This week, Joe Biden, the President of America with a dozen partnering countries introduced a framework called as Indo-Pacific Economic framework. The main purpose of the framework is to strengthen the economies of the countries in the Indo-Pacific region.
The IPEF was launched at the QUAD summit with 12 countries, including the members of QUAD, the United States, India, Australia, and Japan. Along with the QUAD members, ASEAN countries like Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, as well as South Korea, and New Zealand.
What is IPEF?
Indo-Pacific Economic Framework (IPEF) is a framework that aims for collaboration and economic integration, to achieve economic gains for its member countries. IPEF sets the stage for discussions and debate on subjects pertaining to the integration and growth of economies in this region.
While this framework is not a traditional trade association, it is possible that this would help countries in the Indo-Pacific region with trade as well.
What led to the launch of IPEF?
5 years ago, when Donald Trump was the President of the United States, he decided to withdraw America from the Trans-Pacific Partnership(TPP). TPP was a trade deal signed by 12 countries from Asia-Pacific, North America, and South America. After the withdrawal of the US, the remaining countries decided to launch the Comprehensive and Progressive Trans-Pacific Partnership(CPTPP). CPTPP then turned out to be the biggest multi-trade deal of which China wanted to be a part.
Many countries in the Indo-Pacific region are economically dependent on China. With the growing dependencies, China has established its dominance in this region.
The United States, however, is using this framework to present itself as an alternative to China. The US while trying to be the good guy here and preaching the strengthening of the economies in the Indo-Pacific region, is also just trying to overcome the monopoly created by China in the supply chains.
Even though the intentions of the United States can not be trusted especially when it is already in the middle of a trade war with China, it can turn out beneficial for some countries.
What are the objectives of IPEF?
The members of the IPEF represent 40% of the global GDP and the focused region, represents over 60% of the global GDP.
The four main pillars of IPEF are:
- Fair and resilient trade.
- Supply chain resilience.
- Infrastructure, clean energy, and decarbonization.
- Tax and anti-corruption.
IPEF might not be the traditional trade agreement that lays out the terms of taxes or tariffs, but it is being called the “economic alliance” against China.
Asian countries are looking to access the market and better their supply chains, On the other hand, the trade component of IPEF lacks exactly that.