President Biden faces urgent choice over China and trade

Then-US Vice President Joe Biden co-hosts a State Luncheon in honor of Chinese President Xi Jinping September 25, 2015 in the Benjamin Franklin Room of the State Department in Washington, DC. (Photo by Paul J. RICHARDS / AFP) (Photo by PAUL J. RICHARDS / AFP via Getty Images)

Under President Donald Trump, the United States turned the international trading system upside down, starting with the early decision to withdraw from the Trans-Pacific Partnership (TPP) negotiated under President Barack Obama. Now China, in a little-noticed bet, is asking to join the very trade deal Trump has abandoned – a move that confronts President Joseph R. Biden Jr. with an urgent choice.

Will Biden urge the current 11 members of the pact to reject China’s offer in a bid to isolate China and demand changes in its behavior? Or will the administration also seek US membership, recouping the Trump administration’s senseless withdrawal and use the revived TPP to promote economic reforms in China, as Biden says is a top priority? And even if Biden pursues this second course of action, can he persuade a skeptical Congress to go with him?

The smart approach would be for the United States to apply for membership as well. There is precedent as to why lobbying to reject China’s offer to join the trade pact would be misguided. It happened when President Obama embarked on a futile and embarrassing effort to block membership in China’s new Asian Infrastructure Investment Bank in 2015, only to see his closest allies in. Europe and Asia join and push China to work on infrastructure with other multilateral institutions while avoiding practical lending aggressors.

Potentially the biggest trade deal on the planet

The renamed Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) would be the largest trade deal on the planet if China or the United States, let alone both, were to join. It now includes Japan, Australia and New Zealand, America’s main allies in Asia, as well as Canada and Mexico and six smaller countries. The United States initially joined the TPP under the Bush administration. The Obama administration crafted the terms. China’s accession would help address US concerns about its state subsidies, technology transfer requirements, and intellectual property theft. But US membership is probably needed to enforce these conditions. Congress authorized negotiation of the TPP in 2015, but never addressed ratification until Trump stepped down.

US President Barack Obama (left) shakes hands with Chinese President Xi Jinping during the APEC welcome banquet at the Beijing National Swimming Center, or Water Cube, in Beijing on November 10, 2014. REUTERS / Kim Kyung-Hoon (CHINA - Tags: POLICY BUSINESS TPX IMAGES OF THE DAY)

US President Barack Obama (left) shakes hands with Chinese President Xi Jinping during the APEC welcome banquet at the Beijing National Swimming Center, or Water Cube, in Beijing on November 10, 2014. REUTERS / Kim Kyung-Hoon (CHINA – Tags: POLICY BUSINESS TPX IMAGES OF THE DAY)

Obama encouraged US participation in the TPP primarily on the grounds that “the US rather than China should write the rules” for trade and investment in the most dynamic region in the world. Therefore, it would be ironic for China to essentially replace America in the group with its inevitable damage to the rules themselves and the way they are implemented. In purely economic terms, American businesses and workers would face further discrimination against their exports as many of the world’s largest markets moved towards free trade with each other. Many key U.S. industries, and virtually every agriculture and service sector, have already urged Biden to return to the CPTPP even before the prospect of Chinese membership arose. Increased competition from dynamic Asian countries would provide a healthy boost to the US economy.

Biden has continued much of Trump’s policy of confrontation with China while seeking to cooperate with her on climate change and other global challenges. It is not yet clear whether he wishes to include economic issues in the categories of “confrontation” or “cooperation”. But this CPTPP question will force him to choose. Biden says he wants to postpone any new trade deal until he has made progress in tidying up America’s own house, but a significant delay is not an option in this case as China could oppose veto any future entry from the United States if it were to join first.

The United States will continue to disagree deeply with authoritarian China on many security and value issues, including the South China Sea and its crackdown on Uyghurs and Hong Kong. But China’s global economic strength is now roughly equivalent to that of the United States, and we must face its challenges for American leadership pragmatically. The United States cannot block China’s rise to power, as Trump has so vividly demonstrated, and such a functional decoupling is far superior to the overall decoupling of relations between the two superpowers. The rest of the CPTPP will desperately want the United States to join in balancing China, which would otherwise dominate the group.

America’s role in the Asia region, and indeed its global economic leadership, are at stake. The continued absence of the United States from the dominant economic group in Asia would essentially cede the region to China, all the more so. that she joins this group herself. The administration should also quickly request to join the CPTPP and start working to persuade Congress of our critical national interests by doing so. It will be one of the most important foreign and economic policy decisions Biden will make.

C. Fred Bergsten is founding director of The Peterson Institute for International Economics and author of the forthcoming book “The US vs China: The Quest for Global Economic Leadership”, to be published in 2022.


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