The formation of a new economic forum – the Indo-Pacific Economic Framework (IPEF) has been announced in Tokyo amid the ongoing check-and-trick game between the two biggest economic superpowers – the US and China. US President Joe Biden announced this new economic platform in the presence of Prime Minister Narendra Modi and Japanese Prime Minister Kishida Fumio before the start of the meeting of the four-nation coalition ‘Quad’ there.
There are a total of 13 countries in this including America, India and Japan. Through this platform, America will strengthen its business presence in the Indo-Pacific region. It is being argued about the formation of this forum that trade supply from China has been interrupted during the Corona period and China imposed its conditions. This is the reason why the whole world wants to prepare a solid alternative for it. India has also said many times that the world needs a reliable supply chain.
why the need
Joe Biden first mentioned the concept of IPEF in October 2021, saying that the US would try to develop this Indo-Pacific economic framework with its allies. Through this, we will strive to achieve our shared goals of ease of doing business, standardization in digital and technology, strengthening supply chains, cutting carbon emissions and clean energy businesses. It is also being seen as an attempt to restore America’s credibility in the Indo-Pacific region.
In 2017, then US President Donald Trump withdrew the US from the ‘Trans Pacific Partnership’ (TPP). Since then, there has been talk of imbalance due to the increasing influence of China in this region. China is a member of the TPP. Apart from this, China is also a member of the ‘Regional Comprehensive Economic Partnership’ ie RCEP. While both India and the US are not its members. India had distanced itself from the RCEP. The US estimates that through the RCEP, China has made strong economic ties with the region. He then applied to join the ‘Comprehensive and Progressive Agreement for the Transpacific’ (CPTPP). The CPTPP consists of 11 countries. This is a new version of TPP itself.
Terms and Questions
Countries joining the IPEF will have to adopt new rules regarding trade, labor norms and environmental criteria. This will continue to be a downside of IPEF in the eyes of developing countries. The rules for strengthening the supply chain have been included in the IEPF. It is in a way a plan to cut China out of the supply chain. But if this happens, that supply chain will be broken, which includes ASEAN countries. A question is also arising whether America will continue on this initiative even after Biden is not President? As expected, China has criticized the new US structure.
How different from CPTPP and RCEP
It is being said that unlike Asia’s two trading platforms CPTPP and RCEP, the cost rates will be lower in IPEF. Under this platform, the US seeks strategic cooperation on the strengthening of supply chains and the digital economy. Actually, it is a mechanism under which America wants to do business with member countries, but also wants to protect itself from the negative aspects of open trade.
An example of the downside of open trade is the job cuts in the US. Since China’s joining the WTO in 2001, jobs in the US construction industry have been drastically cut. Most American companies started setting up their plants in China. Donald Trump emerged in America due to increased unemployment in this sector. Trump was against such a business alliance, so he pulled America out of the TPP as soon as he came to power in 2017. Now the new platform was described by American National Security Adviser Jack Sullivan as the economic system of the 21st century. How much benefit to India
Through IPEF, America wants to renew trade agreements with East Asia and South East Asia. On the occasion of the announcement of this forum in Tokyo, Prime Minister Narendra Modi supported and said that India will work closely with the member countries. Many other member countries have expressed a positive attitude regarding this for the time being. According to experts, not all countries of the Indo-Pacific region will benefit equally from this.
There will be such rules regarding business, which will have to be followed, but it will not guarantee access to the market. Japan, Thailand, Australia, New Zealand have welcomed it but South Korea, Philippines, Singapore have reacted cautiously. According to experts, India may have a problem with the high US standards of business. So India would like to avoid its risks.
what the experts say
There are some points in the IPEF which do not seem to suit India. For example, digital governance has been talked about, but there are many such issues in its formula, which are in direct conflict with the policies of the Government of India. The government has been in constant conflict with US companies over data localization and cross-border data flow.
Prabir Dey, Professor, Research and Information Systems for Developing Countries
(think tank of the Ministry of External Affairs)
The IPEF will be a medium for the US to build economic ties with the Asia Pacific region. The initiative will fill the gap created by America’s separation from the Trans Pacific Partnership (TPP). Joining countries will have to adopt new rules regarding trade, labor norms and environmental criteria.
Jayant Menon, Senior Fellow, Singapore-based think tank ISEAS