In a sudden decision not previously intimated, India became one of a 13-nation economic initiative led by the U.S., on Monday, as President Joseph Biden unveiled plans for an Indo-Pacific Economic Framework for Prosperity (IPEF). The initiative is touted as a substantial step by the U.S. as part of its decade-old “pivot to Asia”, and an attempt at putting some “economic heft” into its Indo-Pacific presence that has been on the decline after its decision to quit the Trans Pacific Free Trade Agreement, the CPTPP, in 2017. Officials say the IPEF framework has four “pillars”: supply-chain resilience; clean energy, decarbonisation and infrastructure; taxation and anti-corruption; and fair and resilient trade. Mr. Biden’s visit to Japan and South Korea, attendance at the Quad summit and helming the IPEF launch is also aimed at reassuring the Eastern hemisphere about the U.S.’s focus. India’s joining is an equally strong statement of commitment to Indo-Pacific goals, and to broadening regional economic cooperation, particularly after it walked out of the 15-nation RCEP. It is significant that all IPEF members, other than India and the U.S., are a part of the RCEP free trade agreement, and yet have chosen to be part of the U.S.-led initiative.
Despite the strong signalling from all sides, however, there are many aspects to the IPEF that bear further scrutiny. Monday’s launch only signals the willingness of the 13 countries to begin discussions on the contours. Much will depend, as Prime Minister Narendra Modi stressed, on how inclusive the process is. Second, U.S. officials have made it clear that it is not a free trade agreement; nor will it discuss tariff reductions or increasing market access, raising questions about its utility. Shorn of the rhetoric of Indo-Pacific cooperation, there must be more clarity on its framework. The four pillars also lend themselves to some confusion, drawing into question whether there is enough common ground among the 13 countries that are part of very different economic arrangements, as well as outliers (the U.S. and India), to set standards together, or be open to issues that vary for each country. The U.S.’s statement that the IPEF is essentially focused on “American workers” also raises questions on whether increasingly protectionist global trends will chafe. Each of the IPEF countries has considerable trade interests in China, with most having large trade deficits. So, it remains to be seen how much they will be willing to sign on with the IPEF. Already three ASEAN countries, Cambodia, Laos and Myanmar, have decided to stay out of the framework’s launch. Above all, given the fact that the U.S.’s previous initiatives (the Blue Dot Network and the Build Back Better Initiative) have made little headway in changing the region’s infrastructural needs, the IPEF faces a credibility challenge. Negotiators will need to move with both caution and clarity before making any big promises on its benefits for the region.
