Final decisions are likely to be made during the Indo-Pacific Economic Framework (IPEF) negotiations in Kuala Lumpur, Malaysia, October 15-24, so that announcements can be made when President Biden hosts the Asia Pacific Economic Cooperation (APEC) summit in November.
Context: The administration’s “worker-centered” trade agenda has faced escalating attacks from cheerleaders of the neoliberal deals of the past. USTR Katherine Tai’s has deftly responded to critics by explaining that traditional free trade agreements, or “trickle-down economics in trade form,” worsened inequality and perpetuated a global race to the bottom that hurts workers here and abroad. We will soon see if, and to what degree, IPEF represents a new vision for worker-centered trade. That will depend on the outcomes in several areas.
Here’s what we’ll be watching:
Digital Trade: Reports indicate that IPEF’s Trade Pillar text on various “digital trade” issues is stuck. Big Tech companies have been complaining loudly, as they have been pushing for a repeat of controversial “digital trade” provisions from previous agreements that could circumscribe regulation in the U.S. and other countries, while congressional leaders have made clear that they expect the U.S. to exercise caution. Tai has repeatedly explained that she cannot get ahead of Congress on critical issues of consumer privacy online, algorithmic discrimination, and Big Tech accountability. This is a welcome change after decades of USTRs of both parties have sold off domestic policy space on food safety, public health, financial regulation, and much more.
Labor and Environmental Standards: Congressional leaders have made clear that any new trade deals must build on the floor set by the U.S.-Mexico-Canada Agreement (USMCA), meaning high standards for labor rights with rapid enforcement and meaningful penalties for violations. The only text available thus far, IPEF’s Supply Chain Pillar, negotiated by the Commerce Department, does not come close to meeting that bar, and it does not contain a single requirement around climate change or the environment. Because the Supply Chain Pillar is novel and not a trade agreement with binding provisions, it is perhaps unsurprising that the labor and environmental provisions are relatively weak and unenforceable. IPEF’s Trade Pillar, on the other hand, is expected to include binding terms on trade. In order to achieve the laudable “worker-centered” trade model promised by President Biden, the Trade Pillar must contain real labor rights and environmental enforcement that builds from the bar set by the USMCA. This is the right move in terms of policy – and also increasingly in terms of politics, as the country witnesses the rising strength of labor movements, evidenced by the UAW strike, writers’ and actors’ strikes, and growing rates of unionization.
Critical Minerals: Worker, environmental, and consumer advocates have continually raised alarm about the documented labor and environmental abuses across the critical minerals mining and processing supply chain, and have been pushing back against an exploitative, extractivist model that harms some of the most vulnerable communities and ecosystems across the world. Some IPEF countries, including Indonesia and the Philippines, have continued to push for a “critical minerals agreement” to qualify for tax credits under the Inflation Reduction Act (IRA). Yet the U.S.-Japan Critical Minerals Agreement (CMA), which was negotiated rapidly and without congressional input, contains only non-binding “commitments” to human rights without any binding or enforceable labor or environmental standards. And it also applies to minerals mined or processed in the jurisdiction, which could allow minerals mined under deplorable conditions in third countries to be processed and then qualify for IRA tax credit. The bipartisan Taiwan bill indicates that Congress will not allow IPEF to be considered a CMA, and congressional leaders have made clear that the weak U.S.-Japan CMA labor standards would be unacceptable for any future CMAs.
Early Harvest: Veterans of trade negotiations past know well that a last-minute rush to finalize a pact can lead to important issues being traded away. The long-touted APEC deadline for announcement of some or all of IPEF is completely arbitrary. An “early harvest” of some chapters in the Trade Pillar without meaningful labor and environmental provisions would eliminate leverage for the United States to use IPEF to help lift standards in a number of participating countries with documented patterns of labor and environmental abuses. And it would send a message that instead of being central to the U.S. approach to IPEF as initially stated, labor and environment are secondary.
For additional information or to speak with an expert, please contact Emily Leach at email@example.com.