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America’s Pivot to Asia 2.0 - The Indo-Pacific Economic Framework

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12/20/22, 1:20 PM America’s Pivot to Asia 2.0: The Indo-Pacific Economic Framework – The Diplomat

FEATURES | ECONOMY

America’s Pivot to
Asia 2.0: The
Indo-Pacific
Economic
Framework
As long as IPEF lacks clear
incentives, it will be hard to
transform the framework
into meaningful action.

By Mohammadbagher Forough
May 26, 2022

Credit: Official White House photo

On his Asia trip, U.S. President Joe Biden

announced on Monday that Japan, India and
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10 other countries have committed to join the

U.S.-led Indo-Pacific Economic Framework
(IPEF). Those countries include Australia,
Brunei, Indonesia, South Korea, Malaysia, New
Zealand, the Philippines, Singapore, Thailand,
and Vietnam. Not included, at least for now,
are Taiwan, three ASEAN member states
(Cambodia, Laos, and Myanmar) and China
(obviously). But the door to their future
membership remains (at least theoretically)
open.

Through IPEF, the United States hopes to

economically engage the Indo-Pacific and
counter China’s increasing economic and
political influence in the region. With around
60 percent of global population, the region is
going to be the main driver of economic
growth in the world in the next few decades.
According to the White House, the region
“supports 3 million American jobs” and is “the
source of nearly $900 billion in foreign direct
investment in the United States,” while U.S. FDI
in the region totaled around $969 billion in
2020. What’s more, the United States is the
“primary exporter of services to the region.”

In short, U.S. (and many global) policy and

economic elites see the course of this century’s
geopolitics and geoeconomics to be
determined in this region.

From Pivot 1.0 to Pivot 2.0

In 2011, then-U.S. President Barack Obama, on

a trip to Asia, introduced the U.S. Pivot to Asia,
which had both geopolitical components (such
as increasing the U.S. military presence in the 
region) and geoeconomic ones (such as the
Trans-Pacific Partnership, or TPP). Through the
TPP, Obama wanted the United States, not
China, to write “the rules of the road in the
region” or “write the rules of the global
economy” in this century. Obama hoped the

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TPP would be materialized by December 2012;

as it turned out, negotiations lasted until 2015.

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In their 2016 electoral campaigns, both Hillary

Clinton and Donald Trump opposed the TPP
due to anti-globalization (i.e. anti-FTA)
sentiments in the United States. President
Trump then torpedoed the TPP immediately
after taking office in 2017. Since then, the U.S.
Indo-Pacific policy has been increasingly
lopsided, defined more by geopolitical
formations (such as the Quad and AUKUS) than
(geo)economic initiatives and trade pacts.

In the meantime, in 2021, after around 10

years of painstaking negotiations, China and
other Indo-Pacific countries signed the
Regional Comprehensive Economic
Partnership (RCEP), the largest free trade deal
in the world. All ASEAN countries and some
close U.S. allies (Australia, Japan, New Zealand,
and South Korea) joined RCEP. It entered into
force on January 1, 2022.

On the other hand, Japan and others

negotiated and revived the TPP (or what was
left of it after the U.S. withdrawal) and called it
Comprehensive and Progressive Transpacific
Partnership (CPTPP). It was ratified in 2018.
The United States has ruled out the possibility
of rejoining this FTA, however. Instead,
Washington has argued that the region needs
to move beyond it. Enter IPEF, the second
coming of the U.S. Pivot to Asia.

While the Pivot’s geopolitics developed

substance (through the likes of the Quad and
AUKUS), the U.S. Indo-Pacific policy lacks
geoeconomic heft. IPEF aims to fill this gap.
According to the White House, the goal of the
IPEF is to tackle:

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21st century economic challenges

ranging from setting the rules of the
road for the digital economy, to
ensuring secure and resilient supply
chains, to helping make the kinds of
major investments necessary in clean
energy infrastructure and the clean

”
energy transition, to raising standards
for transparency, fair taxation, and anti-
corruption.

Obama’s legacy of the Pivot is almost

impossible to miss in IPEF. His discourse about
the TPP’s objective (“writing the rules of the
road”) resonates clearly in the quote above. In
this sense, IPEF is the United States’ second
attempt at a Pivot to Asia. U.S. policymakers
have noticed that the United States is left
sitting on the outside of the Indo-Pacific’s two
main trade blocs (RCEP and CPTPP).

