In what was a throwback to the Obama Administration’s “pivot to Asia”, president Biden was able to get endorsements from 12 partner countries to join the Indo Pacific Economic Framework (IPEF). According to the White House, the IPEF will enable the United States and its allies to “decide on rules of the road that ensure American workers, small businesses, and ranchers can compete in the Indo-Pacific”. More importantly, the IPEF is explicitly aimed at re-establishing the leadership role of the US in the Indo-Pacific region, a role that the President Trump had abdicated immediately after taking charge in Washington by withdrawing from the Trans-Pacific Partnership (TPP). The US’ withdrawal from region also set the stage for China to strengthen its position there, for which it was enabled by the economic integration agreement of East Asia, the Regional Comprehensive Economic Partnership (RCEP). Although IPEF has not been formally projected as a bulwark against the Chinese hegemony, there are indications that the new coalition could focus on developing supply chains by-passing the world’s second-largest economy.
Given that both the TPP and now the IPEF were proposed as instruments for stamping US’ leadership in the Indo- Pacific, comparisons between the two are bound to be made. In one significant respect, the two frameworks are similar, for both of them bear the indelible impressions of the US’ ambitions in the region. The Obama administration made no bones that TPP was “Made in America” for furthering the interests of “American workers and American businesses”. Although the Biden administration has not claimed credit for creating the IPEF, it is no secret that the Washington establishment and America Inc. have together put together an unusually cogent framework which was endorsed by the original signatories. In fact, IPEF bears testimony to efforts that Washington had expended to give shape to a proposal that the president had made during the East Asia Summit in October 2021 that the US “will explore with partners the development of an Indo-Pacific economic framework …”The IPEF stands on four pillars—fair and resilient trade, decarbonisation, supply chain resiliency, and tax and anticorruption. The first pillar on fair and resilient trade is to be led by the United States Trade Representative (USTR), while the Department of Commerce (DoC) would lead the other three pillars. This structure was first unveiled in March 2022 when the DoC and the Office of the USTR had sought comments from “interested parties” to assist the USTR/DoC in developing the US position in IPEF negotiations. Not surprisingly, major corporations, including Google, Microsoft, IBM, Intel, and Cargill and influential industry associations like Biotechnology Innovation Organisation and Pharmaceutical Research and Manufacturers of America (PhRMA) responded to the call.
With regards the fair and resilient trade pillar, the USTR sought comments in the areas of labour standards, environment and climate, digital economy, agriculture, transparency and good regulatory practices, competition policy and trade facilitation. It may be pointed out that the US has been making efforts to expand the mandate of the World Trade Organisation (WTO) by including most of these issues on the agenda, but most developing country members have been blocking its efforts. Therefore, together with the issues, which the DoC will provide the lead, IPEF has a expansive negotiating agenda.
With the two wings of the US Trade Administration leading the negotiations, the obvious conclusion would be that IPEF will be a trade agreement. But it is not intended to be one, as the US secretary of commerce Gina Raimondo has clarified. According to secretary Raimondo, IPEF is “intentionally designed not to be a same old … traditional trade agreement” and that the proposed framework is “designed to reflect the fact that … economies [of the Indo- Pacific region] have changed”. Thus, IPEF will formulate rules for the digital economy, ensuring secure and resilient supply chains, facilitating major investments in clean energy infrastructure and transition, and raising standards for transparency, fair taxation, and anti-corruption. Moreover, focus on “fair and resilient trade” is an added confirmation that securing market access through tariff reduction is not on the negotiating agenda, at least for now. However, market access will be contingent upon fulfilling the regulatory standards that the IPEF signatories intend to put in place. In short, the IPEF intends to achieve regulatory coherence in the Indo-Pacific region that will be hinged to the US’ regulatory structures, as has been the case with all the economic cooperation agreements it has endorsed.
What does the IPEF offer to India? The official position of the Centre, which was evident from prime minister Modi’s statement at the launch of the IPEF is that India seeks to participate more effectively in the regional supply chains. But this would have its challenges. For instance, while addressing the needs of the digital economy, the US has emphasised the importance of “high-standard rules … on cross-border data flows and data localisation”. The only evidence of India’s position on these issues is the Draft National e-Commerce Policy 2019, which is diametrically opposite to the objectives of the IPEF since the former had backed restrictions on cross-border data flows. A second area in which India’s regulations could be at variance with the IPEF rules is labour standards. While the Indian government has introduced greater “flexibility” in labour markets through the labour codes, the US is seeking to use the IPEF to adequately protect workers’ rights by incorporating strong and enforceable labour standards.
(The Author is a Professor at the Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University. Views are personal)
