IPEF will tackle new global economic challenges that FTAs don’t: US
In the run-up to the first in-person ministerial of the Indo-Pacific Economic Framework (IPEF) in Los Angeles from Thursday, the United States has said that IPEF will address issues that traditional free trade agreements have not.
The US has also portrayed the framework as “an affirmative economic agenda” for the region and claimed it is not meant to force countries to choose between the US and China.
“This is a unique and unprecedented economic arrangement..and it is critical to address global economic relationships and strengthen our economic engagement in the region. We are excited about the progress so far,” a senior US administration official told reporters on Wednesday.
The ministerial is expected to see an announcement by countries about which pillars they will join under IPEF. India’s minister for commerce and industry Piyush Goyal will participate in the summit.
IPEF was launched in May on the sidelines of the Tokyo Quad Summit. Initiated by the US, it has 13 other participating countries: India, Japan, South Korea, Philippines, Australia, New Zealand, Fiji, Indonesia, Brunei, Malaysia, Singapore, Thailand and Vietnam.
The framework is not a free trade agreement and doesn’t involve market access. It has four pillars – of a connected economy (trade), resilient economy (supply chains), clean economy (decarbonisation and infrastructure), and fair economy (anti corruption and taxation). The US Trade Representative (USTR), led by ambassador Katherine Tai, is the lead agency for the trade pillar, while the department of commerce, led by secretary Gina Raimondo, is leading the other three pillars.
After the official launch, Tai held an informal ministerial with participating countries on the trade pillar in June, and Tai and Raimondo have held a virtual ministerial with IPEF partners in July. Officials of all 14 countries also participated in a meeting in July to process the details of the agreement.
Responding to criticism that in the absence of market access provisions, the framework lacks teeth, the official claimed that IPEF will tackle issues that free trade agreements haven’t addressed in the past. “Think of supply chains, clean energy, digital trade issues. In this day and age, these are some of the biggest barriers. The framework is going to deal with a lot of non-tariff barriers.”
An official from another participating country however indicated that the trade pillar was the weakest in the framework for it laid out expectations on a range of issues – digital, environment and labour with compliance requirements – without providing any market access in return.
Participating countries seem most enthused about the supply chain pillar, which envisages early warning mechanisms on critical minerals, semiconductors, pharma, among other products.
When asked whether the framework was meant to counter China, a second senior administration official said that the initiative was about the US having an “affirmative economic agenda” in the region and was not meant as a way to choose between US and China but promote “long-term inclusive growth” in the region.
Experts, however, believe that while the key motivation for US is indeed countering China, it has to be careful with its language for Southeast Asian countries, in particular, don’t want to be seen as participating in any arrangement that can be construed as “anti-China”. It was also this apprehension that saw Taiwan’s exclusion from the IPEF despite its keenness to participate.