Biden launches Indo-Pacific trade deal, warns over inflation
President Joe Biden launched a new trade deal with 12 Indo-Pacific nations Monday aimed at strengthening their economies as he warned Americans worried about high inflation that it is "going to be a haul” before they feel relief. The president said he does not believe an economic recession is inevitable in the U.S.
Biden, speaking at a news conference after holding talks with Japan’s Prime Minister Fumio Kishida, acknowledged the U.S. economy has “problems” but said they were "less consequential than the rest of the world has.”
He added: “This is going to be a haul. This is going to take some time." In answer to a question, he rejected the idea a recession in the U.S. is inevitable.
His comments came just before Biden's launch of the Indo-Pacific Economic Framework. His administration says the trade deal is designed to signal U.S. dedication to the contested economic sphere and to address the need for stability in commerce after disruptions caused by the pandemic and Russia’s invasion of Ukraine.
Nations joining the U.S. in the pact are: Australia, Brunei, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam. Along with the United States, they represent 40% of world GDP.
The countries said in a joint statement that the pact will help them collectively “prepare our economies for the future” after the fallout from the pandemic and the war in Ukraine.
Biden and Kishida were joined for the launch event by Indian Prime Minister Narendra Modi, while representatives from the other countries appeared by video. Modi was in Tokyo for Tuesday's meeting of the Quad, a four-country security group that also includes the U.S., Japan and Australia.
The White House said the framework will help the United States and Asian economies work more closely on issues including supply chains, digital trade, clean energy, worker protections and anticorruption efforts. The details still need to be negotiated among the member countries, making it difficult for the administration to say how this agreement would fulfill the promise of helping U.S. workers and businesses while also meeting global needs.
Critics say the framework has gaping shortcomings. It doesn’t offer incentives to prospective partners by lowering tariffs or provide signatories with greater access to U.S. markets. Those limitations may not make the U.S. framework an attractive alternative to the Trans-Pacific Partnership, which moved forward without the U.S. after former President Donald Trump pulled out. China, the largest trading partner for many in the region, is also seeking to join TPP.
“I think a lot of partners are going to look at that list and say: ‘That’s a good list of issues. I’m happy to be involved,’” said Matthew Goodman, a former director for international economics on the National Security Council during President Barack Obama’s administration. But he said they also may ask, “Are we going to get any tangible benefits out of participating in this framework?”
Kishida hosted a formal state welcome for Biden at Akasaka Palace, including a white-clad military honor guard and band in the front plaza. Reviewing the assembled troops, Biden placed his hand over his heart as he passed the American flag and bowed slightly as he passed the Japanese standard.
The Japanese premier took office last fall and is looking to strengthen ties with the U.S. and build a personal relationship with Biden. The two leaders ended their day with dinner at Kochuan, an iconic Tokyo restaurant on the grounds of a Japanese garden.
Kishida said at their meeting that he was “absolutely delighted” to welcome Biden to Tokyo on the first Asia trip of his presidency. Along with Biden, he drove a tough line against Russia over its invasion of Ukraine, saying the aggression “undermines the foundation of global order.”
Biden, who is in the midst of a five-day visit to South Korea and Japan, called the U.S.-Japanese alliance a “cornerstone of peace and prosperity in the Indo-Pacific" and thanked Japan for its “strong leadership” in standing up to Russia.
Kishida welcomed the new Biden trade pact but said he still hoped the president would reconsider the United States' position and return it to the Trans-Pacific pact that Trump withdrew from.
“We think it’s desirable for the United States to return to the TPP,” he said.
The new pact comes at a moment when the administration believes it has the edge in its competition with Beijing. Bloomberg Economics published a report last week projecting U.S. GDP growth at about 2.8% in 2022 compared to 2% for China, which has been trying to contain the coronavirus through strict lockdowns while also dealing with a property bust. The slowdown has undermined assumptions that China would automatically supplant the U.S. as the world's leading economy.
“The fact that the United States will grow faster than China this year, for the first time since 1976, is a quite striking example of how countries in this region should be looking at the question of trends and trajectories,” said White House national security adviser Jake Sullivan.
The two leaders also met with families of Japanese citizens abducted by North Korea decades ago. The White House said Biden “expressed his deepest condolences for their suffering, and called on North Korea to right this historic wrong and provide a full accounting of the 12 Japanese nationals who remain missing.”
The launch of the Indo-Pacific Economic Framework, also known as IPEF, has been billed by the White House as one of the bigger moments of Biden's Asia trip and of his ongoing effort to bolster ties with Pacific allies. Through it all, administration officials have kept a close eye on China's growing economic and military might in the region.
In September the U.S. announced a new partnership with Australia and Britain called AUKUS that is aimed and deepening security, diplomatic and defense cooperation in the Asia-Pacific region.
The U.S. president has also devoted great attention to the informal alliance known as the Quad, formed during the response to the 2004 Indian Ocean tsunami that killed some 230,000 people. Biden and fellow leaders from the alliance are set to gather Tuesday in Tokyo for their second in-person meeting in less than a year.
And earlier this month, Biden gathered representatives from the Association of Southeast Asian Nations in Washington for a summit.
Taiwan — which had sought membership in the IPEF framework— isn’t among the governments that will be included. Participation of the self-ruled island of Taiwan, which China claims as its own, would have irked Beijing.
Sullivan said the U.S. wants to deepen its economic partnership with Taiwan, including on high technology issues and semiconductor supply on a one-to-one basis.
Biden also issued a stern warning to China over Taiwan, saying the U.S. would respond militarily if China were to invade the self-ruled island. “That's the commitment we made,” Biden said.
The U.S. recognizes Beijing as the one government of China and doesn’t have diplomatic relations with Taiwan. However, it maintains unofficial contacts with Taiwan, including a de facto embassy in Taipei, the capital, and supplies military equipment to the island for its defense.
Biden’s comments drew a sharp response from China, which has claimed Taiwan to be a rogue province.
A White House official said Biden’s comments did not reflect a policy shift.