The Indo-Pacific Economic
Framework for Prosperity
On May 23, during his first Asia tour, US President Joe Biden formally introduced the Indo-Pacific Economic Framework for Prosperity, or IPEF, revealing Washington’s long-awaited Asia-Pacific economic strategy. The IPEF involves, besides the United States, a dozen initial partners which together represent 40% of world’s GDP. As per the joint statement, the IPEF will help the member countries collectively prepare their economies for the future, following disruptions from the coronavirus pandemic and the Russian invasion of Ukraine.
Seen as a means to counter China in the region, the IPEF is a US-led framework for participating countries to solidify their relationships and engage in crucial economic and trade matters that concern the region, such as building resilient supply chains battered by the pandemic.
Unlike traditional trading blocs, there is no plan for IPEF members to negotiate tariffs and ease market access, which is increasingly unpalatable to US voters fearful of undermining homegrown manufacturing. Instead, the programme foresees integrating partners through agreed standards in four main areas: the digital economy, supply chains, clean energy infrastructure and anti-corruption measures.
It is not a security pact, unlike the four-nation Quad group, which is made up of Australia, India, Japan and the US.
Need for IPEF
Domestic compulsions have played a major part in the launch of IPEF because Biden, who is known to be a natural free trade internationalist, wanted to work with Beijing to lift trade and wealth for the US but he faced China hawks in Congress, protectionist sentiments in the US and even a possible resurgence of Donald Trump. Moreover, his administration’s realisation that its near-onlooker status to the trade arrangements in the region, with China’s stamp all over it, did not match its Indo-Pacific strategic objectives spurred work on a new framework for doing trade. The aim was to reclaim economic leadership in East Asia and the ASEAN region without giving away concessions that would anger domestic lobbies.
The IPEF serves as a middle ground for Biden’s plans to be more in control of economic flows in the Indo-Pacific especially with China at the center of the region’s supply chains. As a non-trade agreement entry into Asia, Biden would not need to seek congressional approval and, therefore, avoid a battle for domestic ratification.
The Indo-Pacific Economic Framework for Prosperity, initially, includes 13 countries, including, besides the United States, Australia, Brunei, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam – the 13 countries represent 40 percent of world’s GDP
Although specific terms and details of the IPEF are still being hammered out, for a start, here are the four main tenets of the framework:
1. Connected economy: trade that will include digital economy and emerging technology, labour commitments, the environment, trade facilitation, transparency and good regulatory practices, and corporate accountability, standards on cross-border data flows and data localisations.
2. Resilient economy: supply chain resiliency to develop “a first-of-its-kind supply chain agreement” that would anticipate and prevent disruptions.
3. Clean economy: clean energy and decarbonisation that will include agreements on “high-ambition commitments” such as renewable energy targets, carbon removal purchasing commitments, energy efficiency standards, and new measures to combat methane emissions.
4. Fair economy: tax and anti-corruption, with commitments to enact and enforce “effective tax, anti-money laundering, anti-bribery schemes in line with [American] values”.
Is it against China?
Touted as a counterweight to China’s aggressive expansion in the region, the IPEF is intended to offer US allies an alternative to China’s growing commercial presence across the Asia-Pacific region. According to President Biden, “This framework is a commitment to working with our close friends and partners in the region on challenges that matter most to ensuring economic competitiveness in the 21st century.”
The writer is a member of staff.