China-less IPEF trade framework will benefit business: USTR

Viet · Feb 20, 2023

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U.S. Trade Representative Katherine Tai shakes hands with Vietnamese Prime Minister Pham Minh Chinh on Feb. 14. Tai was in the country for a three-day visit. © USTR
LIEN HOANG, Nikkei staff writerFebruary 15, 2023 15:41 JST

HO CHI MINH CITY -- A U.S.-led Pacific trade framework that excludes China will deliver practical benefits for business, the U.S. Trade Representative said on a visit to Vietnam, adding that the postwar history between Washington and Hanoi shows how today's economic and geopolitical problems can be solved.

USTR Katherine Tai also addressed concerns of forced labor in the supply chain of nearby Xinjiang, China, saying the issue matters to the "integrity" of Vietnam-U.S. trade. She pointed to the two sides' successful handling of other problems, namely currency manipulation and the timber trade, as well.

Tai, who is closing out a three-day trip to Hanoi on Wednesday, pushed back against critics of the Indo-Pacific Economic Framework. One of the biggest criticisms of the IPEF is that it lacks the tariff cuts that make up trade deals like the former Trans-Pacific Partnership, which the U.S. exited.

"I agree, I have heard skepticism," Tai told reporters. "I do not hear it from our trading partners. I hear it mostly from observers and commentators."

IPEF priorities like fair taxes and clean energy are being negotiated by 14 nations. If they can agree to make their customs procedures digital and interoperable among all member states, for example, that would benefit exporters and importers, Tai said.

"They will know how improved trade facilitation between these 14 countries will translate into dollars and cents for them," the first Asian-American USTR said.

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U.S. Trade Representative Katherine Tai meets with Vietnamese Prime Minister Pham Minh Chinh on Feb. 14. © USTR

China is not a negotiator in the IPEF. Instead, it is locking horns with the U.S. over semiconductors, forced labor, the South China Sea, spy balloons and an ongoing tariff war.

"We see in the world today increasing complexity, whether it's in trade and economics, supply chains or geopolitics," Tai said, suggesting U.S.-Vietnamese history offers lessons for solving the most intractable issues.

"This history has seen a lot of darkness and pain," she said. "But if you look at where we are today this history also reflects resilience, reconciliation and hope."

The countries fought a war that ended in 1975, but the U.S. is now the biggest customer of exports from Vietnam, which in turn is America's biggest trade partner in Southeast Asia.

The U.S. relies on Vietnam for products like electronics, furniture and cashews, but also solar panels and clothes, two industries the U.S. is investigating globally under the new Uyghur Forced Labor Prevention Act. Beijing denies U.S. allegations that the minority group in Xinjiang is forced to produce materials for these and other industries.

Washington has warned neighboring Vietnam not to allow such materials into its supply chain and, ultimately, into the U.S. market. Preliminary findings in a separate inquiry implicated companies in Vietnam in December for helping skirt U.S. tariffs on Chinese solar cells. Vietnam's foreign ministry did not immediately respond to a request for comment.

"What is most important about that particular exercise is the work that the United States and Vietnam are doing together to address and to ensure the integrity of our bilateral trade," Tai said

She added that Hanoi and Washington have dealt with timber and currency concerns. Vietnam agreed to monitor the border for illegal logging and keep confiscated wood out of the supply chain, the USTR office said in 2021 after a rare environmental probe.

Vietnam would not "manage exchange rate policy" to "create an unfair competitive advantage in international trade," State Bank of Vietnam Governor Nguyen Thi Hong said in a statement on the U.S. Treasury Department website that year. The U.S. removed Vietnam from a currency manipulator watch list in November.