. Worse for the US, IPEF’s modest offer may unwittingly strengthen longer term concerns about US hegemony and leadership, instead of restoring confidence in it.
The largely cool and ambivalent reception to IPEF reflects a divide. On one side, the US and its allies seek to strengthen their hegemony in the region. On the other are the mixed interests and ambivalent attitudes of others, mainly developing countries, coping with US-China rivalry.
IPEF’s fate is compounded by domestic political constraints on US foreign policy, which have reduced its room for manoeuvre. To be attractive to the region, IPEF needs to offer more tangible benefits to current and prospective members, especially developing countries.
Thus far, it has appealed to fears of Chinese expansionism and its alleged ‘debt traps’. For all but the staunchest US allies, however, concerns about privacy, surveillance or sovereignty are secondary to the need for finance and economic development.
China understands this, often sweetening its infrastructure deals, and making them more attractive to developing countries. Without a more generous response, it will be difficult to overcome IPEF’s current reputation as a low-cost means to enhance US dominance of the region.
Currently, the US is imposing itself on, rather than trying to be supportive of the region. Hence, the IPS and IPEF run the risk of simply being the latest in a series of US hegemonic initiatives from the first Cold War’s Southeast Asian Treaty Organization (SEATO) in the 1950s to Obama’s TPP.
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‘and US inability to match China’s infrastructure initiatives’
I can’t say that I know the construction abilities of the different countries to build new infrastructure but could it be that there is really only one country that has the technical & engineering expertise along with the experience necessary to carry out such infrastructure projects and that that country is – wait for it – China?
Japan has world competitive infrastructure players. But probably not enough capacity to meet demand.
I’ve often thought that the Japanese were underperformers in worldwide infrastructure contracting, which I’ve tended to put down to cultural factors – they seem sometimes to be a little at sea when dealing with the complexities of other countries politics. They’ve lost out on a number of huge contracts in recent years despite having what seemed to be the best bids. They usually only seem comfortable when they have full control of the project.
One reason though that the Chinese have not always had success in exporting their HSR is quite simply that the Japanese own licenses on much of the technology, such as the CRH2 rolling stock. China can get away with using copies in some countries, but in most they get bogged down in legal challenges from the likes of Hitachi or Mitsubishi. So the Japanese can act as a spoiler, even if they don’t win the contract.
Japan is a weird nation. I get the impression that much of their cultural fiber is still stuck in a quasi-feudal mode, only with companies rather than estates.
And the Japanese “Politeness” is not politeness but Obsequiousness.
That is false. There are many forms of address in Japanese. All make statements about your position versus your recipient. That is why Japanese grab for business cards at the start of a conversation. They want to know your formal rank. You can’t speak in Japanese without making decisions about power.
Japanese have ways to be rude or diss people. Use the form of address that indicates you are unsure of their status when it’s clear you know it.
And as for obsequiousness, I have no idea what you are talking about. The more seemingly polite Kanto (Tokyo and environs) Japanese, when they want to screw you, will be polite and do the least important 40% of what you want done slowly. Kansei (Western Japanese, Osaka in particular) will make it clear they aren’t going along. Osaka was the original merchant/trading city for Japan and its inhabitants are direct by Japanese standards.
Its not my expert area, but somehow the Japanese seem to have spent billions on infrastructural support around Asia (the road networks in Laos and Cambodia for example) without getting any credit for it, while simultaneously souring relationships for no apparent good reason (South Korea, regularly). I suspect that the Japanese just culturally struggle with empathy for non-Japanese. It doesn’t help that (along with the Koreans and Chinese), there is a lot of unspoken contempt for darker skinned Asians.
Yeah, Japan is a xenophobic culture deep down. But less overtly so than they were between Meiji and WW2. And those expansionist imperial years likely left deep animosities that have yet to heal. And it does not help that Japan has not fully admitted to the atrocities, unlike Germany.
That’s fair. The impacts of events like the Meji Restoration still never fully reformed the older feudal system.
It’s a very complicated issue that can’t be described in one comment.
The Keiretsu business system is also very complex and has a business structure that is rather different than the Western world.
Yeah, similar-ish structures, as well as the pre-war Zaibatsu system, in Europe or USA would have been subject to antitrust scrutiny long ago (USA did make a half-hearted attempt at breaking up the Zaibatsus, only for them to later reform into the current Keiretsus).
