What the Indo-Pacific Economic Framework Is and Isn’t – Analysis – Eurasia Review
By Riya Shah *
In May 2022, US President Joe Biden unveiled the long-awaited Indo-Pacific Economic Framework for Prosperity (IPEF). Launched on the sidelines of the Quad Summit in Tokyo, Biden was joined in person by Indian Prime Minister Narendra Modi and Japanese Prime Minister Fumio Kishida, and virtually by leaders from eleven partner countries in South and Southeast Asia.
As initial partner nations, the United States joined Australia, Brunei, Fiji, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam. This US-led economic grouping aims to prepare these economies for the future. It is broadly based on four pillars: trade, supply chain resilience, clean energy and decarbonization, and taxes and anti-corruption measures. As stated in the joint statement, the framework is “intended to advance resilience, sustainability, inclusiveness, economic growth, equity and competitiveness” in the region.
Hailed as the linchpin of Biden’s economic and trade strategy toward the region, the framework aims to create a free, open and prosperous Indo-Pacific with the unspoken intention of containing China. Although in its infancy, the strategic and political objective of this Quad-plus initiative is quite clear. It is ultimately a geostrategic platform that attempts to fill the vacuum created by the US exit from the Trans-Pacific Partnership (TPP) and strengthen regional cooperation to counter China in the region.
The IPEF seeks to provide an alternative to the Regional Comprehensive Economic Partnership (RCEP) and the Belt and Road Initiative (BRI) in the context of China’s military and economic maneuvers in the region. Indo-Pacific economies have all grappled with BIS secrecy clauses, opaque investment practices and predatory debt traps. The IPEF distinguishes itself from the BRI by emphasizing transparency commitments and purportedly aligns with the Biden administration’s broader trade policy of inclusion and fair trade.
The Indo-Pacific accounts for more than 60% of the world’s population and almost 40% of world merchandise trade. The absence of a US presence in the region due to withdrawals from major regional trade agreements has allowed China to emerge as a normative country. With regional economic integration through RCEP, BRI, Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP) and Digital Economy Partnership Agreement (DEPA), China is already the largest trading partner for most IPEF countries. The IPEF thus attempts to reaffirm the economic weight of the United States and to claim its role in the decision-making processes of the Indo-Pacific.
Taiwan was excluded from the framework despite the insistence of a group of 52 US senators, signaling US reluctance to politicize IPEF and appeasing ASEAN countries with strong economic ties to China. However, this does not include China, the biggest player in the region. Beijing, in turn, called the IPEF a reiteration of “China threat theory,” a return to Cold War mentality and an “economic NATO.”
The Biden administration plans to roll out the framework not as a single venture but as a platform where countries can join different a la carte pillars. This approach has two objectives.
First, for the United States to pass a non-trade agreement in Asia. Since the IPEF is not a traditional regional trade agreement, it is not necessary to obtain congressional approval. As previous experiences show, there has been little domestic support for anything involving lower tariffs and the opening of US markets. Proposed trade deals with Kenya, the UK and the Environmental Goods Agreement (EGA) have all been reduced or blocked. Through the IPEF, the Biden administration is managing to establish a regional presence while pursuing a foreign policy focused on worker-centric trade policies.
Second, the à la carte system attempts to fill the gaps in market access and tariff liberalization by providing a flexible framework. Developing economies in South and Southeast Asia might seek cooperation in the lucrative areas of digital trade, but they might not be as eager to give equal priority to high-level provisions of decarbonization and carbon. ‘clean energy. Thus, thanks to its “soft law” framework, the IPEF serves as a common ground for Biden to ensure a presence in the Indo-Pacific. It simultaneously helps him avoid a messy political battle at home, with midterm elections just around the corner in November.
Pitfalls and opportunities
IPEF will have varying degrees of appeal to member countries. Some common reservations relate to the lack of detailed objectives and clear policy actions, a complex negotiation process, the lack of tariff reduction, and the likelihood that the initiative will survive US election cycles. Previous US-led initiatives – such as the Blue Dot Network, Build Back Better World, and First Movers Coalition – have made little headway, and as a result, a persistent trust deficit overshadows the latest initiative. The IPEF will only appeal to the greater Indo-Pacific if its structural flaws are corrected and if it can actually deliver tangible economic benefits instead of solely serving US security interests.
*Riya Shah is a research intern at the China Research Program (CRP) of IPCS.