What Does Biden’s Domestic Infrastructure Push Mean for Asia?

The Biden administration’s plans for infrastructure investment are nothing short of breathtaking in terms of sheer size and scope. The proposed $2 trillion plan comes on top of a slew of spending packages to deal with the economic blow of the pandemic. Whether or not the plan will be able to garner bipartisan support to become a reality has yet to be seen.

The proposal packages are, of course, U.S. domestic spending bills to serve the United States. Yet businesses across Asia in particular are monitoring the outcome closely with the burning question: What opportunities will it create for foreign investors, if any?

No facet of the domestic spending proposals has captured the public’s imagination across East Asia quite like President Joe Biden’s plans to reinvigorate the U.S. railway system. With $85 billion planned to modernize commuter railway networks and another $80 billion to bolster long-distance passenger and freight railways, it runs almost counterintuitive to the post-war American way of life, which has cherished the freedom of automobiles, and designed communities around it. Preaching the allure of mass transit commuter rail and high-speed train systems in the United States seemingly fell on deaf ears until now, not least in the face of powerful industry lobbying groups, from oil producers to auto manufacturers. That perception, however, has changed under the Biden administration. The president’s personal ties to and appreciation for Amtrak as a decades-long commuter from Delaware to Washington, D.C. has resonated with Japan’s urbanites, regardless of income level, who can hardly imagine daily life without reliable and efficient public transit.

Japan’s public rail model has been a source of pride for Tokyo, and emulated across Asia, from South Korea to Taiwan and China, to India and Southeast Asia. But when it comes to U.S. markets, one of the biggest hurdles has been a lack of political impetus as much as a lack of public spending across the country for short-distance and long-haul networks. As the U.S. president champions the benefits of mass transit, there is excitement about potential opportunities for foreign companies to enter the market in conjunction with local partners.

Already, there are signs of partnerships, including the Washington, D.C. metro network. The metro system of the U.S. capital signed a $2.2 billion contract with Hitachi Rail in March to provide a new generation of rail cars. The deal includes a provision to have the Japanese company build an assembly plant in the Washington region, which could lead to hundreds of new jobs being created. The Washington Metro system had previously toyed with the possibility of partnering with a Chinese rail manufacturer, which came under heavy criticism well beyond the Beltway amid ever-growing concerns about Chinese competition.

Meanwhile, the Biden administration has expanded the definition of infrastructure beyond the scope of traditional elements such as roads and railways to include internet connectivity, job training, and healthcare. Coupled with the fact that the White House is now focused on addressing the climate change challenge and developing decarbonization policies, businesses from Tokyo, Seoul, Taipei, and beyond are anticipating the emergence of fresh opportunities to do business in the United States.

One unknown factor remains how the White House will reconcile its push to promote U.S. businesses under the mantra of “Build Back Better” while encouraging foreign direct investment (FDI) at the same time. In the 2021 trade policy agenda released in March, the Office of the U.S. Trade Representative noted that trade policies under the Biden administration would “contribute to a strong domestic recovery and ensure future opportunities for American workers and businesses, including through opening international markets.”

For now, the surge in pent-up demand for consumer goods is likely to benefit Asian exporters in the near term. But the real opportunities for Asian exports will be to further partnerships with the United States that enhance the infrastructure and competitiveness of both sides of the Pacific, helping to stave off the growing threat of China. Having identified semiconductors, large capacity batteries, critical minerals, and pharmaceuticals as four key industries for growth, it is clear that the United States will need partners outside of its borders not only for capital and knowledge, but also to hedge risks in the case of unforeseen disruptions.

By focusing on massive infrastructure spending at home, the Biden administration will not only be  investing in U.S. growth in the longer term, but also could potentially open doors for new partnerships with trusted Asian allies. Certainly, a vision not only to push back against the China threat, but also to create greener, more resilient, and more equitable economies are values that could be shared with Washington’s allies in Asia. Cutting them out from the emerging investment opportunities would be costly not only financially, but diplomatically as well.