The Indo-Pacific Region Needs a Comprehensive Digital Trade Agenda

The Indo-Pacific Economic Framework (IPEF) is a landmark trade negotiation focused on advancing “sustainability, inclusiveness, economic growth, fairness, and competitiveness.” The 14 participating countries comprise 40% of global GDP, 32% of the world’s population, and 28% of global trade in goods and services. As such, IPEF represents an important opportunity to enhance economic and trade ties among a large and strategically important group of 14 countries. 

The United States is one of those countries, much as it was in 2016 on the eve of finalizing another major regional trade agreement, the Trans-Pacific Partnership (TPP). Under the Trump administration, the US chose to withdraw from the TPP. Despite that, the agreement moved forward. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) was ultimately signed by 11 countries and entered into force in 2018. It was notable for being one of the first major trade agreements to address digital trade and cybersecurity. It was also notable for the absence of the US in the final agreement, which set important trade rules for much of Asia.

An Uninspiring Start

From the outset, the Biden administration has lacked ambition on the issue of trade, perhaps a hangover from the hard lessons of the 2016 presidential election. No US President since George H.W. Bush has completed a term without a trade agreement being signed or entering into force under their leadership. And yet, President Biden is on track to do so. This is not for want of opportunities. Negotiations with close allies such as the UK, launched under President Trump, have stalled under Biden’s leadership. Even Trump, despite his misguided opposition to TPP, completed a renegotiated NAFTA (“USMCA”) and a Digital Trade Agreement with Japan during his term.

Nearly seven years on from TPP, IPEF represents a renewed opportunity for the US to demonstrate its commitment to trade in a region of the utmost geopolitical and strategic importance. And as US economic competitiveness is increasingly focused on services and digital trade, robust digital trade disciplines are critical to deriving value for the US economy from IPEF. Yet a lack of ambition still plagues the administration’s approach. In agreeing both to an IPEF that does not address tariff adjustments or traditional market access commitments and failing to table ambitious proposals for digital trade, the administration risks squandering the moment. 

Leadership at Home, Leadership Abroad   

The lack of ambition in the trade arena stands in stark contrast to the impressive progress made in security partnerships in the Indo-Pacific region. These include the Quadrilateral Security Dialogue, the groundbreaking trilateral summit among the US, Japan and Republic of Korea, and the strengthening of a multitude of bilateral arrangements. As impressive as these efforts have been, a comprehensive strategy for the Indo-Pacific region cannot rest solely on a growing security umbrella. Where economic dependence on China persists, its influence on the region will remain significant.

To be sure, the politics of trade can be challenging to navigate. The benefits are diffuse and the drawbacks are concentrated. In the US, opposition is often concentrated in states with outsized influence over presidential elections. Democratic politicians, such as President Biden, must also contend with the influence of trade-skeptics such as environmental and labor groups that hold significant sway in internal party politics. 

Yet digital trade need not be as controversial as other areas of trade policy. It is unlikely to lead to the outsourcing of US jobs or the associated environmental and labor concerns. The US is fortunate to have a comparative advantage in digital services such as cloud and cybersecurity, which drive immense benefits to the country’s economy and create good, well-paying jobs at home. Perhaps equally important, digital trade agreements provide the US and its international partners an enduring mechanism to champion human rights and a model digital governance grounded in the principles of a free, fair, and open internet. 

In a world where the US declines to engage, trade and digital policy do not operate in a vacuum. Already we see alternative models for digital governance emerging. The models strengthen authoritarianism, such as Russia’s activities at the UN Cybercrime Convention negotiations or China’s Data Security Law. They also champion digital protectionism, as seen in the growing group of data localization measures, which cover even non-sensitive data. 

Even where the result is less malign, the lack of engagement by the US harms its economic competitiveness. Take the topic of cybersecurity. Since the CPTPP, an additional eight international trade agreements have been created that include commitments to cybersecurity principles and practices. While USMCA set the most ambitious model for cybersecurity trade policy five years ago, it has since fallen behind others, such as the Singapore-UK Digital Agreement. Those two countries now benefit from easier access to each other’s markets for connected devices–everything from laptops, to refrigerators, to connected toys. US companies may need to demonstrate compliance with each separately. 

The impact of this inaction will be borne in the years ahead in terms of reduced economic competitiveness at home and less economic influence abroad. 

Renewing US Economic Leadership

Through IPEF, the Biden administration has the opportunity to enhance US engagement in the Indo-Pacific region and fortify regional digital infrastructure. Most important, incorporating a robust and ambitious digital trade agenda into the framework will enhance trade in an area where the US stands to gain most significantly. A more ambitious approach to cybersecurity will facilitate more–and more secure–digital trade in the region. It will also serve to reinforce the region’s commitment to a model of internet governance that supports freedom of speech, privacy, and security.

Despite its slow start on trade, the Biden administration’s commitment to engaging and strengthening its partnerships with allies around the world gives it a strong platform from which to provide economic leadership in the Indo-Pacific region. It should seize the opportunity. US leadership in the Indo-Pacific region cannot rest solely on security cooperation. It needs economic leadership too.

The views expressed in this article are those of the author and do not reflect either way the views of Venable LLP.