The United States, under President Joe Biden’s leadership, introduced the Indo-Pacific Economic Framework for Prosperity (IPEF) in Tokyo on May 23, marking a significant move to bolster the U.S.’s economic presence in the Indo-Pacific region. This initiative saw participation from 13 countries, including Australia, Brunei, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam, collectively representing approximately 40% of the global GDP. The IPEF is positioned as an integral component of the U.S. strategy in the Indo-Pacific, aiming to fill the void left by the U.S.’s withdrawal from the Trans-Pacific Partnership (TPP) in 2017.
This withdrawal had previously given China more leeway to expand its economic influence in the region. In lieu of rejoining the TPP, now known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Biden administration chose to develop the IPEF as an alternative approach to engage with the region’s economies. The framework concentrates on four primary areas: enhancing supply-chain resilience; advancing clean energy and infrastructure for decarbonization; promoting taxation and anti-corruption measures; and encouraging fair and resilient trade practices. The IPEF aims to foster cooperation and economic stability in the region, addressing contemporary global challenges. However, the IPEF differs from traditional free-trade agreements like the CPTPP and RCEP (Regional Comprehensive Economic Partnership) as it does not include provisions for expanded market access or tariff reductions. This aspect has raised questions about the framework’s potential attractiveness and effectiveness in incentivizing regional participation.
Notably, the IPEF seeks to establish pioneering commitments in emerging economic sectors such as the digital economy and clean energy. Additionally, it aims to uphold robust labor and environmental standards. However, varying policies and developmental stages among Indo-Pacific countries, especially in the digital domain, might pose challenges for uniform implementation of such standards across all member states. Bryan Mercurio, an international trade expert and professor of law at the Chinese University of Hong Kong, highlighted the regional desire for trade and market access as a key interest, an area where the IPEF currently shows limitations. Furthermore, the Biden administration’s cautious stance on offering greater U.S. market access and reducing tariffs, influenced by domestic protectionist sentiments, could affect the framework’s impact on reducing economic dependencies in the region.
The IPEF represents a nuanced shift in the U.S. approach to economic engagement in the Indo-Pacific, balancing regional economic integration with strategic interests and new trade norms. As the framework evolves, it will be crucial to observe how it adapts to the diverse economic landscapes and policy preferences of its member countries.
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