Biden faces hard sell in asia for anti-China digital trade pact #SootinClaimon.Com

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Biden faces hard sell in asia for anti-China digital trade pact


As the U.S. mulls a digital trade agreement to counter China, it faces a key problem: Many countries in Asia dont want to join any deal seen as challenging Beijing, whose tech giants are deeply entrenched in the region.

China’s largest corporations like Alibaba Group Holding and Tencent Holdings have in recent years led a wave of investment into Southeast Asia, which has more than half a billion people rapidly migrating online. Governments in the region have largely resisted U.S. calls in recent years to avoid Huawei Technologies Co. for 5G networks even as they look to America as a counterweight to China on security issues.

While the White House hasn’t made a decision on whether to pursue a deal, people familiar with the plans told Bloomberg this week it could set out standards for the digital economy, including rules on the use of data, trade facilitation and electronic customs arrangements. It would potentially include many of the countries in the Asia-Pacific trade deal that Donald Trump exited from in 2017.

Yet even the 11 countries in that deal — now known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership — say it remains open to all applicants. And China is now pushing ahead with behind-the-scenes talks to join the pact, which at one time was envisioned to cement U.S. economic power and trade ties in the region.

Beyond the enormous technical difficulties the U.S. would face in completing a wide-ranging digital trade agreement, the question over how it’s perceived in Beijing will prove crucial, said Deborah Elms, founder of the Singapore-based Asian Trade Center, which has extensive contacts with companies and governments in the region.

“If this becomes seen as or is in fact a method to contain China, then, in my view, it’s dead in the water,” she said. “Even countries that are ambitious on digital who broadly would agree, who are even worried about China in the digital space, would say, ‘That is a commitment that I’m not ready to make. I don’t want to join an agreement that is explicitly about containing China, or anti-China, or in any way carves out China.'”

Chinese state-run media warned countries against joining any U.S.-backed digital deal that excludes Beijing, likening it to “shackles restricting trade and their freedom of cooperation.” The China Daily newspaper said the world’s two largest economies cannot decouple and it was “therefore absurd for it to try to force other countries to do that without finding them new sources of goods, services and capital to fill the vacuum caused by it forcing them to sever ties with China.”

The digital trade deal may come up in a special meeting Friday of leaders from 21 Asia-Pacific Economic Cooperation economies, where Presidents Joe Biden and Xi Jinping are expected to outline their visions for the region. Biden has proposed a “Build Back Better World” program to finance infrastructure as an alternative to Xi’s Belt and Road Initiative, which has a “Digital Silk Road” component that includes “the protection of data security and policy communication and coordination.”

Several Asian countries this week voiced support for a U.S.-backed digital trade agreement while avoiding any suggestion it would be used to counter China. Malaysian Trade Minister Azmin Ali welcomed the move and called on American businesses to use his country as a “gateway” to Southeast Asia, while Singapore touted the potential to create an “open, trusted global digital commons.”

After removing the U.S. from regional trade discussions, Trump focused on pressuring countries to avoid using Huawei and embracing a so-called Clean Network with communications networks free from Chinese companies and equipment. That proposal was shunned by close partners like Japan and Singapore, whose prime minister, Lee Hsien Loong, said last year that “not very many countries would like to join basically a coalition against those who have been excluded, chief of whom will be China.”

Still, the U.S. has an incentive to take action on data rules. While Biden revoked Trump’s orders banning ByteDance Ltd.’s TikTok and Tencent’s WeChat, his administration is currently reviewing what data would be considered too sensitive for China to access. Claire Chu, a senior analyst at Washington-based RWR Advisory, said that was a worry for any government that welcomes Chinese companies, as “data transfer is inevitable due to Beijing’s data-appropriation powers and oversight mechanisms.”

Beijing, meanwhile, has sought to set global standards adhering to its concept of “cybersovereignty,” even raising the plan with Group of 20 counterparts last year. The control of data — everything from private details like locations and emails to personal profiles and online behavior — was a key facet in Beijing’s move this month to add barriers for data-heavy firms to conduct U.S. initial public offerings.

Ultimately China’s approach toward data could clash with Western values on issues like data privacy, transparency and surveillance that could lead to a “general splintering of the digital landscape,” said Alex Capri, author and research fellow at the Asia-based Hinrich Foundation set up by U.S. entrepreneur Merle Hinrich. “Thus, more exposure in Southeast Asia to Western rules and digital trade frameworks will put Chinese tech companies between a rock and hard place.”

China has been working hard to ensure that doesn’t happen. In January, Beijing signed an agreement with Indonesia — Southeast Asia’s largest economy — on internet security and tech cooperation, which state-run media dubbed a “strategic counterattack” against the U.S.’s Clean Network. Chinese companies have also thrived: Southeast Asia has become the springboard for Alibaba’s global expansion, one of Tencent’s most lucrative media markets and a center for the fintech ambitions of ByteDance and Ant Group Co.

Although that aggressive expansion has slowed over the past year due to the pandemic and Xi’s debilitating regulatory crackdown, China’s tech giants are expected to continue seeking new sources of growth abroad. In March, China Telecom bought a 40% stake in the Philippine telecom company Dito Telecommunity, while Tencent opened a new data center in Indonesia in April and is poised to open others in Bangkok, Hong Kong, Tokyo, Frankfurt and Bahrain by the end of the year to support its expanding cloud services.

“Chinese hardware and software and networks are so pervasive in the Indo-Pacific region that actually trying to apply norms to encourage a free-and-open cyberdomain just will be very difficult,” said Alexander Neill, a consultant on Asia Pacific geopolitical risk and security, foreign affairs and defense.

And then there are the technical problems. The bilateral digital trade agreements cited as models — one between the U.S. and Japan, and the other between Singapore and Australia — are effectively add-ons to already-existing wider free-trade pacts, while the other option is to join the Digital Economic Partnership Agreement spearheaded by Chile, New Zealand and Singapore.

But that is even less ambitious than the CPTPP and would raise questions about why the U.S. wasn’t simply rejoining the agreement Trump abandoned, according to Elms from the Asian Trade Center. The digital standards the U.S. would push for, such as those in the revamped deal with Mexico and Canada, “are a non-starter for many other governments,” she said, citing provisions like an inability to tax electronic transactions or limit data flows.

“The political obstacles to getting that level of ambition by a lot more countries — I think it’s high,” Elms said. “That gets you back to this: What would the U.S. be able to agree to that everyone else would be able to agree to that does something interesting?”

Published : July 16, 2021

By : Syndication Washington Post, Bloomberg

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