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US announces major economic deal in Asia in effort to boost image and counter China

US announces major economic deal in Asia in effort to boost image and counter China

US President Joe Biden, pictured here on Thursday, April 21, 2022, launched the Indo-Pacific Economic Prosperity Framework (IPEF) with dozens of tentative partners.

Yuri Grybas | Abaca | Bloomberg | Getty Images

In a move to raise its economic standing and create another balance for China within Asia, the United States on Monday announced the Indo-Pacific Economic Framework with Asian partners including Australia, Japan and the Republic of Korea.

It is a broad plan designed to help expand US “economic leadership” in the Indo-Pacific region. The group wants to set international rules on the digital economy, supply chains, decarbonization, and regulations that apply to workers.

US President Joe Biden said tackling inflation is a priority and that this framework is designed to help reduce costs by making supply chains more resilient in the long term.

Most importantly, IPEF is not a free trade agreement. Biden faces political pressure from both the left and the right in the United States to avoid free trade agreements.

US National Security Adviser Jake Sullivan told reporters on Sunday that the deal is not a security pact and is separate from the Defense Quartet, which includes the United States, Japan, India and Australia.

Biden is visiting Tokyo this week to meet with regional leaders on the IPEF and Quad.

enhance competitiveness

Despite avoiding trade deals, the United States wants to strengthen its position in the economic sphere of Asia, where China is the dominant country despite two American allies, Japan and South Korea, which boast large economies, and India, a member of the Quartet, is growing by leaps and bounds.

The United States needs to “strengthen its economic competitiveness in the region,” according to Ali Wen, senior analyst at Global Macro Group at Eurasia Group.

“Even those countries that have significant and growing concerns about China’s foreign policy and strategic goals realize that they cannot meaningfully decouple from their economy in the short term,” Wayne said, so the Biden administration would work to gain maximum momentum for India. Pacific Economic Framework”.

US officials have been careful to avoid mentioning China in discussions on the IPEF and have denied that it is a “closed” group, as China has claimed.

“The main objective of Biden’s trip to South Korea and Japan is to try to form a new political stance against China, by establishing an alliance around Washington in the Asia-Pacific region,” Chinese state-controlled media Global Times said on Saturday.

Sullivan told reporters Sunday that he was not surprised “that China has concerns about the number of countries, and the diversity of countries that have expressed interest and enthusiasm for IPEF.”

hard to sell?

Speaking to CNBC’s “Capital Connection” on Monday, before revealing details of the IPEF, senior fellow at Washington, DC’s Stimson Center, Yuki Tatsumi, said the plan would be difficult to sell in the region.

She said it is similar to the Trans-Pacific Partnership that the United States withdrew from during the Trump administration, when countries in the region struggled to be eligible to become part of it.

In addition, Tatsumi said the United States has sharpened its approach to China under the administrations of former Presidents Donald Trump and Barack Obama.

“So no matter what new policy initiatives come out of Washington, the strategic competition between the United States and China will intensify,” she said, adding that the new framework is likely only to accelerate this trend.

CNBC’s Vicki McIver and Ravi Buddhavaraphu contributed to this report

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