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Indo-Pacific Economic Framework

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Indo-Pacific Economic Framework for Prosperity
Members of IPEF
Members of IPEF
TypeEconomic initiative
Membership14 countries

The Indo-Pacific Economic Framework for Prosperity (IPEF) is an economic initiative launched by U.S. President Joe Biden on May 23, 2022.[1][2] The framework launched with fourteen participating founding member nations in the Indo-Pacific region with an open invitation for other countries to join.

Background

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Main article: Trans-Pacific Partnership

Obama and Trump administration policies

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During the presidency of Barack Obama (with Joe Biden as vice president), the United States negotiated a trade proposal with twelve Pacific Rim countries that would become known as the Trans-Pacific Partnership (TPP). In 2015, the Obama administration pitched the proposal as a means to promote American economic interests in the region in the face of a rising China.[3][4]

Following his election in 2016 and subsequent inauguration, then-President Donald Trump issued an executive order pulling the United States out of the TPP, which had not been ratified by Congress.[5] In 2018, the eleven remaining countries in the TPP went on to sign a revised version of the agreement, known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.[6]

Biden administration policy

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In a statement, the Biden White House outlined the four pillars of underlying the IPEF:[7]

  1. Fair and resilient trade (Trade)
  2. Supply chain resilience (Supply Chains)
  3. Infrastructure, clean energy, and decarbonization (Clean Economy)
  4. Tax and anti-corruption (Fair Economy)

Commentators have described the IPEF as being part of the Biden administration's efforts to counter growing Chinese influence in the region.[8][9] According to the Financial Times, countries in the region urged the Biden administration to develop an international economic policy framework to combat China's influence.

Analysts have compared it to the Trans-Pacific Partnership (TPP), which the United States withdrew from in 2017.[10] However, the initiative is intended to be a precursor for later negotiations, as it does not include a uniform lowering of tariffs.[11]

Biden described the initiative as "writing the new rules for the 21st century economy", stating that the agreement would make the participant's economies "grow faster and fairer". Secretary of Commerce Gina Raimondo argued that the framework constituted "the most significant international economic engagement that the United States has ever had in this region".[12] However, the pact has been described as being "hollow", "meaningless" or "useless" by some commentators, including US industry groups, due to its lack of tangible policy actions such as lowering tariffs.[13][14][15]

Prior to the launch of the IPEF, critics argued that the U.S. was engaged in an “all guns and no butter” strategy, in which defense was emphasized over regional economic policy.[11]

Supply Chains

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The Agreement Relating to Supply Chain Resilience was signed in November 2023, and entered into force in February 2024.[16] The agreement establishes the Supply Chain Council, the Crisis Response Network and the Labor Rights Advisory Board to address supply chain resilience.[17]

Clean Economy

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The Clean Economy Agreement was signed in June 2024. The agreement includes measures on developing and deploying clean energy and climate-friendly technologies, facilitating investment towards climate-related projects in the region, connecting markets through policies and standards, and promoting low-and zero-emission goods and services.

Fair Economy

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The Fair Economy Agreement was signed in June 2024. The agreement aims to prevent and combat corruption and to improve tax transparency and the exchange of information, domestic resource mobilization, and tax administration.

Trade

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In November 2023, the United States halted plans for the IPEF's trade component.[18] The Biden administration had intended to conclude the negotiations during the Asia-Pacific Economic Cooperation forum, but reversed course following opposition from Democratic members of Congress including Sherrod Brown.[18]

Participating nations

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Summit-level meeting on the launch of the Indo-Pacific Economic Framework, 23 May 2022

Nations included in the framework

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The IPEF has fourteen participating member states, representing around 40% of the world's GDP.[19] Seven members of the IPEF are ASEAN (Association of Southeast Asian Nations) member states.[20]

The 14th and most recent entry into the IPEF was Fiji, which was welcomed into the framework on May 27, 2023 as the first Pacific Island nation to join.[21] Including the United States, the following member countries joined in the framework:

Member countries with the four largest GDPs:

Countries in Oceania:

ASEAN member states:

Excluded or potential entrant nations

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The following non-participating nations were subject to media attention surrounding their potential involvement in the IPEF:

  •  Canada: Canada was not among the nations included in the framework at the time of its launch.[23] Since then, the country has sought admission into the IPEF, with trade minister Mary Ng claiming in December 2022 that the country's bid has the support of all constituent members.[24]
  •  Taiwan: Taiwan (ROC) was not invited to join the IPEF.[25]
  •  United Kingdom: The British Foreign Affairs Committee urged the UK Government to assess membership of the IPEF, as part of the UK's 'Indo-Pacific tilt'.[26][27]

International reactions

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Chinese Foreign Minister Wang Yi criticized the initiative as an attempt to further economic decoupling from China. Wang Yi argued that the initiative, and the US Indo-Pacific strategy as a whole, created divisions and "incited confrontation". Wang stated that such an agreement would "ultimately be a failure".[28]

