By Mark Chan | June 5, 2022, 2.00pm SGT
First proposed by U.S. President Joe Biden at the East Asia Summit in October 2021, the Indo-Pacific Economic Framework for Prosperity (IPEF) has garnered significant attention following its launch in May 2022. It is widely seen as an attempt at U.S. economic re-engagement with key Asia-Pacific economies, following its withdrawal from the Trans Pacific Partnership (TPP) in 2017. Possible rules harmonisation efforts may be of interest to technology companies, but absent terms for better U.S. market access to members, the IPEF is unlikely to upset China’s deeply embedded role in the region’s tech supply chains anytime soon.
What is the IPEF?
The IPEF is best understood as a broad geo-economic strategic initiative, under which the U.S. and IPEF members will align on new rules in emerging economic areas. Rather than serving as a conventional Free Trade Agreement (FTA), it is meant to re-assert U.S. leadership in emerging technology standards and practices, while not conceding further U.S. market access or tariff reductions to IPEF members. It is envisioned as a counterweight to China’s regional economic influence, with “faster and fairer” growth as a key objective.
In their current form, the IPEF’s four pillars reflect several novel alignment priorities:
- “Connected Economy”: To create ‘higher watermark’ rules for emerging economic areas, including Digital Trade (under U.S. Trade Representative)
- “Resilient Economy”: To enhance supply chains resilience in the wake of the global pandemic and trade wars (under the Department of Commerce)
- “Clean Economy”: To accelerate Clean Energy technology to decarbonise economies (under the Department of Commerce)
- “Fair Economy”: To improve fair trade and competition, including through tax and anti-corruption members (under the Department of Commerce)
IPEF members can choose to join as many pillars as they wish, but the respective countries have yet to declare their preferences. Ministerial-level meetings are also expected to be convened throughout 2022 to form agendas to discuss each of the pillars, though a general timeline for producing an agreement is unclear.
The U.S. has so far secured 13 initial members to begin early negotiations with. They are: Australia, Brunei, Fiji, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand, and Vietnam. These countries collectively form 40% of world GDP and 60% of the world’s population.
Despite Taiwan’s interest in joining, it was ultimately not invited to join IPEF. However, fresh U.S.-Taiwan bilateral trade talks have just been launched which could conclude an even more pointed agreement than the IPEF at a quicker pace. The U.S. is also expected to discuss the IPEF with Pacific Rim countries (e.g. Canada, Mexico, Chile) at the upcoming Summit of the Americas.
Some commentators observe a unique gap that the IPEF could play in the harmonisation of technology rules and frameworks in the region, such as data privacy regimes and rules on cross-border data movement. However, it is unclear how IPEF rules would interact with pre-existing harmonisation initiatives, such as the ASEAN Digital Economy Framework or the Singapore-led constellation of Digital Economy Agreements – some of which have terms which ride on pre-existing TPP or APEC rules. Moreover, while the IPEF could indeed be an opportunity to shape harmonisation around more ‘free’ and portable notions of data regulation vis-a-visones based around data sovereignty, there is relatively little for IPEF members to gain in exchange for potentially significant regulatory overhauls.
The IPEF’s crucial “Connected Economy” pillar is ultimately unlikely to significantly augment trade flows between the U.S. and IPEF members, since it refrains from addressing key trade barriers in member economies (e.g., trade quotas) and market access issues in the U.S. However, the “Resilient Economy” and “Clean Economy” pillars could potentially create new initiatives which draw further attention to the region’s manufacturing hubs and outstanding infrastructure needs.
There is also scepticism over the IPEF’s ability to challenge China’s regional economic influence. The region’s growth is increasingly driven by intra-Asian trade, rendering key U.S. allies like Japan and South Korea unable to meaningfully recalibrate their supply chains away from China. Even in instances of strategic reshoring or “friend-shoring”, raw materials or equipment from China are still often needed.
Despite the lack of standout economic incentives like market access in the IPEF, some optimism exists over the U.S.’ re-engagement efforts as a prelude to future deals. Nonetheless, concern exists over whether momentum can be sustained to negotiate and work through the framework’s vast scope – let alone whether the IPEF will see political longevity come the 2024 U.S. presidential elections.
Ultimately, as a strategic economic engagement initiative, the IPEF will only succeed if members are consistently engaged with reference to their respective economic priorities. This will be a challenge, given the sheer heterogeneity of economies represented in the initial IPEF cohort. As pillars can be selected individually, this will likely mean that only advanced economies and traditional U.S. allies (e.g., Japan, South Korea, Singapore) will partake in the IPEF to its fullest extent.