A first look at the Indo-Pacific Economic Framework: What’s in it for Indo-Pacific participants, and can it succeed?
(Part 1)
By Celine Lange
Published on 10 November 2022
In February 2022, the President of the United States announced the launch of a new Indo-Pacific Strategy, characterised as heralding a US re-engagement with the region, which would lead to ‘a multilateral partnership for the 21st century’. A central part of this re-engagement was unveiled in May 2022 by President Biden at the ASEAN-US Special Summit: the Indo-Pacific Economic Framework (IPEF or Framework). Its intended objective is to ‘create a stronger, fairer, more resilient economy for families, workers, and businesses in the United States and in the Indo-Pacific region’. While the IPEF has been described by some as toothless, in particular because of the Framework’s lack of market liberalisation commitments, other commentators have emphasised that the IPEF is not a fully developed treaty but a skeleton requiring the conclusion of subsequent agreements. Furthermore, after the first in-person IPEF Ministerial meeting in Los Angeles, the statements released by the White House, in September 2022, indicate that IPEF participants have started to substantialise the Framework.
This post is part of a blog series discussing the US’ policy rationale behind the IPEF, the salient features of the Framework, and the benefits, if any, that it can potentially bring for the thirteen Indo-Pacific signatories (Australia, Brunei, India, Fiji, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, and Viet Nam). This Part 1 examines the Framework’s agenda and contents to demonstrate that the IPEF sets the stage for an economic alliance rather than a trade partnership, and that it does not, in its current state, achieve its standard-setting ambition. Part 2 of this series will examine the possible benefits of the Framework for its Indo-Pacific participants, as well as its potential implementation difficulties.
I. DECONSTRUCTING THE IPEF AGENDA: CONTAINING CHINESE INFLUENCE IN THE INDO-PACIFIC
The IPEF launch in May 2022 was heavy with symbolism. It coincided with the 45th anniversary of ties between ASEAN and the US. The ASEAN-US Special Summit at which it was unveiled was also marked by several firsts: it was the first ASEAN Summit held in Washington D.C.; the first visit of ASEAN leaders there; and their first in-person meeting since 2017.
In this context, it is important to recall that the IPEF is part of a larger package of initiatives and policies launched by the US Government with respect to the US-ASEAN relationship (see the US-ASEAN Joint Vision Statement and the US Administration’s ‘Approach to China’ speech of May 2022).
When these initiatives, including the IPEF, are put in broader context, the US re-engagement has thus far largely focused on geostrategic, political and defence integration objectives. Re-engagement on economic matters, however, such as those addressed in the Trans-Pacific Partnership (TPP), from which the US withdrew in 2017, has been conspicuously absent. International trade agreements remain deeply polarising in the US and, therefore, the Biden Administration has neither commenced any new trade negotiations nor has it sought to engineer a return to the TPP. Indeed, US Trade Representative Katherine Tai frankly acknowledged that there had not been ‘the support at home to get [the TPP] through’ the US Congress.
The TTP withdrawal left a void of US influence and leadership in the region which China has actively sought to fill in the years since, first by becoming a key party to the Regional Comprehensive Economic Partnership (RCEP) and then, in 2021, by applying to join the TPP’s successor agreement, the Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP). In May 2022, in his speech on the US approach to China, Secretary of State Anthony Blinken described China as ‘the most serious long-term challenge to the international order’ and announced that the objective of US policy would be to ‘[present] Indo-Pacific countries an alternative to China’s approach’.
Thus, although the IPEF is ostensibly directed towards developing US economic relations in the Indo-Pacific, its fundamental objective appears to be counterbalancing China’s influence across the region. The Framework thus comes across more as a strategic economic alliance than a trade partnership. Its shallowness contrasts starkly with the deep economic integration developed by the US under the TPP. Yet, according to the US Administration, the fact that the IPEF is not a traditional free trade agreement is ‘a feature, not a bug’.
II. The IPEF: A DONWGRADED VERSION OF THE TPP/CPTPP?
The TPP would have set binding rules covering 30% of the world economy on a broad range of issues, including trade liberalisation and investment market access. Conversely, the US, unable to re-join the CPTPP under the Biden Administration, proposed in the IPEF a loose framework that identifies goals for future agreements. Given the absence of market access commitments in the IPEF, at odds with Asian States’ traditional interest in market access when it comes to trade partnerships, it is worth asking whether the IPEF has anything different or more to offer to its partners, especially considering that a number of topics covered by the IPEF are also dealt with under the CPTPP.