Many analysts have criticized the lack of inclusion of Taiwan in the framework, with Taiwan News calling the lack of inclusion a "snub".[29] An opinion piece published in The Hill asserted that Taiwan was excluded in order to appease key "fence-sitter" countries such as Indonesia whose governments feared angering China.[30]

Biden with Japanese prime minister Fumio Kishida

Former Malaysian Prime Minister Mahathir Mohamad criticized the grouping as an initiative intended to isolate China, saying "many countries recognize that this is not an economic grouping but it is truly a political grouping."[31]

India

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Initially, India did not outline a definitive position towards the Indo-Pacific Economic Framework.[32] Prabir De of the Research and Information System for Developing Countries, a think tank associated with the Ministry of External Affairs, wrote that India may be uncomfortable with the high economic standards envisaged by the US. He also noted that the IPEF position on digital governance contained issues that directly conflict with India's stated positions.[32]

In September 2022, Minister of Commerce & Industry Piyush Goyal said at a press conference in the United States that India had agreed to three pillars relating to supply chains: tax, anti-corruption and clean energy, but that the fourth pillar on trade, involving labour, environment, digital data and public procurement, had not been agreed yet.[32] The US expressed concerns about potential Indian demands for data localisation to ensure that data about Indian users is held and processed only in India and not in the US.[32]

A particular aspect of the framework caters also to Indian protectionists. The framework does not allow access to the U.S. market and does not mandate tariff liberalization. Instead, it emphasizes supply chain resilience and provides room to negotiate regulations related to India's highly controversial policies such as data localization.[33]

United States

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In March 2022, a bipartisan coalition of over 200 members of the United States Congress wrote a letter to Secretary of Commerce Gina Raimondo and Trade Representative Katherine Tai urging the inclusion of Taiwan in the IPEF.[34] Following the IPEF's formation, groups including Public Citizen urged trade officials to be transparent during negotiations, including through the publication of draft text proposals.[35]

In a 2022 hearing, two Democratic members of the U.S. Senate expressed concerns that the IPEF was insufficiently ambitious in scope. Senator Bob Menendez (D-NJ), who chairs the Senate Committee on Foreign Relations, stated that he did not believe the framework was “as robust as I think we need" and questioned the absence of Taiwan in the framework. Senator Maria Cantwell (D-WA) expressed concern that IPEF does not include a mechanism to allow U.S. agriculture producers the opportunity to export to new markets.[36]

Comparison with the RCEP

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Main article: Regional Comprehensive Economic Partnership

The combined population and gross domestic product of IPEF member states exceeds that of the Regional Comprehensive Economic Partnership (RCEP), a 2020 regional trade deal that includes China.[37] The only RCEP members not also included in the IPEF are China, Myanmar, Cambodia, and Laos; while non-RCEP members are the United States, India, and Fiji.

