Tuesday 28 June 2022
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Why Indo-Pacific Economic Framework is hard to trust

Unlike traditional trade blocs, there is no plan for Indo-Pacific Economic Framework for Prosperity members to negotiate tariffs and ease market access

With India joining US President Joe Biden-initiated Asia-Pacific trade initiative today in Tokyo, with 13 countries signing up, questions have arisen about the pact’s effectiveness, as the US is committed equally to trade and business with China. Biden launched the Indo-Pacific Economic Framework for Prosperity on his second day in Japan, where he is also holding talks with Japan Prime Minister Fumio Kishida before joining a regional Quad summit tomorrow.

“This framework is a commitment to working with our close friends and partners in the region on challenges that matter most to ensuring economic competitiveness in the 21st century,” Biden said.

The US president had first mentioned the Indo-Pacific Economic Framework for Prosperity at the October 2021 East Asia Summit. “the US will explore with partners the development of an Indo-Pacific economic framework that will define our shared objectives around trade facilitation, standards for the digital economy and technology, supply chain resiliency, decarbonization and clean energy, infrastructure, worker standards, and other areas of shared interest,” he had said.

Sirf News Analysis: Why Indo-Pacific Economic Framework is hard to trust

Unlike traditional trade blocs, there is no plan for Indo-Pacific Economic Framework for Prosperity members to negotiate tariffs and ease market access — a tool that has become unacceptable to American voters fearful of seeing homegrown manufacturing undermined. Instead, the programme foresees integrating partners through agreed standards in four main areas — the digital economy, supply chains, clean energy infrastructure and anti-corruption measures.

The initial members in addition to the US are Australia, Brunei, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand and Vietnam. These countries have hailed Indo-Pacific Economic Framework for Prosperity as a framework for what will ultimately become a tight-knit group of trading nations. “We share a commitment to a free, open, fair, inclusive, interconnected, resilient, secure, and prosperous Indo-Pacific region,” they said in a joint statement. “Deepening economic engagement among partners is crucial for continued growth, peace, and prosperity.”

How Indo-Pacific Economic Framework for Prosperity does not help

The 13 countries make for about 40% of global GDP and “there are other countries that could conceivably join us,” Biden’s national security adviser Jake Sullivan told the media.

Biden has pushed to rapidly rebuild strategic military and trade alliances weakened under his predecessor Donald Trump since taking office in 2021.

Indo-Pacific Economic Framework for Prosperity is meant to offer US allies an alternative to China’s growing commercial presence across the Asia-Pacific.

However, there Washington is not keen on returning to a tariffs-based Asia trade deal following Trump’s 2017 withdrawal from the Trans-Pacific Partnership — a huge trading bloc that was revived under a new name in 2018, without US membership.

While the Trans-Pacific Partnership lowers trade barriers for members, US Secretary of Commerce Gina Raimondo stressed that Indo-Pacific Economic Framework for Prosperity was not designed to go down the same route. The “framework is intentionally designed not to be a same old, same old traditional trade agreement,” she said.

Even then, Japan’s Kishida said there was still an appetite for US involvement in the larger pact abandoned by Trump. Japan welcomes the new framework and will “participate and cooperate”, he said, but “from a strategic standpoint, Japan hopes that the US will return to the TPP”.

No Taiwan in framework

China has criticised Indo-Pacific Economic Framework for Prosperity as an attempt to create a closed club. Sullivan rejected this, saying “it is by design and definition an open platform.”

Taiwan, a democracy that China claims sovereignty over, has pointedly not been brought into the initial line-up — despite being an important link in supply chains for microchips.

Sullivan said nevertheless that the US is “looking to deepen our economic partnership with Taiwan, including on high-technology issues, including on semiconductors and supply chains”.

This will happen, however, only “on a basis”.

The US faces scepticism, given the lack of incentives to go along with the plan of the Indo-Pacific Economic Framework for Prosperity for smoother integration. Without offering increased access to the huge US market, it is unclear what enforcement mechanisms could be applied.

But Raimondo said that if Indo-Pacific Economic Framework for Prosperity had been in place before the Covid-19 pandemic triggered mass economic shutdowns, the US would have “experienced much less disruption”.

More broadly, the US trade-boosting initiative is welcomed by businesses that “increasingly look for alternatives to China”, she said.

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