Mint takes a look at what all it entails:
What is the Indo-Pacific Economic Framework (IPEF)?
IPEF is an economic compact that is oriented around four key pillars. First, “Connected Economy", prioritizes trade and looks to set the rules of the road in the digital economy. The second pillar. “Resilient Economy", focuses on building out secure supply chains. Third, the “Clean Economy" pillar looks to secure key climate goals like decarbonization and clean energy. Finally, the “Fair Economy" segment hopes to push anti-corruption efforts and corporate governance.
The 14 nations involved in IPEF are a mixed bag. Some, like Japan, South Korea and Australia, are long time treaty allies of the United States, while others like India are major partners. Besides this, Southeast nations like Vietnam, Indonesia and Brunei also find themselves included in the compact.
However, as America is at pains to point out, IPEF is not a “traditional" free trade agreement. This means that elements like reciprocal market access are not on the table.
What does the framework aim to do?
Part of the IPEF’s motivation is to forge an economic accord that allows like-minded nations to set technical rules and reap the economic benefits of growth in the Indo-Pacific. As the White House Fact Sheet on IPEF states, “with 60 percent of the world’s population, the Indo‑Pacific is projected to be the largest contributor to global growth over the next 30 years."
Lower costs and assured supplies of goods are another major factor. The White House argues that the “IPEF will help lower costs by making our supply chains more resilient in the long term" by “protecting us against costly disruptions that lead to higher prices for consumers."
The focus on decarbonization and clean supply chains is also aimed at achieving ambitious emissions reductions goals.
Is it a challenge to China?
A major driver of the Indo-Pacific Economic Framework is America’s competition with China. The former has lost ground to China as a major economic player in Asia and is looking to claw back its position. The choice of partners is also instructive and represents a mix of American partners and allies as well as markets the US would like to deepen relations with. The competition over setting rules, whether over digital norms or corporate governance, will prevent China from writing the economic rules of the game.
The focus on securing supply chains and critical minerals is also partly to reduce exposure to Chinese weaponization of any economic dependencies with IPEF nations.
What are the challenges?
For one, the lack of market access negotiations is a problem. The United States earlier backed out of the mammoth Trans-Pacific Partnership, a trade accord that placed market access, high-level standards among others on the table. With the IPEF, America runs the risk of demanding that partners meet the same demanding standards without any inducements in the form of market access and trade agreements. While the usual suspects like Japan, South Korea and Singapore will be happy to be a part of such a high standards agreement, developing nations like Vietnam and Indonesia have little reason to make binding commitments on anti-corruption standards and other issues without trade inducements.
What does India get out of it?
For one, India can secure a place at the negotiating table as major economic and technology standards for the region are set. IPEF offers a key platform for India after it chose not to join mega trade accords like the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership.
Further, supply chain initiatives allow India to position itself as a potential key recipient of investment and ensure that supplies of strategically vital goods, like critical minerals, are shored up by like-minded partners.
