Q: What do you mean by the Indo-Pacific Economic Framework (IPEF)? How is it beneficial to developing economic cooperation in the region?

The Indo-Pacific Economic Framework for Prosperity (IPEF) is a trans-Pacific partnership
that aims to strengthen economic ties between nations in order to improve the Indo-Pacific
region’s competitiveness, fairness, inclusiveness, and economic growth.
It was launched by United States President Joe Biden on May 23, 2022, in Tokyo, Japan, to
counter China in the region.

INDO-PACIFIC ECONOMIC FRAMEWORK

• Founding members: The IPEF has 13 other founding members, which include
members from the QUAD: Australia, India, and Japan. It also includes seven ASEAN
countries like Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and
Vietnam, as well as South Korea and New Zealand.
• The members together account for 28% of global trade in goods and services
and 40% of global GDP.

• Objective: The IPEF seeks to strengthen economic partnership among participating
countries in the Indo-Pacific region to enhance resilience, sustainability,
inclusiveness, economic growth, fairness, and competitiveness.

• Main Pillars: The framework is structured around four pillars which include:

• Connected economy: For higher standards and rules for digital trade, such
as cross-border data flow, data localisation, online privacy, discriminatory and
unethical use of Artificial Intelligence, etc.

• Resilient economy: For resilient supply chains that will withstand
unexpected disruptions like the pandemic through the establishment of an
early warning system, mapping critical mineral supply chains, improving
traceability in key sectors, and coordinating on diversification efforts.

• Clean economy: Countries are targeting green energy commitment and
projects to tackle the climate crisis, including in the areas of renewable
energy, carbon removal, energy efficiency standards, and new measures to
combat methane emissions.

• Fair economy: Commitments to enact and enforce the effective tax, anti-money laundering, and anti-bribery regimes through provisions on the exchange of tax information, criminalization of bribery in accordance with UN standards etc.

• Flexible framework: The signing modules of IPEF are flexible. Neither market
access nor congressional approvals are required for it. Although it does not qualify as
an FTA, members are free to negotiate in accordance with their own interests.
• For instance, India has opted out of the multilateral agreement’s trade
provisions while joining its other three components, which cover supply
chains, taxes, anti-corruption, and clean energy.

• Benefits: This framework will offer tangible benefits that fuel economic activity and
investment, promote sustainable and inclusive economic growth, and
benefit workers and consumers across the region.

BENEFITS OF IPEF IN DEVELOPING ECONOMIC COOPERATION IN THE REGION

IPEF serves as a middle ground for developing economic cooperation. This will control more
economic flows in the Indo-Pacific, especially with China at the centre of the region’s supply
chains. With 60 percent of the world’s population, the Indo-Pacific is projected to be the
largest contributor to global growth over the next 30 years.

• This framework is a revival of the US’s “Pivot to Asia” strategy with a renewed
focus on building partner coalitions and developing a collective response to curtail
the rapidly growing influence of China in the region.

• It offers the US the chance to provide expertise and technical assistance in
areas such as deep industrial decarbonization, supply chain resiliency, and
digital standards.

• This broad and flexible economic arrangement could help countries align
objectives and help create new opportunities for growth at home and abroad.

• It can be beneficial in diversifying and stabilising supply chains amid the fast-changing global trade circumstances. With the devastating impact of COVID-19 and
the Russia-Ukraine war on the world economy, there is a need to come together and
strengthen the resilience of supply chains to better respond to such issues as climate
change, pandemic, etc.

• It could act as a broad structure for the collaborative resolution of issues through
cooperation, capacity building, and technical assistance which are needed in today’s
polarised world.

• Bringing together highly heterogeneous countries with high-standard commitments
on the digital economy, green infrastructure, clean energy, and social and
environmental standards under the rubric of IPEF is a herculean effort.

• IPEF ensures establishing “trusted trader programs” to facilitate customs
clearance for traders that meet specified security criteria.

• IPEF ensures that the trade initiative will benefit the medical, electrical, and electronics sectors as well as the digital economy.

• Promoting the use of “single windows” for import, export, and transit will facilitate transparency among the members

• IPEF ensures the promotion of greater SME (small and medium-sized) enterprise
participation in Indo-Pacific markets by providing capacity building and technical assistance to fulfil TFA (Trade Facilitation Agreement) commitments and by increasing access to broadband connectivity.
• IPEF potentially creates a counter-narrative to Chinese dominance of economic and infrastructure architecture in the region. Asia needs $22-26 trillion over a decade to build infrastructure and connectivity in the region and the IPEF can aid in this.

INDIA AND THE IPEF

India is the only country from the South Asian region to participate in IPEF. Joining IPEF
reflects India’s renewed interest in economically engaging with the Asia and the Pacific
region and its commitment to bringing growth and prosperity to the region. As an emerging
leader in the region, India will play a significant role in the success of this regional initiative.
At the same time, India would also benefit from the initiative in several ways.

Benefits	Concerns
• By joining the IPEF, India could explore and be transformed by the economic potential associated with the digital economy. • In early 2021, India signed an agreement with Japan and Australia for supply chain resilience. With the IPEF, this move will be further strengthened.	• The IPEF talks about digital governance but its formulation contains issues that directly conflict with India’s stated position. India is firming up its own digital framework and laws, mainly privacy and data. • The Indian government withdrew the Personal Data Protection Bill, saying it would consider a “comprehensive legal framework” to regulate the overall Internet ecosystem, cybersecurity, etc.
• Building resilient supply chains is one of the goals of the IPEF. It will complement India’s ambition to integrate its economy with the global supply chain network through various efforts including the Resilient Supply Chain Initiative. It would both bring investment and create jobs	• The framework emphasises high- standard rules on cross-border data flows and data localization. However, in the Draft National e- Commerce Policy, India had backed restrictions on cross-border data flows. • India’s policy will serve as a significant barrier to digital trade and act as a market access barrier, especially for smaller firms.
• India’s aim to become a US$ 5 trillion economy by 2025 where trade is a major element of growth would get a boost from this initiative as it proposes to expand trade among the participants. • India’s ambition to become a digital economy hub is complemented by the primary goals of the IPEF. The IPEF would also extend its support to India’s plan to become a net-zero economy as it promises to work closely on climate related issues.	• The IPEF will follow a policy to further workers rights and introduce greater flexibility in labour markets. However, India’s Policies in this regard have been quite ambivalent. • India has not ratified two of the eight fundamental conventions of the ILO, namely, “Freedom of Association and Protection of the Right to Organise Convention, 1948” (Convention No. 87) and “Right to “Organise and Collective Bargaining Convention, 1949” (Convention No. 98), and both these Conventions focus on the fundamental rights of the workers.

CONCLUSION

For a long time, India was denied access to the Asia-Pacific Economic Cooperation
grouping, which projected China. However, with China posing existential challenges to many
countries, IPEF is seen as a robust and resilient alternative. The emphasis in IPEF on
preparing for the economic crisis strengthens Indian crisis management skills and this is
expected to cushion the Indian economy. The covid pandemic has disrupted many sectors of
the Indian economy and hence working with like-minded countries in a rules-based order
strengthens Indian competitiveness.