US, Indo-Pacific partners need to 'recalibrate' trade talks -USTR's Bianchi

The United States hosts leaders from APEC nations in San Francisco

By David Lawder

SAN FRANCISCO (Reuters) -The U.S. and its Indo-Pacific Economic Framework partners will regroup their trade pillar negotiations early next year after three negotiating rounds in the past two months fell short of substantial agreements, Deputy U.S. Trade Representative Sarah Bianchi told Reuters on Thursday.

"We’ve got to recalibrate in the new year with our partners," Bianchi said in an interview on the sidelines of the Asia Pacific Economic Cooperation summit in San Francisco. "We have a little different path for next year than we thought because some of the pieces are still ongoing."

USTR said later in a statement that it was seeing progress in the trade negotiations on trade facilitation, agriculture, technical assistance and economic cooperation.

The failure to complete at least some chapters in the IPEF trade pillar is a setback for President Joe Biden, who had aimed to showcase the initiative during the APEC summit as a symbol of U.S. economic re-engagement in Asia that would provide countries a counterweight to China's growing trade clout in the region.

Bianchi acknowledged that election-year politics could complicate next year's negotiations. Another Asian trade deal, the Trans-Pacific Partnership, died during the 2016 election campaign.

Senator Sherrod Brown, a Democrat facing a tough re-election fight in the industrial state of Ohio, last week demanded that Biden drop the trade pillar from the Indo-Pacific initiative. Brown on Wednesday claimed responsibility for the stalling IPEF trade pillar by insisting on enforceable labor provisions.

Some countries, including Vietnam and Indonesia, had rejected U.S. demands for labor rights standards to be enforced through a dispute settlement system similar to that in the U.S.-Canada-Mexico agreement on trade, according to people briefed on the talks.

Bianchi said some of the other 12 IPEF countries in the trade talks "prefer a different approach" on labor and environment chapters, but they support continued negotiations on trade. "Partners are committed to the work. They want to keep the process going."

She said that even without market access benefits such as tariff reductions, IPEF partners see value in provisions on good regulatory practices, trade facilitation and agriculture, which will help drive investment to their economies.

USTR said it would continue to work towards a "mutually beneficial" trade pillar deal that would include technical assistance and cooperation, that also advances workers' rights through "strong and enforceable labor standards."

It also said it wants an agreement that protects the environment and "builds trust in the digital economy" while benefiting U.S. farmers and ranchers, families and small and mid-size businesses.

(Reporting by David Lawder; Editing by David Gregorio and Raju Gopalakrishnan)