The IPEF’s proposed commitments are organised around four pillars, namely: Trade, Supply Chains, Clean Economy and Fair Economy. While the Framework has been presented as a new model designed to address contemporary challenges, such as clean energy, the digital economy, and supply chains, comparing its proposals and the TPP’s/CPTPP’s shows, interestingly, that almost every IPEF proposal is functionally equivalent to an existing TPP/CPTPP provision. The table below demonstrates the point in visual terms.
Table 1: IPEF provisions and comparable provisions in TPP/CPTPP
|
IPEF provisions (as released in May 2022) |
Comparable provisions in TPP/CPTPP |
|
|
Pillar I: Connected economy (renamed “Trade” in Sept. 2022 Ministerial Statement) |
– High-standard rules for the digital economy (cross-border data flows, data localization etc). |
Chapter 14 (Electronic Commerce): Article 14.13 (Location of Computing Facilities); Article 14.17 (Source Code) |
|
– Ensure SMEs benefit from growing e-commerce. |
Article 14.15 (Cooperation) |
|
|
– Address issues such as online privacy and the discriminatory and unethical use of Artificial Intelligence. |
Article 14.8 (Personal Information Protection) |
|
|
– Strong labour/environmental standards and corporate accountability provisions. |
Chapter 19 (Labour), Chapter 20 (Environment) |
|
|
Pillar II: Resilient Economy (renamed “Supply Chains” in Sept. 2022 Ministerial Statement) |
– Anticipate and prevent disruptions in supply chains (e.g., early warning system, mapping critical mineral supply chains, improving traceability in key sectors, coordinated diversification efforts). |
Chapter 22 (Competitiveness and Business Facilitation); Article 22.3 (Supply Chains). |
|
Pillar III: Clean Economy (“Clean Economy” in Sept. 2022 Ministerial Statement) |
– Commitments on clean energy, decarbonization, and infrastructure that promote good-paying jobs. |
Chapter 20 (Environment) |
|
– Accelerate efforts to tackle the climate crisis, including in the areas of renewable energy, carbon removal, energy efficiency standards, and introduce new measures to combat methane emissions. |
||
|
Pillar IV: Fair Economy (“Fair Economy” in Sept. 2022 Ministerial Statement) |
– Enact and enforce effective tax, anti-money laundering, and anti-bribery measures. |
Chapter 26 (Transparency and Anti-corruption) |
|
– Exchange of tax information and criminalization of bribery in accordance with UN standards. |
Article 26.7 (Measures to Combat Corruption ) |
|
|
– Effective implementation of beneficial ownership recommendations to strengthen anti-corruption efforts. |
Chapter 26 (Transparency and Anti-corruption) |
|
Hence, the IPEF does not seem to bring forward entirely novel or unprecedented proposals, with the possible exception of the unethical use of artificial intelligence (which however does not appear anymore in the September 2022 Ministerial Statement). Moreover, while the Framework certainly has the potential in theory to contribute to further developments (e.g., on freeing up digital trade, addressing fair taxation or money laundering issues and preventing supply chains disruptions, in particular with the establishment of a crisis response mechanism), in its current stage, it is an outline of issues awaiting the conclusion of specific agreements.
The Ministerial Statements of September 2022, as a result of the discussions that have been held since May, introduced new topics (e.g. under Pillar I, agriculture or inclusivity—see the IPEF Upskilling Initiative—and, in general, capacity building efforts) as well as provided further details on the existing ones. But the Statements still fall short of hard commitments. The negotiation objectives presented indeed largely entail promotion and coordination efforts instead of specific actions and commitments, even if numerous initiatives’ proposals are listed. Thus, in the short term, the Framework’s aspirational language seems to do little to create rules or set standards in the way that the CPTPP has.
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Because the IPEF is driven by political and geostrategic concerns more than trade and investment considerations, it may not have much new to offer economically to its Indo-Pacific participants. The absence of tariff provisions in the Framework and the associated ‘new model’ narrative are consistent, both, with IPEF’s geostrategic raison d’être as well as the current political constraints about international trade within the US.
Given the impossibility of the US joining the CPTPP at the moment, the IPEF seems like an effort by the US to keep alive the possibility of affecting rules and standards on a variety of topics in the region—even if liberalisation isn’t on the agenda. Part 2 of this blog series will look at the possible future benefits for IPEF’s Indo-Pacific participants depending on their respective situations, as well as the foreseeable difficulties in the Framework’s implementation.
Read Part 2 of Celine Lange’s IPEF series here.
Read Part 3 of Celine Lange’s IPEF series here.