Satyam Tripathi

Abstract

The launch of the Indo-Pacific economic framework (IPEF) for prosperity by President Joe Biden on May 23, 2022, from Tokyo reflects the recuperation of US’s geo-economic initiative surfing onboard the multilateral platform within the geo-political construct, i.e., Indo-pacific, after five years since Donald Trump pulled out from Trans-Pacific Partnership (TPP) in 2017. In this article I have tried to analyze the concerns for the IPEF amidst an intersectional web of multilateral groupings in the Indo-Pacific.

India’s engagement in the region

After a number of China’s assertive actions since 1974 with the claiming of Paracel islands and later passing a territorial sea law allegedly claiming entire South China sea giving historical reasons, a decade after establishment of UNCLOS, created skepticism and a sense of fear among Southeast Asian states.

In order to counterbalance China’s dominance in the region, South-East Asian states initiated a ‘Look West’ outlook where India was perceived as a natural balancer to China. Lee Kuan Yew, Former Prime Minister of Singapore once said,

“There will be U.S., there will be China, the Indians are going to be themselves, they’re not going to be everybody’s lackey”

  It was in 1994 when India reciprocated by officially launching ‘Look East’ policy with its core idea of integration of Indian economy with that of ASEAN. Given Indo-Pacific’s historic importance with more than 50 percent of world trade taking place in the region, India realized this potential only with liberalization of its economy in 1990s.

 In 2018, PM Modi outlined India’s vision for the Indo-Pacific region at the Shangri La Dialogue in Singapore. Subsequently, in April 2019, an Indo-Pacific division was established by MEA bringing within its ambit ASEAN, IORA, and QUAD. 

U.S. under Donald trump had largely been reluctant and retracting from committing with multilateral institutions under the domestic pressure of protectionist nationalism. Hence, remained mostly occupied with deals, bilaterally. TPP first conceived by Trump’s predecessor, Barack Obama under his “Pivot to Asia” strategy, was aimed to contain China’s growing economic clout in the region. The withdrawal revived the end of multilateralism debate, more importantly after the Covid induced pandemic, posing a question on multilateralist world order on its ability to ensure stability and cooperativeness when every country was looking inward or at most having a bilateral gaze.

A multi-layered web of relationships 

The IPEF contains but is not limited to trade that forms one of its four pillars on which India abstained from going on-board. But this abstention does not mean the end of India’s engagement with the initiative. India’s vision of Indo-Pacific and Act East Policy has ASEAN at its central premise. This holds significance since IPEF as of now is joined by all ASEAN countries except Laos, Cambodia, and Myanmar.

Figure 1 shows ASEAN’s bilateral trade with China, US, and India in USD Billions as of 2021.

Figure 1

The above chart affirms the fact that China remains largest trading partner for ASEAN and the long way ahead for India to take the lead in the region.

The 15-member Regional Comprehensive Economic Partnership (RCEP) contains all the ten members of ASEAN. It remains the world’s largest FTA trading bloc with 30 per cent of the global GDP. India opted not to be the part of the economic integration, given its ill-at-ease when seen in terms of trade deficit, conspicuously with China. RCEP accounts for more than 30 percent of China’s trade volume and is thus perceived largely as its sphere of influence from the west’s perspective.

RCEP is necessarily an FTA that aims to reduce 90 percent of import tariffs within 20 years, while IPEF negotiations do not involve lowering of tariffs or liberalising market access. The IPEF emphasis more on rules and policies than market access gives it a political tilt as conceived by China. Although, it would be too early to predict its evolution. 

All the four members of the Quadrilateral Dialogue (QUAD) comprising India, Australia, Japan, and the US are the consulting members of the IPEF whose final framework remains yet to be negotiated. Both Australia and Japan of the QUAD are common to RCEP, Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and now IPEF. The QUAD forms the frame for U.S. led IPEF. Two-way trade between the United States and the region representing 60 percent of global GDP stood at $1.75 trillion in 2020. US FDI in the region as of 2020 stood at over $969 billion.

The fact that IPEF is a not a traditional economic or trade agreement unlike CPTPP or RCEP is now unriddled. This is also evident from the nomenclature of the initiative itself i.e., ‘Indo-Pacific’ rather than ‘Asia-Pacific.’ This gives it a strategic fervour. At the same time, quite paradoxically, while QUAD having an informal politico-security nature, IPEF engenders an economic width formally, thereby making sense for Southeast Asian states (particularly ASEAN) that are heedful and wary of antagonizing PRC. This also explains as to why Republic of China (ROC) i.e., Taiwan was counted out from the initiative despite its willingness to join.

 The Indo-Pacific Oceans’ Initiative (IP0I) launched at the 4th East Asia Summit in Bangkok. The seven pillars of IPOI envisage maritime resources; disaster risk reduction; science and technology; academic cooperation; maritime security; maritime ecology; capacity building and resource sharing; trade, connectivity, and maritime transport.