That said, South Korea have a system very similar to the Japanese Zaibatsu, known as Chaebol. Samsung being the poster boy for that, as they are, or have been, involved in anything from electronics to ship building and military hardware.
Its interesting how the South Koreans have mirrored so many Japanese structures while usually improving them. I think if there is a key difference between Zaibatsu and Chaebol its that the former are run by something close to consensus, while the latter are still very much family affairs, for good or ill. This can make Chaebol’s more flexible and decisive when it comes to a crisis and a need for change. Also of course, it can make them very corrupt and opaque.
In my anecdotal experience, South Koreans are also much more culturally open than Japanese – more willing to learn new languages, live abroad to learn about new ways, etc. I think in the long run this will be a huge advantage to the country.
Most island nations are “weird” or eccentric. Look at England. Taiwan comes to mind also, though its history is far shorter. It may have to do with inbreeding over centuries and millennia.
England did manage to export said weirdness globally though, at least to a degree. But yeah, i do sometimes wonder if there is something in the water on that island given what it has produced in cultural exports over the generations.
The Chinese are very good at building infrastructure at home, but not particularly great at it abroad.
Its hard to make infrastructure comparisons, but most studies indicate that, to take one well studied example, Chinese HSR costs about 80% that of European lines. But almost all this cost differential is accounted for by regulatory costs, land costs, and much higher wages in Europe. The one thing they seem to be able to do much cheaper is tunneling, but this is probably down to having favourable geology in China and not having to bother so much with troublesome regulatory issues.
What the Chinese are very good at is standardization at scale and maintaining a long term focus, which is essential for keeping infrastructure costs down. However, when they try to apply this outside China, it rarely works. The Chinese built Indonesian HSR has become an expensive disaster for the government there. The Chinese contractors completely failed to recognise that they could not apply their knowhow to a very different country with a very different supply chain and work culture. This is one reason why in Africa Chinese contractors tended to insist on Chinese workers rather than training up locals.
In reality, mostly because they have longer experience of doing this, the French and Spanish in particular are much better at building infrastructure outside their own countries. This is one reason they tend to be so successful in the Middle East, they usually clean up most of the big contracts. The South Koreans are also proving to be particularly good at this. Middle Eastern States have a very long record of hiring in outside construction knowledge. The Chinese are usually way down the list unless there is some sort of sweetener in the deal. Some US construction project management companies such as Bechtel are still very highly regarded in the region, although maybe not as much as they were in decades past.
If the US wanted to build a HSR quickly and could swallow its pride, they should hire French project managers and contractors (or Japanese, if they wanted the ultra high speed chuo shinkensen). But thats never likely to happen.
I suspect the ability to maintain long term focus comes down to being a one party state.
Europe showed a similar ability back when the same political parties were elected term after term to a clean majority. That meant they could set a goal and see it through to the end, even over decades.
These days it is all traffic light coalitions and revolving doors at the top, while plans get stuck in regulatory and budgetary limbo.
To an extent this is true, but other countries have structures that have allowed long term projects to be successfully implemented – the French are particularly good at this (nuclear, TGV, etc), but they are not alone. The Spanish too have managed to put in place some very impressive long term investments and implemented them at relatively low cost – the Madrid metro being a good example. The Germans, on the other hand, seem incapable of putting in place national level infrastructure – pretty much everything they do well is at regional or local level.
I’m inclined to think its mostly down to political/administrative/financial structures. You’ll often find one particular weak point in a system that stops things getting done, and its often quite random.
That said, it helps not to be too democratic. Almost all major infrastructure projects, whether transport or power or anything else requires ignoring someones genuine objections. Developing a genuine national consensus on infrastructure is very difficult, although one example I think of it is (perhaps our friend Ignatio can comment) is the Spanish high speed rail system, which seems universally supported. It helps of course that Spain has a lot of wide open lands where you can run a line without upsetting too many people. This proved impossible in the UK with HSR.
On reason may be that Germany is a very compact federation, that in combo with recent-ish history makes it adverse to top down decrees.
And it is a bit ironic that UK struggle to build rail these days, given how big a deal their rail network was at one point (complete with two lines competing to be the fastest steam line between north and south).
