Trade Can Drive a Revived U.S. Strategy in Asia
After years of neglect under Trump, the region needs fresh attention from Biden.
U.S. relations with Asia have been hobbled by outgoing President Donald Trump’s isolationism, which newly inaugurated President Joe Biden has promised to fix. As has often come up in my conversations with leaders in the Indo-Pacific, Biden must prioritize trade relations with the region—which would send a strong signal to the United States’ regional partners and also boost a lagging U.S. economy. The best place to start is the vibrant digital economy.
America’s competitive advantage in technology and innovation is unquestioned, and U.S. corporations including Apple, Amazon, Facebook, Cisco, Google, Microsoft, and Qualcomm, as well as many other large, medium, and smaller technology companies, are leading the global digital charge. The digital economy itself is increasingly morphing into the overall economy—a trend that has accelerated due to the COVID-19 pandemic, which has forced us to increasingly live our lives online.
Biden understands that just as “all politics is local” so are all trade deals. International trade policy depends on complicated domestic politics in the countries that the United States deals with, just as it does in America itself. His agency review team for the Office of the U.S. Trade Representative, for instance, includes top representatives from Visa, Dropbox, Harvard Law School, and social impact agencies as well as grassroots political coalition builders from labor-oriented organizations, including the AFL-CIO.
The United States’ economic destiny lies in the Indo Pacific. In Asia, trade dominates and influences strategy in a way that’s easily overlooked in Washington, but not in Beijing and other Asian capitals. Commercial and economic ties provide a foundation for the United States to effectively engage its partners and even its competitors on critical issues including security, public health, human rights and the environment.
The reality, however, is that at present the United States is excluded from Asia’s most important trade agreements. The recently signed Regional Comprehensive Economic Partnership (RCEP) brings together 15 Asian nations, including China, to create the world’s largest trading bloc. RCEP signatories collectively represent almost 30 percent of global GDP and a third of the world’s population. Additionally, the European Union has upped its ante in Asia over the past two years by initiating and concluding a series of trade agreements.
Domestic priorities make it unlikely that Biden will be able to ratify a full-fledged regional trade agreement within the first two years of his administration. Therefore, Biden needs to find other routes to bolster America’s economic position in Asia and confront the very real challenge that China presents. If crafted correctly, sector-specific, limited trade deals with key partners can move forward with bipartisan support without needing congressional ratification.
An example of this approach would be the U.S.-Japan Digital Trade Agreement, which the Trump administration brought into force on Jan. 1, 2020, without a vote by the U.S. Congress.
One such route to a sector-specific, limited trade deal runs through the Association of Southeast Asian Nations (ASEAN), where the US-ASEAN Business Council that I run focuses its efforts. ASEAN’s favorable geostrategic position places it at the fulcrum of trade agreements, including RCEP and the Trans-Pacific Partnership (TPP), as well as its successor, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). TPP was an agreement signed by 12 Pacific nations including the United States, Australia, Japan, Vietnam, as well as Canada and Mexico but not China, which created a free trade area that covered 40 percent of global GDP and whose signatories represented one-third of global trade. On Trump’s first day in office, he withdrew the United States from TPP, and it was, therefore, never ratified by the U.S. Congress and has instead been left to the remaining signatories.
ASEAN’s 10-member bloc is significant in itself. If it were a country, ASEAN would have the world’s third-largest population and the fifth-biggest economy. The region is young, online, and tech-savvy, with 380 million citizens under the age of 35—a number almost 20 percent larger than the entire population of the United States. The digital economy in ASEAN is one of the fastest growing in the world. According to the e-Conomy SEA 2020 report by Bain & Company in collaboration with Google and the Singaporean investment firm Temasek, the total number of internet users in ASEAN grew by 11 percent last year to 400 million users while the digital economy grew by 5 percent to $105 billion in 2020. Southeast Asia’s homegrown companies are increasingly part of the mix, including e-commerce companies like Lazada and Sea based in Singapore and Tokopedia and Bukalapak based in Indonesia.
These four leading regional players all have significant, strategic investments from Chinese multinationals, with Alibaba investing in Lazada and Tokopedia, Ant Group backing Bukalapak, and Tencent investing in Sea. The Chinese private sector certainly recognizes the tremendous opportunity and potential of ASEAN’s digital economy.
This is why the emphasis must be on executing digital economy agreements with key partners in the region, starting with Singapore. The city-state already has a regional network of digital economy agreements and is currently in negotiations with other key Asian powers to expand further. The Biden administration can then move on to Australia, Malaysia, and Vietnam.
This would not be a heavy lift for the United States. The Biden team could easily borrow content from the digital chapters of the United States-Mexico-Canada Agreement as well as the stand-alone digital trade agreement with Japan. By using these agreements as a base, the U.S. negotiating team should be 90 percent done before it even sits at the negotiating table.
Negotiations with Singapore and beyond should move forward easily and quickly given that Singapore, Australia, Brunei, Malaysia, Vietnam, and the United States spent six years negotiating the TPP and its chapter on e-commerce. If constructed as an update to the existing U.S.-Singapore Free Trade Agreement or even as an executive agreement on digital trade, it would not require congressional ratification in the United States.
Using a digital economy agreement with Singapore as a base, the Biden administration should then develop a model executive agreement on digital trade, open to other like-minded Indo-Pacific countries, including those in ASEAN that may be working toward joining the CPTPP, such as Indonesia, the Philippines, and Thailand.
These agreements would aid the U.S. domestic economic recovery by easing U.S. access to the burgeoning ASEAN digital economy and beyond. The ASEAN digital economy alone is projected to grow to $300 billion by 2025. They would create high-paying tech jobs for American workers and help a significant share of the 290,000 U.S. small-business exporters who rely on cross-border digital tools to access Asian markets. From a geostrategic angle, these agreements would buttress U.S. companies as they compete against Chinese ones in an increasingly digital and competitive Indo-Pacific region.
Revitalizing America’s economy will be one of Biden’s top priorities. In addition to very real domestic economic benefits, this approach will clearly signal that the United States is once again ready to champion a rules-based approach to trade