The non-treaty based IPOI that transcends beyond the security and political conceptions, draws upon existing regional architectures such as Indian Ocean Rim Association (IORA), ASEAN-led East Asia Summit framework, BIMSTEC, PIF etc.  India has been an active participant in these domains lately and the U.S. led IPEF would not only overlap the cooperation areas, thereby increasing coherence but also includes dimensions such as clean energy, access to key minerals, semiconductors, tax evasions, concessional finance, that are key to India as an aspiring regional as well as global leader.

Concerns

  • The countries joining the initiative may be divided in the future negotiations due to their participation in multilateral FTAs already in the scene and their intersections of strategic alignments.
  • Since the FTAs under the purview of trade do not form the part of IPEF, the initiative would not be subjected to Congress. This implies that participants might have to settle with already existing commitments within the laws. Hence, lacking the legislative substance renders U.S. absurd in making new commitments for its partners committing to the framework.
  • The framework largely being implemented through the executive order, makes it susceptible of being withdrawn by the new administration in 2024, as happened with TPP.
  • China has an advance footing in the RCEP and all the members of IPEF are also the part of supply chain and economic integration under RCEP except U.S. and India. Hence, it would take greater time and participation, of including IORA states to decouple from the China dominated supply chains in the alternate economic framework.
  • The ‘free flow of data’ model and the climate change pillar driven by U.S. may put undue strain on the developing economies, in view of India’s prospective data protection legislation that points to ‘data localization.’
  • IPEF though at a nascent stage, but as indicated by the U.S., the binding commitments on the trade pillar would not be very appealing for the developing countries as it does not provide access to U.S. markets.

Way forward

IPEF offers an alternative multi-dimensional economic platform to China dominated multilaterals and opportunity to assimilate Indian economy in the region which is neither part of RCEP or CPTPP. India has the opportunity to reinforce itself as an attractive investment destination amidst negotiations on alternative to China dependent supply chains. 

There is this perpetual view in China about India bandwagoning with the west. This holds no different for U.S. led IPEF, but India has demonstrated its strategic autonomy time and again, also taking an independent-neutral stand in the UN by abstaining from votes condemning Russian aggression. For other nations in the South-East Asia, New Delhi is more like balancing relations with major powers and so are they.

The U.S. cannot afford to lose India, the largest democracy, out from the initiative given its cultural-diplomatic integration with the region and non-aligning consoling perception for other South-East Asian states.

There are opportunities for India to harness the potential of the sub-topics like clean energy technology, access to strategic minerals, semiconductors, tax evasion issues and lead on the same. The final framework yet remains to be negotiated and officially announced, and hence, what IPEF has in the offing remains to be deciphered.

References 

Statement on Indo-Pacific Economic Framework for Prosperity, May 23, 2022, The White House. https://www.whitehouse.gov/briefing-room/statements-releases/2022/05/23/statement-on-indo-pacific-economic-framework-for-prosperity/

The Indo-Pacific Economic Framework (IPEF): An ASEAN perspective, Premesha  Saha (June 25, 2022), Observer Research Foundation https://www.orfonline.org/research/the-indo-pacific-economic-framework/

Ministry of Commerce and Industry (September 10, 2022), Press Information Bureau https://pib.gov.in/PressReleasePage.aspx?PRID=1858243

IPEF viewed as an effort to box in China, Yifan Xu ( May 27, 2022), China Daily http://global.chinadaily.com.cn/a/202205/27/WS62903040a310fd2b29e5f581.html

China steps up its strategy in the Indo-Pacific (September 30, 2021), The Hindu Business line https://www.thehindubusinessline.com/opinion/china-steps-up-its-trade-strategy-in-the-indo-pacific/article36760078.ece

Overview of India-ASEAN relations (May 09, 2022), Ministry of External Affairs https://www.mea.gov.in/Portal/ForeignRelation/ASEAN_India_Brief_May_2022.pdf

India’s vision for Indo-Pacific Trade, Saon Ray (October 12, 2021), The National Bureau of Asian Research https://www.nbr.org/publication/indias-vision-for-indo-pacific-trade/

FTAs, Ministry of Commerce and Industry, (April 06, 2022), Press Information Bureau https://pib.gov.in/PressReleasePage.aspx?PRID=1814151

The Indo-Pacific Economic Framework (IPEF) is Not a Free Trade Agreement, but Will Be Judged on the Same Principles, Kyle Freeman, (June 1, 2022), China Briefing. https://www.china-briefing.com/news/ipef-not-an-fta-will-still-be-judged-like-one-op-ed/

Regional Perspectives on the Indo-Pacific Economic Framework, Matthew P. Goodman and Aidan Arasasingham, (April 11, 2022), Centre for strategic and International Studies https://www.csis.org/analysis/regional-perspectives-indo-pacific-economic-framework

Can IPEF reduce India’s Economic Dependence on China, Niranjan Marjani, (May 27, 2022), The Diplomat. https://thediplomat.com/2022/05/can-ipef-reduce-indias-economic-dependence-on-china/

About Author

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Satyam Tripathi, Reaserch intern at IMPRI, pursuing MA in Defence and Strategic Studies.