From UPSC perspective, the following things are important :
Prelims level : Indo-Pacific Economic Framework for Prosperity (IPEF)
Mains level : Economic expansion of QUAD
India has signalled its readiness to be part of a new economic initiative led Indo-Pacific Economic Framework for Prosperity (IPEF) by the US for the region.
What is IPEF?
- The grouping, which includes seven out of 10 members of the Association of South East Asian Nations (ASEAN), all four Quad countries, and New Zealand, represents about 40% of global GDP.
- The negotiations for the IPEF are expected to centre around four main pillars, including trade, supply chain resiliency, clean energy and decarbonisation, and taxes and anti-corruption measures.
- Countries would have to sign up to all of the components within a module, but do not have to participate in all modules.
- The “fair and resilient trade” module will be led by the US Trade Representative and include digital, labor, and environment issues, with some binding commitments.
- The IPEF seeks to strengthen economic partnership amongst participating countries with the objective of enhancing resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness in the Indo-Pacific region.
Features of IPEF
- US officials made it clear that the IPEF would not be a “free trade agreement”, nor are countries expected to discuss reducing tariffs or increasing market access.
- The IPEF will not include market access commitments such as lowering tariff barriers,
- In that sense, the IPEF would not seek to replace the 11-nation CPTPP (Trans-Pacific Partnership) that the US quit in 2017, or the RCEP, which China, and all of the other IPEF countries (minus the US) are a part of.
- Three ASEAN countries considered closer to China — Myanmar, Cambodia and Laos — are not members of the IPEF.
Four pillars of IPEF
- Trade that will include digital economy and emerging technology, labour commitments, the environment, trade facilitation, transparency and good regulatory practices, and corporate accountability, standards on cross-border data flows and data localisations;
- Supply chain resiliency to develop “a first-of-its-kind supply chain agreement” that would anticipate and prevent disruptions;
- Clean energy and decarbonisation that will include agreements on “high-ambition commitments” such as renewable energy targets, carbon removal purchasing commitments, energy efficiency standards, and new measures to combat methane emissions; and
- Tax and anti-corruption, with commitments to enact and enforce “effective tax, anti-money laundering, anti-bribery schemes in line with [American] values”.
Reasons for creation of IPEF
- The IPEF is also seen as a means by which the US is trying to regain credibility in the region after former President Donald Trump pulled out of the Trans Pacific Partnership TPP).
- Since then, there has been concern over the absence of a credible US economic and trade strategy to counter China’s economic influence in the region.
- China is an influential member of the TPP, and has sought membership of its successor agreement Comprehensive and Progressive Agreement on Trans Pacific Partnership.
- It is also in the 14-member Regional Comprehensive Economic Partnership, of which the US is not a member (India withdrew from RCEP).
- The Biden Administration is projecting IPEF as the new US vehicle for re-engagement with East Asia and South East Asia.