In a major development last week, the United States President Joseph R Biden announced the formation of a 13-member Indo-Pacific Economic Framework for Prosperity (IPEF) a day before the Quad Leader’s in-person meeting at Tokyo on May 24. It has 13 members including, the US, India, Japan, Australia, Brunei, Indonesia, Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. Indian Prime Minister Narendra Modi welcomed the formation of IPEF and attended it’s opening ceremony.
In late 2021, the US began preparations for the IPEF by despatching commerce and trade secretaries to various countries in the Indo-Pacific for informal discussions, given the mounting economic challenges. These visits came in the wake of the US announcement at the East Asian Summit in October last year expressing its intent to usher in the IPEF. The US-China tariff wars posed the background for this alternative move, as with the unprecedented pandemic related supply-chain disruptions.
Currently the IPEF constitutes 40 percent of global production and 60 percent of the population. Interestingly more than half of the IPEF members are from Southeast Asia and an overwhelming majority of them are also part of the Regional Comprehensive Economic Partnership (RCEP) arrangement that came into being in November 2020. The RCEP is seen as China-dominated grouping and the IPEF therefore provides an alternative for many of its members outside China’s pressures.
The IPEF intends to strengthen digital trade, resilience in supply chain mechanism, green economy and rules- based order although a road map for tariff reductions has not been outlined, and hence cannot be termed as a free trade area. On the other hand, the IPEF intends to accommodate new changes ushered by China’s rise.
The IPEF adds to the Quad’s economic angle and expands the interactions with other countries as well in near future. The revived Quad since 2021 had four Summit meetings and focused on non-traditional security challenges like vaccine production and distribution, critical technologies and maritime order. By including several other “friendly” countries, the IPEF is signalling its expansion and outreach.
IPEF appears to challenge China’s unilateral Belt and Road Initiative. Although China had joined the globalisation process, it has claimed leadership and began weaponing global and regional trade, investments, markets and tourism. China became the centre of trade value chain in the world and the problems surfaced as the Covid-19 pandemic worsened the global economy. Russian military action on Ukraine further led to the deterioration of global economy with high inflation and rise in food and energy prices. IPEF intends to wriggle out of this situation.
The Quad and the IPEF are seen contributing positively to the Indian economic and technological growth as well as for its security. As a “major developing country” with the fastest growing economy (estimated above 8 percent in 2022), the IPEF provides an opportunity for India to expand its economic cooperation with the Indo-Pacific region.
By joining the IPEF, India could explore and be transformed by the economic potential associated with digital economy. In early 2021, India singed an agreement with Japan and Australia for supply chain resilience. With the IPEF, this move will be further strengthened. India also has an ambitious target for “green economy” as reiterated at Paris in December 2015 and recently at COP-26 in Glasgow last year. Joining IPEF further strengthens this process.
While IPEF is not a free trade area, New Delhi’s comprehensive economic partnerships with Japan, South Korea and Singapore or its free trade agreement with the Southeast Asian grouping, the recent trade agreement with Australia and similar negotiations with United Arab Emirates, United Kingdom, Israel and the European Union members–all fit into the framework of linking up and integrating with hi-tech partners and to hence to the elevation of the Indian economy.
Also, the emphasis in IPEF on preparing for the economic crisis, strengthens Indian crisis management skills and this is expected to cushion Indian economy. Covid pandemic had disrupted many sectors of the Indian economy and hence working with like-minded countries in a rules-based order strengthens Indian competitiveness.
For long, India was denied access to the Asia-Pacific Economic Cooperation grouping, which projected China. However, with China posing existential challenges to many a country, IPEF is seen as a robust and resilient alternative.
This commentary aired on the All India Radio on 2 June 2022.
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About the Author
Srikanth Kondapalli, Professor, Center for East Asian Studies, Jawaharlal Nehru University, New Delhi, India