The US government has dropped plans to move forward with an updated Indo-Pacific Economic Framework (IPEF) trade agreement that would have aimed to counter China's rising economic power after opposition from within the Democratic party.
According to the Financial Times (FT), president Joe Biden had aimed to conclude critical elements of the deal at this week's Asia-Pacific Economic Cooperation, but the White House has backed off after the plans were opposed by key figures within Congress.
It reported that several Democrats, including Ohio senator Sherrod Brown, were worried about the potential impact of the proposals ahead of elections next year.
The US' partners were informed about the change in strategy by US Trade Representative Katherine Tai in recent days.
Wendy Cutler, vice-president of the Asia Society Policy Institute, said the news had "shocked" Washington's allies and represented a "major setback" to plans to increase US economic engagement in the region.
The FT noted that many countries have not been hugely enthusiastic about the IPEF, partly because it does not offer any extra access to the US market. However, many have viewed it as better than nothing, with some countries such as Japan regarding it as a potential stepping stone to the US re-engaging with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
While officials from the US and other countries have insisted there has been significant progress on the trade negotiations, the prospect of a deal before the 2024 election now looks increasingly unlikely.
Senator Brown, who has been a longstanding critic of free trade deals and is seen as one of the most vulnerable Democrats up for reelection in 2024, praised Mr Biden for not moving forward with the trade deal, which he said “lacks enforceable labor standards”.
However, the decision was criticized by others. Jake Colvin, president of the National Foreign Trade Council, said: “It’s hard to see how the politics that have guided the Biden administration’s decision-making to date change as the US presidential election approaches.”