Joe Biden set to launch Indo-Pacific economic plan

INTERNATIONAL DESK: The US will launch a long-awaited economic initiative, the Indo-Pacific Economic Framework (IPEF), for enhancing US involvement in Asia, during President Joe Biden’s trip to East Asia including Japan for the Quad Summit next week, to balance China’s fast growing profile in the region.

The US is keen that India joins IPEF and plays a bigger role in the region, ET has learnt. IPEF is viewed as reflecting the US’ ambitions to expand ties with key Indo-Pacific economies by building a supply chain that excludes China.

The focus of the IPEF is on seven aspects, namely: trade facilitation, particularly for small and medium enterprises (SMEs); standards for a digital economy and technology; supply-chain resilience; decarbonisation and clean energy; infrastructure; workers’ standards; and, other areas of shared interest. Although many of these areas are relevant to countries in South-, Southeast- and East Asia, there would be a requirement to invest huge resources and active participation in the implementation phase.

While India is bullish on the supply chain initiative, it has sought flexibility on the other initiatives, ET has learnt. India has concerns about some of the other pillars, particularly trade, and its implications and is currently in talks with US officials over it, ET has learnt.

Last year, speaking at the East Asia Summit, Biden said, “The US will explore with partners the development of an Indo-Pacific economic framework that will define our shared objectives around trade facilitation, standards for the digital economy and technology, supply chain resiliency, decarbonisation and clean energy, infrastructure, worker standards, and other areas of shared interest.”

IPEF differs from a traditional trade bloc based on free-trade agreements. It seeks to establish trade rules, covering areas from data protection to cutting carbon emissions. Member countries can opt to participate in parts of the framework. But a disincentive with IPEF is the fact that it is set to be based on a presidential executive order and could be discarded by the coming US administrations as it is not a senate-ratified treaty.

“There is need of an organisation or secretariat to drive and oversee this initiative, in the absence of which, momentum would be lost.”

It is important to note that along with the BRI, China introduced the AIIB and other institutions such as the BRI Forum.

The IPEF appears to prefer a ‘menu approach’, with an overall framework of principles and goals to which countries would be asked to commit. Given that some nations, like India and ASEAN countries including Indonesia, are facing issues with the digital economy and e-commerce, decarbonisation and clean energy, and workers standards, negotiation through a menu-driven approach is likely to face a certain degree of difficulty,” Dr Prabir De of RIS and an economist specialising on Indo-Pacific economies told ET.

“It is apparent that Indo-Pacific countries would have apprehensions with the six sectors and the likely associated political complications. Costs for Asian countries that have been severely impacted by economic crisis and other social issues due to the ongoing pandemic, may outweigh the benefits. However, the IPEF may garner interest if it is turned into a real economic programme instead of merely advancing the US security-objectives,” Dr De explained.

Washington is not part of Regional Comprehensive Economic Partnership (RCEP) or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), formerly the Trans-Pacific Partnership (TPP), which the US pulled out of during the presidency of Donald Trump. RCEP is the world’s largest trading bloc, with 15 member states centring on the Association of Southeast Asian Nations (Asean) and including major non-Asean economies — China, Japan, South Korea and Australia. (The Economic Times)