Our President Joe Biden formally introduced the Indo-Pacific Economic Framework, or IPEF, this week during his first Asia tour, unveiling the country’s long-awaited Asia-Pacific economic strategy Washington.
It comes five years later The United States unilaterally withdrew from the Trans-Pacific Partnership, a trade agreement signed by 12 countries in Asia-Pacific, North America, and South America.
With the withdrawal of the US, the remaining countries continued to launch the CPTPP, or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership – one of the largest multilateral trade agreements in the world, and one of the largest in the world. multilateral trade agreement. China asked to join.
Since then, the US has been largely absent from the region, made worse by the trade war with China. But IPEF broke the ice.
However, analysts and observers say the deal lacks “teeth” and is more symbolic than it is effective or actual policy.
CNBC looks at what the Indo-Pacific Economic Framework is.
What is IPEF?
Seen as a means to counter China in the region, it is a US-led framework for participating countries to strengthen their relationships and engage in important economic and trade issues. important areas of interest to the region, such as building supply chains that are resilient to the pandemic.
It is not a free trade agreement. There is no chance of market access or tariff reduction yet, although experts say it could pave the way for commercial deals.
David Adelman, managing director of Krane Funds Advisors and former US ambassador to Singapore, told CNBC on Tuesday: “I think President Biden has unfortunately pointed out that it shouldn’t even be seen as a start-up. the beginning of a trade agreement.
What the Asian partners really want is trade. I think they want market access. And the commercial component of IPEF is really lacking.
Bryan Mercurio
Professor of Law, Chinese University of Hong Kong
It is not a security treaty, unlike the four-nation Quad alliance, which includes Australia, India, Japan and the United States.
First, the US will cooperate with 12 countries initially including members of the Quartet: Australia, India and Japan. It also includes seven ASEAN countries such as Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam, as well as South Korea and New Zealand.
Washington has said that the framework is open to new entrants.
“It’s a good set of countries… but we need to remind ourselves that this is not really a policy shift or a breakthrough for trans-Pacific trade – it’s,” Adelman said. is a framework,” Adelman said.
Why the Indo-Pacific?
“The future of the 21st century economy will be largely written in the Indo-Pacific – in our region,” Biden said this week.
US President Joe Biden, Japanese Prime Minister Fumio Kishida and Indian Prime Minister Narendra Modi attend the Indo-Pacific Economic Framework for Prosperity along with other regional leaders via video link on May 23, 2022.
Saul Loeb | Afp | beautiful pictures
The combined GDP of the participating countries accounts for 40% of global GDP.
About 60% of the world’s population resides in the Indo-Pacific, and the region is expected to be the largest contributor to global growth over the next three decades, Biden administration said.
Commerce Secretary Gina Raimondo said the US wants to restore its economic leadership in the region and is “presenting the Indo-Pacific countries an alternative to China’s approach”. “.
US national security adviser Jake Sullivan also said the framework is a means for the US to “strengthen relationships with allies and partners for the sake of enhancing shared prosperity.”
But analysts say it’s “more marketing than policy.”
“The good news is that the United States is actively engaged in trade in Asia and using its summoning power to bring these 12 key economies together,” Adelman said.
The Four Pillars of IPEF
Just to be clear, the specifics and details of the framework are still being worked out. But to start, here are the four main tenets of the framework:
- The Connected Economy: higher standards and rules for digital commerce, such as cross-border data flows.
- Economic recovery: Supply chains are resilient to unexpected disruptions like pandemics.
- Clean economy: towards green energy commitments and projects.
- Fair economy: fair trade practices, including rules targeting corruption and effective taxation.
“If you look at the four pillars, it’s really asking partners to do something to change the law,” said international trade expert and law professor at the Chinese University of Hong Kong, Bryan Mercurio. their laws or regulations or the way they operate”.
“I think what the US has to provide, and the only thing that the US has to provide, is money. Some, I think, will come out, especially clean energy, maybe even some for the capability. supply chain recovery and anti-corruption,” said Mercurio.
“But of course, what the Asian partners really want is trade. I think they want market access. And the commercial component of IPEF is really lacking.”
Where is China in this?
A natural free-trade internationalist, Biden would rather work with Beijing to enhance trade and wealth for the United States but he faces China’s hawks in Congress, protectionism in the US and possibly even the rise of Donald Trump.
The IPEF serves as a mediator for Biden’s plans to gain more control over economic flows in the Indo-Pacific, particularly with China at the heart of the region’s supply chains.
As a non-trade deal into Asia, Biden will not need to seek congressional approval and therefore won’t need to seek congressional approval, say analysts at the Washington-based Center for Strategic and International Studies. avoid a domestic ratification battle.
This is important for Biden, who is facing a complicated political cycle in the country at this time, Adelman said.
Former Indian Commerce Minister Ajay Dua told CNBC that he sees the framework as an economic alliance aimed at countering China’s emergence in the region.
Different from previous commercial transactions
The Trans-Pacific Partnership, an ambitious mega-trade agreement involving Indo-Pacific nations, is part of President Barack Obama’s pivot to Asia strategy.
Trump pulled the US out of the trade pact in 2017, after it drew criticism from ending protectionism on the American political spectrum.
Japanese Prime Minister Fumio Kishida, US President Joe Biden and Indian Prime Minister Narendra Modi attend the Indo-Pacific Economic Framework for Prosperity on May 23, 2022.
Saul Loeb | Afp | beautiful pictures
The TPP has evolved into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, now one of the largest trading blocs in the world, which has attracted new applicants, including China.
But it’s not like TPP or CPTPP.
The Indo-Pacific Economic Framework is still “quite far from the ambition displayed at the time of the CPTPP’s launch,” said Julien Chaisse, a commerce professor at City University of Hong Kong.
“Overall, [this] seems to announce a kind of ‘soft law’ framework with a high degree of flexibility [allows] Members only agree on some rules/pillars,” said Chaisse.
“I think this ‘soft law’ framework allows the US to act quickly [into the region]. “
