WSJ News Exclusive | U.S.-Asia Digital Pact Held Up by Squabble Among Biden Officials

The proposed pact would be open to U.S. allies in the Asia-Pacific region. It would exclude China, similar to the approach the administration has taken on issues such as export controls on advanced technology. The U.S. has tried to put together alliances that would set standards in Asia, as a way of limiting Chinese influence.

U.S. Trade Representative

Katherine Tai

has urged an approach that recognizes potential opposition from Congressional Democrats and labor allies, said people familiar with their thinking. She is concerned about setting priorities in trade policy and maintaining what she calls a “worker-centered” approach.

A digital pact could be seen as a boon for internet giants such as

Amazon.com Inc.

and

Alphabet Inc.’s

Google, which benefit from the unimpeded flow of data across borders. Ms. Tai has focused her efforts so far on issues such as union rights in Mexico and forced labor.

USTR spokesman

Adam Hodge

said Ms. Tai isn’t trying to hinder the digital-trade initiative and has talked to trade ministers from eight countries in the Asia-Pacific region about the pact.

“We are looking at a range of options to forge stronger trade relationships” in Asia, Mr. Hodge said. “We see digital-trade rules, done right, as a potentially important tool to advance those goals.”

National security adviser

Jake Sullivan

said there wasn’t a split between the NSC and the USTR. “We are working on a range of affirmative economic initiatives in the Indo-Pacific and we are aligned at the leadership level on the key elements,” he said in a statement.

Nonetheless, the people familiar said there were disagreements over how to proceed between Ms. Tai and NSC officials including Asia coordinator

Kurt Campbell.

He believes there is an urgent need for the U.S. to assert leadership in Asia, the people said, and that the digital-services pact would be a step in that direction.

“We cannot be successful without a positive trade agenda in the region,” Mr. Campbell told the Asia Society, a nonprofit organization, in an online forum this month “We’re looking closely at what might be possible on the digital front,” he said.

Mr. Campbell’s remarks were aimed to signal White House support for a deal and its dissatisfaction with the pace of the effort, several of the people said. One person noted that President Biden could bypass the USTR’s office by issuing an executive order or by using standards-setting bodies to work out a deal among the U.S. and Asian nations.

The skirmish over Asia trade comes as the administration tries to put together the economic portion of its China policy. Administration officials say that leaders in the Asia-Pacific region continue to press the U.S. to join the Trans-Pacific Partnership—now known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership—a regional trade pact that the

Obama

administration championed but the Trump administration rejected.

Last week, New Zealand Prime Minister

Jacinda Ardern

argued the merits of TPP membership in a call with Mr. Biden, officials said.

Biden administration officials say there is little chance politically of the U.S. joining the pact soon or without significant revisions, given broad-based opposition among Democrats and a significant number of Republicans.

As an alternative, White House and State officials are pushing a digital agreement. The U.S.-Mexico-Canada Agreement, which passed Congress with bipartisan support, has a digital-trade chapter that could serve as a template for an Asian agreement, advocates say.

It would also fit with the administration’s strategy of working closely with allies on high-tech issues to compete with China and show leadership in Asia.

The administration is looking at other economic tools to flesh out its China policy. Mr. Sullivan, the national security adviser, recently suggested screening U.S. investments in China that “circumvent the spirit of export controls.”

Currently, the U.S. monitors inbound investments for national-security concerns, not U.S. investment overseas. The administration isn’t ready to roll out a proposal, officials said.

The trade representative’s office is also pressing ahead with its separate review of China trade policy, which isn’t expected to be completed until the fall.

On digital trade, a number of Asian nations have already put together deals that could serve as a starting point for a U.S. push. Last year, Singapore, New Zealand and Chile, for instance, signed the Digital Economy Partnership Agreement with provisions covering electronic invoicing and payments, digital privacy and the flow of data across borders. South Korea and Canada are considering joining.

The U.S. could join DEPA, said

Wendy Cutler,

a former Trans-Pacific Partnership negotiator in the Obama administration, and look to put a U.S. stamp on the effort. That is similar to the strategy the Obama team took with the TPP when the U.S. joined a nascent trade effort by the three DEPA countries and Brunei, and broadened the approach.

For now, though, much of the effort in the U.S. is focused on convincing USTR that a digital-trade pact could be worker centered. A number of trade associations argue that a pact would help small and medium-size businesses navigate international trade through common standards on electronic payments, digital signatures and other measures

In a 12-page briefing paper, the Coalition of Service Industries, a trade group of service companies, made 13 references to how a pact could lead to high-paying jobs for workers with a high-school education.

Some big tech companies say they aren’t lobbying directly for a pact, fearful that could hurt chances the administration will proceed with the initiative.

Karan Bhatia,

Google’s vice president for government affairs, said companies such as his have the wherewithal to deal with trade barriers. A digital pact would mainly help smaller businesses new to international trade “who are increasingly reliant on the free flow of information and data,” he said.

Mr. Campbell, the NSC Asia coordinator, makes a similar case. The Biden administration will probably start with “something that we can clearly demonstrate affects and supports small and medium-size firms in the United States, working people,” he told the Asia Society.

But, so far, trade officials aren’t convinced. They are looking at whether a digital-trade pact should include issues more closely related to ordinary workers, such as corporate surveillance of employees.

Write to Bob Davis at [email protected]