I think in Germany it is mostly the federal system thats to blame. Even their electricity network is very fragmented and they seem unable to put in place decent north-south connectors.
Back in the 1990’s I worked in the UK on the HSR link to the Channel Tunnel. Not one single British engineer on the project had a days experience on building railways – most had spent their careers building motorways. There hadn’t actually been a new railway built in Britain since the 1920’s, apart from a small number of Tube lines in London. The French engineers were the only ones who knew what they were doing. There were a few excellent US engineers and project managers who had actually learned their skills on the Shanghai metro. The US company that started the work was later kicked out of China once its local staff had decided they’d learned enough and could do it by themselves.
The cold war likely didn’t help the electricity situation.
As for the north-south issue, i suspect some of that is related to Bavaria being a reluctant part of Germany.
From what I understand, its primarily a case that the relevant powers for implementing infrastructure lies with the Lander. Berlin simply doesn’t have the power or budget to force through long distance power lines or highways or new railway lines if any one Lander (or one of the numerous sub-units) along the way is unhappy with the route.
This makes it excruciatingly convoluted to carry out this type of infrastructure given the number of public and private bodies that need to be on board, so the ‘easy’ solution is to just invest within the smaller units. So you get lots of good local transport with terrible intercity railways.
I don’t think ‘more democracy’ is the problem, at least not if democracy is rule of the majority. The majority was behind the major 20th century infra projects, and they continued as admins changed. What is different now is the ability of small minorities to stop projects. We used to not allow such stoppages, granted sometimes with violence. Apparently still France doesn’t, but they’re thought of as a democracy.
Our parties’ control of the ballot is an example of rule by a small minority, donors writing laws of interest to them is another, granted the latter controls the former. Imo we have shifted from a democracy to rule by oligarchs plus obstruction by any and all… in a word, chaos.
I suspect that a lot of this is because the Chinese are newer at building infrastructure abroad. Keep in mind that the Chinese are still a middle income nation, although still in high growth mode (just not the very rapid double digit mode they were in).
Over time, I am expecting to see the Chinese become more proficient at navigating the geopolitical environment outside of China. It comes down to experience more so than anything else.
At that point, I am expecting to see the Europeans and Japanese lose marketshare the way they lost manufacturing marketshare.
I wouldn’t be so sure about this. Chinese investment comes with too many unwritten conditions for most countries – in other words, they are the new USA, and they are particularly reluctant to share technology or know how (even to the extent of only using Chinese staff). Its hard to exaggerate just how deeply resented this is ‘on the ground’ by smaller countries.
Small to medium sized countries are far more comfortable dealing with other small to medium sized countries in deals with fundamental importance to their future. Cost is all that matters when it comes to buying finished products, but soft power matters equally when it comes to construction/management partnerships. In simple terms, everyone is happy to buy Chinese solar panels, and they are very happy to take any cash being handed out or lent at easy rates, but giving even partial control over key infrastructure is a very different matter.
I would expect players like ROK, Vietnam, Turkey and Indonesia to do the eating of Europe/Japans lunch when it comes to these sectors. They have the advantage of learning from everyone else’s mistakes and do not come with the perception issues of the US/China/Russia/UK.
“and they are particularly reluctant to share technology or know how”
Round and round we go. Same thing was going on back when USA was industrializing by running of with English patents (Slater the traitor beyond a big example), and now China is trying to avoid what they themselves did to US and European knowhow in turn.
History repeating or rhyming, hard to tell the difference at times.
I’d have to disagree. Cost isn’t all that matters for finished goods. As the recent trade wars indicate, there are domestic issues too for manufactured goods, such as jobs, which contributed to the rise of politicians like Trump. Yet none of this has stopped the Chinese from becoming and holding the dominant power in manufacturing.
Where geopolitical concerns are raised in, often what ends up happening is that intermediary nations like Mexico are used to pretend that the world isn’t as reliant on China.
https://twitter.com/philippilk/status/1723964887741673526
It is literally the manufacturing industry equal to the Europeans pretending to be buying oil form India and not Russia after the launch of the Special Military Operation.
Finished products are every bit as critical as infrastructure. Nations can’t function without finished goods nor infrastructure. It’s not just finished goods. It’s also capital goods, which I would say are in some ways similar to infrastructure. Volumes are lower and cost is not the only factor. Capital goods are also vital to a nation. They are literally buying the machines that make the goods that their society needs for domestic customers and exports. Certainly with a modern consumer economy, that’s critical, and also as important, China has been displacing the Germans along with the Japanese on capital goods manufacturing.
