IPEF: A new framework
Contemporarily, an economic initiative, namely the Indo-Pacific Economic Framework (IPEF), was launched by United States President Joe Biden on May 23, 2022 in Tokyo just a day before the convening of the fourth summit of the Quad countries. The trip and the announcement come as part of a recent push by the administration to further shape its Asia policy, preceded by the US-ASEAN Special Summit and followed by the announcement of the administration’s China policy.
Along with Japan and India, 10 other countries have committed to join the US-led Indo-Pacific Economic Framework (IPEF). Those countries include Australia, Brunei, Indonesia, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. Not included, at least for now, are Taiwan, three ASEAN member states (Cambodia, Laos, and Myanmar) and China (obviously). But the door to their future membership remains (at least theoretically) open.
The said framework is based on four pillars that are: (1) fair and resilient trade; (2) supply chain resilience; (3) infrastructure, clean energy, and decarbonisation; and (4) tax and anti-corruption. It is the cornerstone of the Biden Administration’s strategy for economic engagement in Asia and is ostensibly intended to be a mechanism for countering China’s influence in the region. Through this initiative, Washington hopes to economically engage the Indo-Pacific and counter China’s increasing economic and political influence in the region. With around 60 percent of the global population, the region is going to be the main driver of economic growth in the world in the next few decades.
In 2021, after around 10 years of painstaking negotiations, China and other Indo-Pacific countries signed the Regional Comprehensive Economic Partnership (RCEP), the largest free trade deal in the world. All ASEAN countries and some close U.S. allies (Australia, Japan, New Zealand, and South Korea) joined RCEP. It entered into force on January 1, 2022.
On the other hand, Japan and others negotiated and revived the Trans-Pacific Partnership (TPP) (or what was left of it after the U.S. withdrawal) and called it the Comprehensive and Progressive Transpacific Partnership (CPTPP). It was ratified in 2018. The United States has ruled out the possibility of rejoining this FTA, however. Instead, Washington has argued that the region needs to move beyond it. Enter IPEF, the second coming of the US pivot to Asia, or pivot to Asia 2.0.
The United States conceived the IPEF to fill this gap. According to the White House, the goal of the IPEF is to tackle, “21st-century economic challenges ranging from setting the rules of the road for the digital economy, to ensuring secure and resilient supply chains, to helping make the kinds of major investments necessary in clean energy infrastructure and the clean energy transition, to raising standards for transparency, fair taxation, and anti-corruption.”
Under the IPEF, the Biden administration is trying to dominate the rules and standards of digital technologies like artificial intelligence and fifth-generation telecom (5G). But the rules of digital trade and technology that the US wants to promote are too “American,” and many countries in the region simply cannot meet the so-called high standards. The US goal to isolate China from regional countries will make the implementation of IPEF rather problematic insofar as the framework serves US interests at the expense of regional countries by setting higher thresholds on the digital economy, environmental protection and other fields in line with US economic policies.
Besides, countries within the Association of Southeast Asian Nations are in no mood to decouple from China, and the existing pattern of supply chain division has lasted a long time and has brought benefits to the countries of the Indo-Pacific. Importantly, China is spearheading a comprehensive free trade effort in Asia, especially with the operationalisation of the Regional Comprehensive Economic Partnership (RCEP), whereas the IPEF has little to offer Asian economies by way of tangible economic benefits such as opening up more of the US market to Asian people. There are no market-access or tariff-reduction provisions in the framework, which lacks trade incentives that countries in the region desire. Above all, the IPEF may take years to take shape and China gets ample time to render it ineffective.
Ultimately, the IPEF is not a free trade agreement; rather, it is an executive branch initiative to negotiate standards and rules in the region. The goal of the IPEF is ostensibly to exert US influence over economic standards in the Indo-Pacific region as a counterweight to China.