Two weeks ago, on May 23, US president Joe Biden announced the Indo-Pacific Economic Framework for Prosperity (IPEF) during a visit to Tokyo, Japan.
Biden said the initiative will allow participating countries to define the “rules of the road.” IPEF participants include Australia, Brunei, Fiji, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand, and Vietnam, in addition to the US.
Bangladesh is not a IPEF member. US representatives have, however, briefed Bangladeshi counterparts, which suggests the country may have a pathway to join the IPEF in the future.
A US State Department spokesperson told Dhaka Tribune the IPEF reflected “President Biden’s commitment to putting workers at the center of our economic and foreign policy, while strengthening our ties with allies and partners to increase our shared prosperity.”
The IPEF will then focus on achieving four key economic goals:
- Connecting economies through digital trade and cross-border data flows;
- Making supply chains more resilient to unexpected events and developments;
- Developing stronger clean energy commitments; and,
- Encouraging fairer trade by cracking down on corruption and tax avoidance.
The US State Department spokesperson said, “this framework will create a fairer, more resilient economy for families, workers, and businesses in the US and in the Indo-Pacific region.”
These goals reflect a broad swath of economic interests shared by IPEF participants. However, many IPEF participants are disappointed the initiative does not promise better market access.
The IPEF is not a free trade agreement
The Biden administration has not proposed better market access – under a trade agreement – because that would require a deeply divided US congress to amend law and implement trade incentives.
The Biden administration has then focused on what it can do without congress: deploy the U.S. Trade Representative (USTR) and Department of Commerce (DoC) to create consensus on the four goals.
The USTR will lead all trade talks, while the DoC will lead supply chain, energy, and tax discussions.
These representatives from the executive branch will encourage their IPEF counterparts to implement, or amend, laws and regulations to match those the US government already has on the books.
This is not a common approach to multilateral economic discussions.
IPEF members committed to discussing each goal, but are not required to implement any agreement. That means the IPEF promises a wide-range of outcomes, reflecting each participant’s interests.
Some countries will commit to most or all agreements; others will commit to some or none.
For example, representatives from countries like New Zealand and Singapore appear interested in binding agreements on trade, while its difficult to imagine countries like Indonesia or India committing to adopting legislation on digital trade, and attendant data localization measures.
The US, for its part, appears most interested in agreements on digital trade, supply chain management, and energy commitments – the Biden administration will likely measure its success on these targets.
A 21st century economic arrangement?
The US State Department spokesperson described the IPEF as “a 21st century economic arrangement designed to tackle 21st century economic challenges”. It’s certainly a unique approach.
Negotiations will likely splinter between more and less developed countries at first.
IPEF participants in Southeast Asia, for example, have experienced a diversity of outcomes following ASEAN economic integration in 2015, and the Regional Comprehensive Economic Partnership in 2020.
Their respective grievances will impact the pace and scale of the IPEF.
At the same time, those agreements demonstrate a long-term interest in deepening economic integration across Asia, which all IPEF participants, excepting India, have steadily progressed.
Negotiators, meanwhile, may struggle to create consensus absent of market access incentives.
These present market access concerns, however, could fade with momentum. Participants that streamline their laws make it easier for companies to trade with, and invest in, each other’s markets; negotiators have a wide scope under the IPEF to establish a favorable cost-benefit.
And it’s not as if IPEF agreements would not hold weight.
For example, any agreement on supply chain management or decarbonization will re-shape trade flows in Asia, while any regulatory standards – covering bribery, taxation, digital trade, labor, or environment – adopted will change the way companies can do business in the region.
IPEF participants are unlikely to want to find themselves on the outside looking in.
Ultimately, though, the IPEF shortens the runway for the free trade negotiations many participants appear to want – an eventuality that would become more certain should Democrats win a majority in upcoming US elections, or support from moderate Republicans thereafter.
The IPEF is, after all, exactly the kind of multilateral dialogue grouping that typically emerges years, sometimes decades, before a larger trade or economic agreement.
Adam Pitman is an American writer and analyst in South Asia.