How to Interpret IPEF and Its Challenges

In what follows, I offer seven observations

about the visions behind and the challenges
ahead of IPEF.

First, it is important to determine what IPEF is

not. It is certainly not an FTA like RCEP and the
CPTPP. It has not involved, nor has it promised
to involve in the future, negotiations to remove
tariffs or increase market access. For now, IPEF
is best understood as a vision, a signal, a
statement of purpose, or an attempt by the
United States to catch up with the Indo-
Pacific’s evolving history, geography, and
(geo)economics.

Second, IPEF’s ultimate vision is to reinstate

U.S. “economic leadership” in the Indo-Pacific
region and enable the United States –  as both
Obama and Biden have envisioned –  “to
[re]write the rules of the road”  for the Indo-
Pacific, and global, economy.

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Third, a major contradiction here is that “rules

of the road” require a framework with binding
commitments based on specific rules and
regulations. This specificity is normally
formalized through FTAs with clear rules and
dispute settlement mechanism. IPEF does not
offer any of that. Even before this trip, the
Biden team had to water down IPEF to attract
more countries to it.

The White House has argued that this aspect of

IPEF is a “feature,” not a “bug,” as it gives more
flexibility to the participants to act upon the
components that are completed without
having to wait for all of IPEF to be completed.
While this is a theoretically beautiful thought
process, we do not have many – in fact, any –
historical precedents of such a loosely defined
framework creating enough obligations and
incentives to create history-changing
momentum.

Fourth, the conceptual baggage of IPEF (setting

“rules,” “standards,” and “principles”) has
already appeared and been tested in both the
Blue Dot Network (BDN) launched in 2019 by
the Trump administration and the Build Back
Better World (B3W) initiative launched in 2021
by the Biden administration. BDN was defined
as “a mechanism to promote robust standards
[…] for quality infrastructure projects” and
B3W as an initiative to promote “high
standards and principles” in areas that overlap
with IPEF’s issue areas. Both B3W and BDN
were defined in terms of countering China and
its Belt and Road Initiative (BRI). Neither has
so far produced much tangible substance and
momentum. The United States should watch
out that IPEF does not meet the same fate as
BDN and B3W.

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Fifth, from the list of excluded countries

(China and its close ASEAN partners such as
Myanmar, Cambodia, and Laos), it is hard not
to infer that IPEF’s trajectory has been – and
will likely be – defined more by the United
States’ geopolitical objectives than global
economic dynamics. Another layer of
complexity for the U.S. is that, since 2011, the
Pivot to Asia has been constantly derailed by
geopolitical emergencies elsewhere, such as in
the Middle East or now in Ukraine.

Sixth, the most herculean challenge for the

United States is to persuade IPEF members to
disentangle their economies from China’s. It is
worth remembering that other than the U.S.,
each and every country that has joined IPEF
previously joined China in signing an actually
binding FTA, namely, RCEP. For them, that was
much more of a commitment than joining
IPEF.

This challenge becomes even greater given

that IPEF, in trying to set standards and
principles, will inevitably create obligations
while “lacking incentives.” It remains to be
seen if, how, and why IPEF partners should not
be “skeptical” and should work against their
own economic interests (i.e., economic
engagement with China) in the absence of IPEF
incentives (such as access to the U.S. market).

Seventh and finally, for IPEF to succeed, U.S.

policymakers should try to do two things
simultaneously: They should, first, get their
domestic act together by properly addressing
the U.S. population’s anti-globalization
sentiments and economic concerns; and,
second, merge initiatives such as IPEF (and
B3W and BDN) with already existing FTAs,
such as the Japan-led CPTPP, which are the
results of years of painstaking negotiations.
Only then can the United States use its
economic might, soft power, and geopolitical
leverage to start writing – or better, co-writing
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with partners – the rules of the road for the

global economy.

AUTHORS

GUEST AUTHOR

Mohammadbagher Forough
Mohammadbagher Forough is a research
fellow at the German Institute of Global and
Area Studies (GIGA) in Hamburg, Germany, and
a research associate at Clingendael –
 Netherlands Institute of International Relations
in The Hague, Netherlands. He holds a Ph.D. in
International Relations. Follow him on
Twitter @Mohamad_Forough.

TAGS

Features Economy United States Biden Asia policy

Indo-Pacific Economic Framework (IPEF) U.S. in CPTPP

U.S. Pivot to Asia U.S. trade agreements

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