Quick Take on the Indo-Pacific Economic Framework Launch

AidanArasasingham and Emily Benson

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Last week’s big event was the launch of the Indo-Pacific Economic Framework (IPEF) during President Biden’s visit to Tokyo. Here at CSIS, the Economics Program and the Scholl Chair combined to produce an analysis of it shortly after the launch. In addition, the two primary authors, Aidan Arasasingham, program coordinator and research assistant with the Economics Program, and Emily Benson, associate research fellow with the Scholl Chair in International Business, have written a shorter version which, conveniently, is just the right length for my column. So, rather than reinvent the wheel, I am borrowing their work (with their permission) to bring you up to date on the IPEF:

At a hybrid event in Tokyo on May 23, 2022, President Biden and 12 regional counterparts officially launched the Indo-Pacific Economic Framework for Prosperity (IPEF). Coming almost five years after the United States withdrew from the Trans-Pacific Partnership (TPP), the IPEF aims to reassert U.S. economic engagement in the region and provide a U.S.-led alternative to China’s economic statecraft in the Indo-Pacific. Though this framework contains no new binding commitments at present, the joint statement solidified some details of the agenda. However, questions remain about the ability of the United States to incentivize closer economic cooperation in the region with this framework.

Australia, Brunei, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam announced their interest in the IPEF at the launch, although it is not yet clear which pillars each country plans to join. While it was widely expected that close advanced economy partners such as Japan, Australia, New Zealand, and Singapore would join the IPEF launch, the inclusion of seven other Indo-Pacific countries—including all seven of the Association of Southeast Asian Nations (ASEAN) members in the Asia Pacific Economic Cooperation (APEC), plus South Korea and India—is significant.

Several countries were not included in the IPEF launch. Given political and human rights concerns, Myanmar is not participating. Laos and Cambodia, two of the least developed countries in the region, are also not participating. Pacific Rim countries that participated in TPP negotiations—Canada, Mexico, Peru, and Chile—were not invited. Pacific Island nations were largely absent, although Fiji joined several days later. Perhaps most notably absent was Taiwan. While Taiwan has indicated interest in joining the IPEF—and 250 members of Congress called for Taiwan’s inclusion—the island was ultimately left out of the framework to secure the participation of other South and Southeast Asian countries reluctant to antagonize Beijing.

1. Connected Economy, which covers fair and resilient trade topics including the seven subtopics of labor, environment and climate, digital economy, agriculture, transparency and good regulatory practices, competition policy, and trade facilitation (led by the U.S. Trade Representative, or USTR);

2. Resilient Economy, which covers supply chain resilience topics (led by the Department of Commerce, or DOC);

3. Clean Economy, which covers infrastructure, clean energy, and decarbonization topics (led by the DOC); and

4. Fair Economy, which covers tax and anti-corruption topics (led by the DOC).

Countries can opt to join any number of the four pillars but are expected to commit to all aspects of each pillar they join. In other words, a country may opt into one pillar but not the others. Notably absent from the launch, and something the administration has repeatedly underscored, is the offer of U.S. market access or tariff liberalization. In prior months, it seemed that U.S. unwillingness to provide market access incentives could make the IPEF a non-starter in regional capitals. Though securing participation in the launch was an effort from the Biden administration that came down to the eleventh hour, it appears that the IPEF’s decentralized pillar approach with low barriers to participation has proven successful—at least for now.

Since the IPEF is not a traditional trade agreement, the administration will not need to seek congressional approval, thereby avoiding a politicized battle for domestic ratification. While its decentralized approach to participation in each pillar lowers the barrier for Indo-Pacific partners to join the framework, pursuing an agreement that does not require the input of Congress signals to other countries that the United States does not intend to make significant concessions.

However, there are still drawbacks to the IPEF since it is not a traditional trade agreement. Without the promise of access to U.S. markets, the United States is removing a significant incentive for regional partners to agree to high U.S. standards. A lack of enforcement mechanisms also limits the ability of the United States to secure its interests.

The IPEF is the centerpiece of the administration’s economic policy in a critical region, and failure would be a significant blow to its objectives. However, the administration has proven adroit at encouraging closer collaboration through other alternative arrangements, namely the U.S.-EU Trade and Technology Council (TTC). If the United States is able to replicate this level of cooperation and momentum in the Indo-Pacific—not certain given the diversity of the region and lack of clear incentives—the IPEF could potentially be a similarly ambitious framework among a broader set of partners.

Following a promising launch event, attention now turns to how effectively the administration can move to formal negotiations and offer incentives for key countries in the region to remain involved and make meaningful commitments.