INDO-PACIFIC ECONOMIC FRAMEWORK (IPEF)

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1. Indo-Pacific Economic Framework (IPEF) is a US led 13 founding members,

association including Australia, Brunei, India, Indonesia, Japan, South Korea,
Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. With the
late entry of Fiji, the first South Pacific Island to join, the membership has gone up to
fourteen.

Fig 4: Indo-Pacific Economic Framework Countries

2. Together, these countries account for around 40 per cent of the global GDP.
The economic framework broadly rests on four pillars: Trade, supply chain
resilience, clean energy and decarbonisation, and taxes and anti-corruption
measures. It intends to “advance resilience, sustainability, inclusiveness, economic
growth, fairness, and competitiveness” in these economies. 1

3. Through this initiative, members aim to contribute to cooperation, stability,

prosperity, development, and peace within the region. The grouping was born from a
collective desire to make the Indo-Pacific region an engine of global economic
growth, calling for common and creative solutions to tackle economic challenges in
the region.
1
https://www.washingtonpost.com/business/energy/understanding-ipef-and-how-it-counters-chinas-clout
Apart from China, three ASEAN countries (Cambodia, Laos, and Myanmar) are also
not part of the IPEF.

Necessity for IPEF

4. After former US President, Donald Trump decided to walk away from the
Trans-Pacific Partnership (TPP), the US’s Indo-Pacific strategy lacked a certain geo-
economic heft and that made it very less attractive to many Asean countries like
Indonesia, Singapore, Malaysia. After the coming of the Biden administration, the
fact that the US is working on an economic framework for the Indo-Pacific had been
doing the rounds. The US has repeatedly reiterated that the IPEF is not a Free Trade
Agreement (FTA) like the Regional Comprehensive Economic Partnership (RCEP)
and Comprehensive and Progressive Transpacific Partnership (CPTPP). It has not
involved, nor has it promised to involve in the future, negotiations to remove tariffs or
increase market access. For now, the IPEF appears to be the US’s way of
convincing countries that its Indo-Pacific strategy very much as a geo-economic
component and is not just security and geo-strategy heavy.

Key Points: IPEF

5. The key take aways from IPEF are as under:-

(a) IPEF is a US led 14 members economic framework that broadly

intends to “advance resilience, sustainability, inclusiveness, economic growth,
fairness, and competitiveness” in these economies.

(b) The IPEF consists of four key pillars to deepen the economic
engagement in the region along with establishing high-standard commitments.
These incl:-

(i) Connected economy. Aims to engage comprehensively among

partners on a wider range of issues like higher standards and rules for
the digital economy including cross-border data flows. Also, to
maximize the benefits of small and medium-sized enterprises it will
seek to address issues such as cyber-privacy, etc. This pillar also
aspires to promote strong labour and environment standards and
corporate accountability provisions.

(ii) Resilient economy. This proposes the efforts and commitments

from partners to build resilient supply chains that better anticipate and
prevent disruptions in supply chains. To have a more resilient
economy, the maintenance of undisruptive supply chains is intended to
be done via establishing an early warning system, mapping critical
 mineral supply chains, improving traceability in key sectors, and
coordinating diversification efforts.

(iii) Clean economy. This aims for targeting commitments to green

energy, decarbonization, and infrastructure projects. It also seeks to
pursue high-ambition targets to boost the efforts to tackle climate
crises.

(iv) Fair economy. For commitments to implementing fair trade,

including rules targeting corruption and effective taxation to promote
transparent economy.2

(c) Apart from the US and India, the other founding members of IPEF are
also the part of Regional Comprehensive Economic Partnership (RCEP) trade
agreement, which is the premier economic cooperation in the Indo-pacific
region. There are concerns about whether the IPEF intends to replace RCEP
in the future and to be operated as the traditional trade agreement.

(d) The Indo-Pacific Economic Framework is widely seen as an effort by

the US to counter China’s influence in the Asia-Pacific region, but it differs
from a traditional trade bloc based on free-trade agreements. 3

Implications for China.

6. There is still significant uncertainty around the IPEF and how effective it will
be as a mechanism for trade and engagement. The launch noticeably lacked details
on which pillars countries have agreed to participate. There is some speculation that
the original Framework was significantly softened in the lead up to the launch in
order to attract countries who had previously expressed doubt or disinterest in the
IPEF. Notably, the Indo-Pacific Economic Framework does not make any promises
of greater U.S. market access and does not include any enforcement mechanisms.
Some trade issues will likely prove difficult in areas like digital regulation, corporate
accountability, labor standards and environmental protections. 4

7. IPEF’s influence on China will be mainly reflected by exclusionary competition

in strategic industries. The IPEF’s establishment means that the United States has
established economic cooperation frameworks in the three major value chain regions
of North America, the EU, and East Asia, forming a closed-loop cooperation
framework

2
https://www.tpci.in/indiabusinesstrade/blogs/ipef-the-launch-of-an-economic-alliance/
3
https://www.scmp.com/economy/china-economy/article/3174211/what-ipef-and-will-it-help-us-counter-
chinas-influence-asia
4
https://www.jdsupra.com/legalnews/better-understanding-the-indo-pacific-3237634/
in which the United States dominates strategic industrial value chains.

8. The USEU Trade and Technology Council and IPEF are regional extensions
from the technological competition between China and the US in strategic industries.
The fields of technological competition include the digital economy, artificial
intelligence, new energy, and the semiconductor industry, among others. These are
industries of systemic importance, having very large, positive spill over effects on
national economies.