See also

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References

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  1. ^ Liptak, Kevin (2022-05-23). "Biden unveils his economic plan for countering China in Asia". CNN. Archived from the original on 2022-05-31. Retrieved 2022-05-24.
  2. ^ "FACT SHEET: In Asia, President Biden and a Dozen Indo-Pacific Partners Launch the Indo-Pacific Economic Framework for Prosperity". whitehouse.gov. 2022-05-23. Archived from the original on 2022-05-31. Retrieved 2022-05-24.
  3. ^ Nakamura, David (2015-04-26). "Obama shifts his pitch for the Trans-Pacific Partnership". The Washington Post. Retrieved 2023-05-03.
  4. ^ Rampton, Roberta (2016-05-02). "Obama says Chinese-led trade deal shows need for TPP: Washington Post". Reuters. Retrieved 2023-05-03.
  5. ^ "Trump executive order pulls out of TPP trade deal". BBC News. 23 January 2017. Retrieved 23 January 2017. Mr Trump's executive order on TPP is seen as mainly symbolic since the deal was never ratified by a divided US Congress.
  6. ^ Ming, Cheang (9 March 2018). "Global trade just had a 'one step forward, one step back' day". CNBC. Retrieved 10 March 2018.
  7. ^ "Statement on Indo-Pacific Economic Framework for Prosperity". The White House. 2022-05-23. Archived from the original on 2022-05-28. Retrieved 2022-05-28.
  8. ^ Liptak, Kevin (2022-05-23). "Biden unveils his economic plan for countering China in Asia". CNN. Retrieved 2023-05-03.
  9. ^ Swanson, Ana (2022-09-09). "Biden Administration Outlines Scope of Asian Economic Pact". The New York Times. ISSN 0362-4331. Retrieved 2023-05-03.
  10. ^ In Tokyo, Biden set to launch new Indo-Pacific trade pact to replace TPP, Marketwatch, archived from the original on 2022-05-24, retrieved 2022-05-24
  11. ^ a b Sevastopulo, Demetri; Inagaki, Kana (20 May 2022), "Joe Biden waters down Indo-Pacific Economic Framework to win more support", Financial Times, archived from the original on 2022-05-24, retrieved 2022-05-24
  12. ^ Baker, Peter; Kanno-Youngs, Zolan (2022-05-23). "Biden to Begin New Asia-Pacific Economic Bloc With a Dozen Allies". The New York Times. ISSN 0362-4331. Retrieved 2023-07-23.
  13. ^ Swanson, Ana (2023-05-27). "Biden Administration Announces Indo-Pacific Deal, Clashing With Industry Groups". The New York Times. ISSN 0362-4331. Retrieved 2023-06-15.
  14. ^ Bhadrakumar, M. K. (2022-05-25). "IPEF will be a hard sell in the Indo-Pacific". Asia Times. Retrieved 2023-06-15.
  15. ^ "What is the point of the Indo-Pacific Economic Framework?". The Economist. ISSN 0013-0613. Retrieved 2023-06-15.
  16. ^ "Leaders' Statement on Indo-Pacific Economic Framework for Prosperity". The White House. 2023-11-16. Retrieved 2023-11-16.
  17. ^ "Pillar II – Supply Chains". U.S. Department of Commerce. Retrieved 2024-06-09.
  18. ^ a b Rogers, Alex; Sevastopulo, Demetri (2023-11-15). "Joe Biden halts plan for Indo-Pacific trade deal after opposition from Democrats". Financial Times. Retrieved 2023-11-15.
  19. ^ Tan, Su-Lin (2022-05-25). "The Indo-Pacific Economic Framework: What it is — and why it matters". CNBC. Retrieved 2023-05-02.
  20. ^ Bowie, Nile (2022-05-30). "Why ASEAN is giving Biden's IPEF a chance". Asia Times. Retrieved 2023-05-03.
  21. ^ "White House welcomes Fiji to its Indo-Pacific economic plan". Reuters. 2022-05-27. Retrieved 2023-05-03.
  22. ^ Sinha, Saurabh (2022-09-10). "India stays out of Indo-Pacific trade pillar". The Times of India. Retrieved 2022-10-06.
  23. ^ Ibbitson, John (2022-05-26). "Canada inexcusably absent from another Indo-Pacific initiative". The Globe and Mail. Retrieved 2023-05-03.
  24. ^ Oshikiri, Tomoyoshi (2022-12-06). "Canada's IPEF bid has support from all members: trade minister". Nikkei Asia. Retrieved 2023-05-02.
  25. ^ Lawder, David; Martina, Michael (2022-06-01). "U.S., Taiwan to launch trade talks after island excluded from Indo-Pacific group". Reuters. Retrieved 2023-05-02.
  26. ^ "Tilting horizons: the Integrated Review and the Indo-Pacific". UK Government. 30 August 2023.
  27. ^ "Parliament panel: Government should assess whether IPEF is right for the UK". InsideTrade. 31 August 2023.
  28. ^ China says Washington's 'divisive' Indo-Pacific strategy doomed to fail, South China Morning Post, 23 May 2022, archived from the original on 2022-05-24, retrieved 2022-05-24
  29. ^ US snubs Taiwan from Indo-Pacific Economic Framework, Taiwan News, 23 May 2022, archived from the original on 2022-05-24, retrieved 2022-05-24{{citation}}: CS1 maint: location missing publisher (link)
  30. ^ Tong, Kurt (11 May 2022). "Congress should get creative on Taiwan". The Hill. Archived from the original on 25 May 2022. Retrieved 25 May 2022.
  31. ^ Yamaguchi, Mari (27 May 2022). "Ex-Malaysia PM: US-led trade group intended to isolate China". Associated Press. Archived from the original on 28 May 2022. Retrieved 28 May 2022.
  32. ^ a b c d "India accepts three out of four pillars of US-led IPEF, so why has it stopped short of a total agreement?". Indian Express. 2022-09-10. Retrieved 2023-05-03.
  33. ^ Ramesh, Akhil (2022-06-17). "Why US' Indo-Pacific economic initiative is really all about India". South China Morning Post. Retrieved 2023-04-24.
  34. ^ Martina, Michael; Lawder, David (2022-03-31). "U.S. trade chief Tai declines to say if Taiwan will be part of Indo-Pacific pact". Reuters. Retrieved 2023-05-02.
  35. ^ Overly, Steven (2022-10-03). "IPEF confidentiality rules revealed". POLITICO. Retrieved 2023-05-02.
  36. ^ Martin, Eric (2022-03-31). "Biden Trade Plans Criticized by Senators as Lacking Ambition". Bloomberg. Retrieved 2023-05-02.
  37. ^ U.S.-led IPEF outweighs China-involving RCEP in population, GDP, Yonhap News Agency, 23 May 2022, archived from the original on 2022-05-24, retrieved 2022-05-24
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