Apart from the four Quad members, IPEF includes Brunei Darussalam, Indonesia, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam
PM Narendra Modi (right) interacts with US President Joe Biden (centre) as Japanese PM Fumio Kishida looks on, ahead of the launch of Indo-Pacific Economic Framework for Prosperity in Tokyo | PHOTO: PTI
India, along with 12 other countries, on Monday joined the Indo-Pacific Economic Framework (IPEF) that seeks to establish a trading bloc in the region led by the United States. This is the first plurilateral deal that India has agreed to join after exiting the Regional Comprehensive Economic Partnership (RCEP) deal at the last minute in 2019. Here is a look at what IPEF stands for and what is in it for India.
Why is the US pushing for the Indo-Pacific Economic Framework (IPEF)?
In 2009, Barack Obama envisioned a trade pact in the Asia-Pacific through the Trans-Pacific Partnership (TPP) as part of his pivoting toward the region as well as a counter to China’s rising clout. However, the Trump administration in 2017 exited the trade pact holding that it is not in the interest of American workers. While the Biden administration didn’t join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) given domestic pressure not to yield market access through tariff cuts, it believes a trade bloc minus the tariff cuts in the Indo-Pacific region is a logical extension of the Quad formulation that also includes India, Australia and Japan. In many ways, IPEF is Biden’s TPP.
What does IPEF intend to do?
IPEF proposes to have four pillars: Trade; supply chains; clean energy, decarbonisation and infrastructure; and tax and anti-corruption. Under the trade pillar, IPEF seeks to build “high-standard, inclusive, free and fair trade commitments”. “Our efforts include, but are not limited to, cooperation in the digital economy,” the joint statement said without ruling out tariff negotiations under the proposed trade pact. The supply chain pillar is meant to ensure access to key raw and processed materials, semiconductors, critical minerals and clean energy technology for member countries. “Clean Energy, decarbonisation and infrastructure” involves mobilising finance, including concessional finance, and enhancing connectivity by supporting the development of sustainable and durable infrastructure. The tax and anti-corruption pillar seeks to promote fair competition by enacting and enforcing tax, anti-money laundering, and anti-bribery regimes in line with existing multilateral obligations to curb tax evasion and corruption in the Indo-Pacific region.
The member countries do not plan to begin negotiations for a trade pact immediately. They only promised to launch “collective discussions towards future negotiations” with the ambitious wish list.
What does the US seek to achieve through the IPEF?
A fact sheet released by the White House gave out more details about IPEF. “We will pursue high-standard rules of the road in the digital economy, including standards on cross-border data flows and data localisation. We will also seek strong labour and environment standards and corporate accountability provisions that promote a race to the top for workers through trade,” it said.
Who else is becoming part of IPEF?
The proposed economic bloc has 13 members so far and more countries are expected to join. Apart from the four Quad members, IPEF includes Brunei Darussalam, Indonesia, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam.
What is India’s position on IPEF?
On the face of it, India has welcomed IPEF. At the IPEF launch, Modi said India would work with other members to build an “inclusive and flexible” EPEF. “The Indo-Pacific Economic Framework is a declaration of our collective will to make the region an engine of global economic growth. I believe that there should be three main pillars of resilient supply chains: Trust, transparency and timeliness. I am confident that this framework will help strengthen these three pillars, and pave the way for development, peace and prosperity in the Indo-Pacific region,” Modi said, without mentioning the other three pillars of the proposed trade deal.
Will IPEF be beneficial for India?
IPEF gives India an opportunity to be part of the value chain in the Asia-Pacific region after it exited the RCEP trade deal at the last minute. It also takes care of India’s concern of China being part of RCEP as IPEF by design excludes China.
However, the agenda of IPEF poses significant challenges to India’s stated position. On issues like digital commerce, labour and environmental standards, India and the US have diametrically opposite views. India strongly resists putting such standards in any of the free trade agreements it signs. India didn’t join the Osaka Track on the digital economy at the G20 leaders’ summit in 2019 as it remains reluctant on setting global rules on e-commerce, holding that this may deny policy space to developing countries to expand their nascent e-commerce sector. India has also been strongly advocating data localisation because of its perceived economic benefits and protection of personal data for national security reasons and law enforcement purposes.