IPEF: Breaking the ice?
The Biden administration launched an informal trade partnership by the name of Indo-pacific Economic Framework (IPEF) on May 23 in Tokyo. IPEF has fourteen signatory member countries with Fiji joining late this year. According to the Biden administration, the framework is meant to boost economic cooperation, solidify relationships amongst the member countries, and engage in crucial trade matters in the region. The Indo-Pacific region is of immense importance due to geo-political and geo-strategic reasons. China has for long held hegemony in the region and is benefitting through trade with neighboring countries. Apart from its location, the Chinese foreign policy, the aggressive attitude of XI Jinpeng and the rapid rise of China, makes the region significant. Its foreign policy is inspired by masters like Sun Tzu and games like chess where the only viable move is to play on the back foot.
IPEF has four modules which include a connected, green, fair and resilient economy. It claims to deal with resilient supply chains, anti-corruption and anti-money laundering measures, regional economic connectivity, and infrastructural development. Many analysts are of the view that this initiative was taken to help challenge the Chinese dominance in the region.
Although, the IPEF was launched with the speculation that it will help the US in regaining the creditability in the region that was lost after she pulled out of the Trans-Pacific Partnership (TPP) and will also prove influential in countering the hard and strict commitments made by China under the Regional Comprehensive Economic Partnership (RCEP). However, since it is exclusively an administrative initiative and not a formal trade agreement, it is unlikely to produce the desired and speculative targets and achievements.
China is the main constraint and obstructionist in IPEF’s success. China will never allow another power to dominate this region. It has already shown concerns about the IPEF, stating that the framework is liable to protectionism and destabilising of supply chains which lead to global confrontation. The second major challenge to the IPEF is the speculated resurgence of Donald Trump, who is responsible for the trade sanctions against China. The third challenge is the protectionist sentiments in the US. According to protectionists, the labor and environmental standards are at stake due to such agreements. Owing to these concerns, the trade barriers and custom duties will remain in place, thus denying access to US markets. Bryan Mercurio, who is the Professor of Law at the Chinese University of Hong Kong, hinted its failure in these words, “what Asian partners really want is trade. I think they want market access, and the trade component of the IPEF, is really lacking.”
Despite the combined GDP of participant countries accounting for 40 percent of the world’s GDP, it is unlikely to help deter the rapid and fast-growing economy of China. Successive US governments have been devising policies to strengthen their position in the Indo-Pacific region with President Barack Obama launching the famous ‘Pivot to Asia’ strategy to contain the overriding Chinese ambitions in the region. Biden followed suit but will sink sooner rather than later. With the sentiments of labor and environmental standards sparking resentment at home, and apparently no major geo-political wins for US and the member countries, the Indo-Pacific Economic framework for prosperity is far-fetched to bear fruits. Chinese hegemony in the region by sustaining the status-quo will limit the IPEF to merely an economic partnership in vaccine supply and technological development of securing computer chips which are urgently needed in the automobile and hi-tech industries.