Explained: What is the new Indo-Pacific Economic Framework that India is part of?

United States president Joe Biden faced a dilemma on trade in Asia: He couldn’t just rejoin the Trans-Pacific Partnership that his predecessor had pulled the US out of in 2017. Many related trade deals, regardless of their content, had become politically toxic for US voters, who associated them with job losses.

So Biden came up with a replacement. During Biden’s visit to Tokyo, the US on Monday announced the countries that are joining the new Indo-Pacific Economic Framework. In the tradition of trade deals, it’s best known by its initials: IPEF. (Pronounced EYE-pef.)

Which are the countries joining IPEF?

Thirteen countries including US, India, and Japan are part of the trade initiative. Others on the starting list of members are Australia, Brunei, Indonesia, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand and Vietnam.

Together, the participants account for about 40 percent of global GDP and “there are other countries that could conceivably join us,” Biden’s national security adviser, Jake Sullivan, told reporters.

What would IPEF do?

Biden formally unveiled the Indo-Pacific Economic Framework for Prosperity, or IPEF, on his second day in Japan, where he held talks with Japan prime minister Fumio Kishida ahead of a regional Quad summit on Tuesday.

“I believe we’ll win the competition of the 21st century together,” he said at the launch, attended in person by Kishida and Prime Minister Narendra Modi, and virtually by representatives from the other countries.

Unlike traditional trade blocs, there is no plan for IPEF members to negotiate tariffs and ease market access – a tool that has become increasingly unpalatable to US voters fearful of seeing homegrown manufacturing undermined.

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.

The countries touted IPEF as a framework for what will ultimately become a tight-knit group of trading nations.

“We share a commitment to a free, open, fair, inclusive, interconnected, resilient, secure, and prosperous Indo-Pacific region,” they said in a joint statement. “Deepening economic engagement among partners is crucial for continued growth, peace, and prosperity.”

Monday’s announcement signals the start of talks among participating countries to decide what will ultimately be in the framework, so the descriptions, for now, are largely aspirational. In a broad sense, it’s a way for the US to lay down a marker signalling its commitment to remain a leading force in Asia.

White House national security adviser Jake Sullivan said IPEF is “focused around the further integration of Indo-Pacific economies, setting of standards and rules, particularly in new areas like the digital economy, and also trying to ensure that there are secure and resilient supply chains”.

The idea that new standards for world trade are needed isn’t just about discontent among US voters. It’s a recognition of how the pandemic disrupted the entire scope of supply chains, shuttering factories, delaying cargo ships, clogging ports and causing higher inflation globally. Those vulnerabilities became even clearer in late February after Russian president Vladimir Putin ordered the invasion of Ukraine, causing dangerously high jumps in food and energy costs in parts of the world.

IPEF is intended to offer US allies an alternative to China’s growing commercial presence across the Asia-Pacific.

Who’s going to firm up the deal?

The negotiations with partner countries will revolve around four pillars, or topics, with the work split between the US trade representative and the commerce department.

The US trade representative will handle talks on the “fair” trade pillar. This would likely include efforts to shield US workers from job losses as China’s entrance into the World Trade Organization in 2001 led to severe manufacturing layoffs. Those job losses gutted parts of the US, angered voters and helped power the political rise of Donald Trump, who, as president, pulled the US out of the Trans-Pacific Partnership almost as soon as he took the oath of office in 2017.

The commerce department will oversee negotiations on the other three pillars: supply chain resiliency, infrastructure and climate change, and tax and anti-corruption. Commerce Secretary Gina Raimondo flew with Biden on Air Force One to Japan. She was also by the president’s side during his time in South Korea, where he highlighted investments in US factories by automaker Hyundai and the electronics behemoth Samsung.

Who else can join the club?

The White House has said IPEF will be an open platform. But it has faced criticism from the Chinese government that any agreement could be an “exclusive” clique that would lead to greater turmoil in the region.

And there are sensitivities to China, the world’s second-largest economy, in setting up IPEF. The self-ruled island of Taiwan, which China claims as its own, is being excluded from the pact. This exclusion is noteworthy since Taiwan is also a leading manufacturer of computer chips, a key element of the digital economy that will be part of IPEF negotiations.

Sullivan said any trade talks with Taiwan would be done one to one.
“We are looking to deepen our economic partnership with Taiwan including on high technology issues, including on semiconductor supply,” Sullivan said. “But we’re pursuing that in the first instance on a bilateral basis.”

How long will this take?

Once talks start, negotiations are expected to go 12 to 18 months, an aggressive timeline for a global trade deal, according to an administration official. The official insisted on anonymity to discuss plans and added that building consensus inside the US will also be key.

With inputs from AP and AFP

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