In News

• US President Joe Biden, during his East Asia trip, is expected to launch Indo-Pacific Economic Framework (IPEF) in Tokyo.
• US President is on an East Asia trip that saw him touch down first in Seoul and in Tokyo ahead of the May 24 Quad summit

What’s in Today’s Article:

• Indo-Pacific Economic Framework - About, key features, origin, US’ keenness to launch IPEF, response from other countries, India’s response, Analysis

Indo-Pacific Economic Framework (IPEF)

• According to an insight paper on IPEF put out by the US Congressional Research Service, the IPEF is not a traditional trade agreement.
• Rather, it would include different modules (four pillars) covering:
  • fair and resilient trade,
  • supply chain resilience,
  • infrastructure and decarbonization, and
  • tax and anti-corruption.
• These pillars will have specific modules. Countries would have to sign up to all of the components within a module, but do not have to participate in all modules.

Key Features

• The fair and resilient trade module will be led by the US Trade Representative and include digital, labour, and environment issues, with some binding commitments.
• The IPEF will not include market access commitments such as lowering tariff barriers, as the agreement is more of an administrative arrangement.

Origin of IPEF

• Biden first spoke about the IPEF at the October 2021 East Asia Summit.
• At this summit, he said that the United States will explore with partners the development of an Indo-Pacific economic framework.
• This framework will define our shared objectives around:
  • trade facilitation, standards for the digital economy and technology, supply chain resiliency, decarbonization and clean energy,
  • infrastructure, worker standards, and other areas of shared interest.

Why US is keen on launching the IPEF?

• The US is trying to regain credibility in the region after former President Donald Trump pulled out of the Trans Pacific Partnership (TPP).
• Since then, there has been concern over the absence of a credible US economic and trade strategy to counter China’s economic influence in the region.
  • China is an influential member of the TPP, and has sought membership of its successor agreement Comprehensive and Progressive Agreement on Trans Pacific Partnership.
  • It is also in the 14-member Regional Comprehensive Economic Partnership(RCEP), of which the US is not a member (India withdrew from RCEP).
• The Biden Administration is projecting IPEF as the new US vehicle for re-engagement with East Asia and South East Asia.

Response from other countries

• IPEF may not enthuse all countries in the Indo-Pacific region equally as it comes with binding trade rules but no guarantees on market access.
• However, many countries in the region have expressed their willingness to join the framework.
  • Japan has welcomed the IPEF, and Thailand announced that it would join the negotiations.
  • Australia and New Zealand may also join. South Korea, Philippines and Singapore have expressed cautious interest.

India’s Response

• US President is expected to invite India to join negotiations for the IPEF when he meets Prime Minister Narendra Modi on the side-lines of the Quad summit.
• So far, India has refrained from committing itself to joining the framework.
• Analysts, on the other hand, believe that India may be uncomfortable with the US high standards. It would like to avoid risks and may take time to consider joining.
• Some areas proposed in the IPEF do not appear to serve India’s interests.
• E.g., the IPEF talks about digital governance but the IPEF formulation contains issues that directly conflict with India’s stated position. Among these are:
  • Prohibition / restrictions on cross-border data flows and data localization requirements, including for financial services;
  • Prohibition of the levying of customs duties on digital products distributed electronically;
  • Promotion of the interoperability of privacy rules and related enforcement regimes, such as the APEC Cross-Border Privacy Rule, while respecting U.S. federal and state privacy laws and regulations.

Analysis

• IPEF is more suited to the 21st century
  • American officials have argued the IPEF is more suited to the 21st century than traditional trade deals that cut tariffs.
  • They have also made clear that conventional agreements have become politically toxic in US politics, making it difficult to sign deals that grant market access.
• Not an initiative of Quad
  • Although Biden is planning to launch it on the sideline of Quad summit, IPEF is not going to be an initiative by the Quad.
  • Also, India is still studying the proposal and remains non-committal about joining the IPEF.
• Does not include access to the US market
  • Critics contend that some countries were reluctant because they did not see much value for them.
  • This is particularly because the IPEF will not include access to the US market.