Capital goods and many consumer goods such as automobiles also require a long term reliance on that exporting nation, such as in automotive parts. Its not a matter of buy the car and the importing nation is done. In that regard, it’s quite similar to infrastructure in that ongoing maintenance requirements mean a long term dependence on another nation for critical functions in society. China is becoming a bigger player in the automotive industry.
https://europe.autonews.com/automakers/china-overtakes-japan-top-vehicle-exporting-country
Every nation has its terms and conditions on exports and infrastructure. Apart from the one China policy, which isn’t the issue it is for nations outside the Collective West, there really isn’t much that would seriously block the Chinese from becoming an infrastructure superpower.
Even small to medium sized countries that try to export their own technical know-how on infrastructure are going to have to rely on their own workers to do critical work on exported infrastructure. There’s always going to be a big trade off from any nation without that know how on paying more to try to build up a domestic base of experience and expertise in that field, versus being dependent on another nation with that expertise.
Which brings me to the final point. Technical expertise. There’s 2 ways to distinguish – cost and expertise. The world is rapidly changing to a place where China is quickly becoming not the “low priced copycat”, but has become the leading technical innovator. That means that there will be a day, and it will happen soon, where the Chinese are going to be by far the biggest leaders in certain fields of both infrastructure and manufacturing. Going to someone else will mean not just going to the higher cost solution, but also to the nation that is at best a technologically less-advanced laggard in that field.
Apparently Russia is big on building nuclear power plants for other countries, presumably to create markets for their Uranium and processing services.
They’ve long had an export industry, but its only quite recently I think that they’ve really got their act together when it comes to putting in place integrated solutions including financing. Most of their projects abroad have come with huge low interest loans which would make it questionable about whether they are commercial projects or simply a form of foreign aid that happens to aid Russian industry..
They have however, largely failed to sell their reactors outside their immediate neighbours and historic allies. Countries like China, Vietnam and Turkey have overtly bought Russian reactors in order to get hold of key technology.
I think that when it comes to a straight cost comparison in open markets, they will struggle against the likes of the Chinese, South Koreans and Japanese. Not that the market for nuclear reactors is in any way transparent or based on economics.
bah-da-bing…it was always and always will be about creating and accessing markets for the excess capacity of the metropole…pick your metropole. The tried and true Open Door Policy…back when the US became an agricultural giant we had to off-load the surplus to keep the farmers and their congressmen happy. And it was so much nicer when the English blasted the doors open.
The BRI? Sameo, sameo. The Chinese can’t kick the investment in manufacturing jones and they are desperate for foreign markets. Even a large expansion of domestic consumption won’t cure this contradiction. And I thought that the imperial impulse was supposed to be cured by socialism. What a dope. And the poor Greeks. Forced by Schabule and his cohort to sell off their public infrastructure far a pittance including Piraeus…now a jewel in the crown of the BRI. You can’t make this stuff up.
True, but I don’t see China as having an imperial impulse – I don’t see them building military bases across the globe, for example. They haven’t launched any wars of aggression and occupation, like US and NATO vassals. One could argue that historically, China has never really projected it’s hard power beyond the region. China also has a unique style of “socialism with Chinese characteristics”. Some call it state-directed capitalism, not classic “socialism”
China is a one-party state and the US is an oligarchy, run by a de-facto one-party D/R duopoly.
It is hard to believe that the creation of a US-led economic bloc can compete with China’s global infrastructure development plans.
They can’t and won’t. Since we can’t compete on trade – witness our 1.1T deficit – we will continue offering punitive imf etc loans. The difference from the 2nd half of 20th century is we no longer do world class infra and there is now superior competition from China and, post Ukraine, Russia for our one successful export, defense.
Do you need f16’s with their pilots and fussy runway requirements if you have s300/400 missile systems? Or pricey f35’s with their crappy reliability? Plus cheap Russian and Iranian drones look to be far more useful than much of the west’s armaments, even serving as a poor man’s satellite system. Iran is showing carrier groups are not as threatening if you have good defense systems. Imo gunboat diplomacy is ending.