[CTC] IPEF negotiators to head to San Francisco early as divisions remain

[Arthur Stamoulis]

IPEF negotiators to head to San Francisco early as divisions remain
Inside US Trade, 10/20/23
 
Negotiators hoping to finalize parts of the Indo-Pacific Economic Framework for Prosperity’s trade pillar are planning to head to San Francisco well before an IPEF ministerial is set to be held on the sidelines of the Asia-Pacific Economic Cooperation leaders’ summit next month -- and some trade talks are likely to extend beyond the ministerial, sources said.
 
IPEF parties this week are meeting in Kuala Lumpur, Malaysia, for the sixth negotiating round -- the last before next month’s ministerial, where ministers are expected to announce some trade outcomes <https://insidetrade.com/node/178060> as well as agreements on the clean energy and anticorruption pillars. But with many issues unresolved, negotiators have suggested the trade talks could continue in a second stage, a source said.
 
The parties are still far apart in a host of areas, including labor, environment and digital provisions, according to another source who has advised the U.S. government during the negotiations.
 
One issue is the Biden administration’s push for strong labor provisions, according to sources. The U.S. is “looking for very ambitious outcomes on labor,” an industry source said. Those provisions would be subject to dispute settlement, according to the second source.
 
In a summary of the fifth IPEF negotiating round <https://insidetrade.com/sites/insidetrade.com/files/documents/2023/oct/wto2023_0891a.pdf> in Thailand last month, the government of New Zealand said the parties had made progress on core labor provisions “relating to internationally recognised labour rights, including the adoption and enforcement of those rights.”
 
The 13 participants in the trade pillar “also discussed areas of cooperation to lift labour standards and processes for dealing with complaints about labour standards,” the summary says.
 
That mention of how to deal with labor complaints is likely a reference to a U.S.-proposed facility-specific complaint mechanism, the second source said. The mechanism is similar to one included in the supply chain pillar largely completed earlier this year, but “stronger,” the source said, noting that Pillar II, on supply chains, is largely non-binding.
 
IPEF’s supply chain pillar includes a facility-specific mechanism to address “labor rights inconsistencies,” according to the text <https://insidetrade.com/node/177780> published by the parties in September. Under that pillar, parties are required to establish a reporting mechanism to receive and address labor complaints on specific facilities.
 
The U.S. will not accept a labor chapter just for the sake of having one, according to the source. “If there’s a labor chapter, I think it will be fairly robust,” the source said.
 
Divergences throughout the trade pillar leave negotiators uncertain which chapters will be closed in time for the San Francisco ministerial, according to the source, leaving the need for a dispute settlement chapter in doubt. The dispute settlement chapter tabled by the U.S. would cover only some of the chapters in the trade pillar, the source said; accordingly, the need for dispute settlement could hinge on which chapters are completed.
 
For instance, the trade outcomes IPEF parties announce next month could look similar to the initial trade agreement the U.S. and Taiwan announced in May <https://insidetrade.com/node/176918>, the source said. That deal covers trade facilitation, good regulatory practices, services domestic regulation and small and medium-sized enterprises; it does not have a dedicated dispute settlement or enforcement chapter. The sides have said they will continue talks in several other areas considered more difficult to conclude, including agriculture, digital trade, labor and non-market economy practices.
 
The U.S. has been pushing for a dispute settlement chapter that includes a mechanism similar to those used in previous free trade agreements, according to the source. The chapter would not be identical to any in such deals, however; the source said it would include “many steps” before parties get to the panel stage, for example.
 
Language on enforcement, meanwhile, is likely to be “focused on collaboration rather than retaliation,” added the industry source. The emphasis in the text, the source continued, would be on how to help a party reach a standard it is failing to meet.
 
The Office of the U.S. Trade Representative in April issued a summary of its labor text <https://insidetrade.com/sites/insidetrade.com/files/documents/2023/may/wto2023_0377a.pdf> that said the chapter “includes provisions establishing cooperative mechanisms to help the Parties support each other in achieving ambitious labor goals and to collaborate constructively on labor issues, including through capacity building, and sharing information and best practices.”
 
Negotiators also are still working out considerable differences in the environment chapter, according to the New Zealand summary, which singles out fossil fuel subsidies. Environmental advocates have identified fossil fuel subsidies as a major issue to resolve in battling climate change, an industry source said. Developed countries that are implementing reduced-carbon goals want to see fossil fuel subsidies reduced and even phased out, according to the source. But many IPEF countries are either dependent on fossil fuels or producers of them, the source noted.
 
The sides could agree to work plans on the issue instead of provisions in a specific subsidy chapter, the industry source said, adding that the work plans might be more appropriate for the clean energy pillar than the trade pillar.
 
The clean energy and anticorruption pillars “have a lot of momentum,” the industry source said, with negotiators for the clean energy pillar “very confident” their deal will be completed, a second industry source added. The talks on those pillars are largely cooperative, noted the third source.
 
Clean energy negotiators after last month’s round had only a “small number of outstanding issues” to resolve, according to the New Zealand summary. “Partners considered legal and institutional provisions, including modalities for future collaboration on implementation,” it said. “Partners also presented proposals for cooperative work programs, with a view to future decisions on which can be launched at the end of the negotiations.”
 
On the fair economy pillar, “negotiators substantially reduced the number of bracketed text during the Bangkok round” while agreeing to five intersessional rounds before the Kuala Lumpur meeting, which began on Oct. 14, the summary states.
 
“The text elements for the Commerce pillars ultimately aren’t the hard part,” the first industry source said. The work streams stemming from those agreements will be the more complicated aspects, the source continued. But for the trade pillar, “the contribution is the text,” the source said, making the negotiations more difficult. -- Brett Fortnam (bfortnam at iwpnews.com <mailto:bfortnam at iwpnews.com>)


Arthur Stamoulis
Citizens Trade Campaign
(202) 494-8826




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