To re-engage economically with the Indo-Pacific region, United States (US) President Bidenlaunched the Indo-Pacific Economic Framework for Prosperity (IPEF) in May 2022. For Malaysia,the IPEF could help restore market access to the US by relaxing Withhold Release Orders (WROs)that ban exports of companies facing forced labour allegations. Malaysia also expects that theease and frequency with which trade sanctions are applied in the future will be better managed asa result of the IPEF. These potential benefits of the IPEF need to be weighed against a worst casescenario where the creation of the IPEF further fuels US-China tensions. Another problem is thatthe IPEF without China is almost economically meaningless to countries with China-centred supplychains like Malaysia. Worse than that, any potential benefits could be more than offset if it fuelsUS-China tensions leading to actions that further disrupt supply chains and trade.
Twelve months after the launch of the Indo-Pacific Economic Framework for Prosperity (IPEF), ithas achieved “substantial conclusion of the negotiations of a first-of-its-kind international IPEFSupply Chain Agreement”, in one of its four Pillars. The remaining three Pillars are Trade, CleanEconomy and Fair Economy (taxation/anti-corruption). Significant progress on each of theseremaining Pillars has also been announced, raising the expectation of conclusions by the end ofthis year.
This paper reflects on what the IPEF means for India. The structure of the paper is as follows: thefirst part traces the principal drivers for engagement in the IPEF, both from the United States (US)and the Indian perspectives; the second part identifies some of the key challenges for negotiation,anticipated outcomes as well as implementation challenges for India across its four Pillars, whiledwelling deeper into the Supply Chain Pillar, which has seen substantial conclusion; the third partis the concluding section for assessing the future evolution of the IPEF.
As the Indo-Pacific Economic Framework (IPEF) negotiations intensify, significant challenges awaitthe United States (US), both in successfully concluding an agreement that achieves US objectives,as well as ensuring successful implementation of the agreement once concluded. Complicatednegotiating dynamics will deny the US important leverage that it has used in the past to gettrade agreements over the finish line. Unique institutional features of the agreement call intoquestion whether some objectives can be achieved and enforced. Divergent domestic interests onsome issues will require US negotiators to walk a tightrope between energetic and diametricallyopposed domestic constituencies. The IPEF is freighted with heavy geopolitical baggage whichcould complicate negotiations. The unorthodox use of Executive Orders (EOs) to effectuate theagreement will raise several significant implementation challenges of which the IPEF partnersshould take clear note. Ultimately, the most important impact of the IPEF could lie far beyond theIndo-Pacific. The IPEF could be an important bellwether for how US-European Union (EU) traderelations are handled in this post-Free Trade Agreements (FTA), post-World Trade Organization(WTO) world.
The Indo-Pacific Economic Framework (IPEF) seeks to establish the United States (US) as the primaryrule-setter in the Asia Pacific (APAC), a position it has ceded to China in recent years. The reciprocalbenefits for the APAC are not so evident. Many in the region are not keen to choose sides and asa trade pact, it compares poorly with the Regional Comprehensive Economic Partnership (RCEP)and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). On itsside, the IPEF has reminded detractors that it is not a traditional Free-Trade Agreement (FTA), buta new generation economic agreement. This has some appeal and the APAC allies have signed onquickly. But the IPEF’s flexible approach means that having signed on, there is no compulsion tofollow through. Importantly, for now, there are no clear incentives for the private sector to partwith the sensitive supply chain information that is central to the IPEF’s success. Future negotiationswill benefit from the US’s willingness to sweeten the terms and position IPEF as an economicarrangement complementing existing trade pacts rather than upending those.
Japan has wedded its Free and Open Indo-Pacific (FOIP) Vision to various initiatives, includingthe Indo-Pacific Economic Framework (IPEF), to embed itself in the regional political economy.However, several factors such as COVID-19, geopolitics, policy choice, and costs are shapingJapan’s engagement. The IPEF is an inclusive agenda that sets rules and lays the foundation for theAmerican-led economic framework, anchoring the United States (US) in the region. It should beviewed through several initiatives, including the Resilient Supply Chain Initiative (RSCI), Data FreeFlow with Trust (DFFT), and the Japan-European Union (EU) Economic Partnership Agreement (EPA)amongst others. The Japan-US alliance informs all aspects of the Indo-Pacific engagement, butJapan has its own nuanced view of the region. Japan seeks to build resilience into the relationshipwith China through selective diversification and economic engagement while rejecting zero-sumapproaches, decoupling and containment policies toward the world’s second largest economy. This paper examines Japan’s strategic priorities pertaining to the IPEF, their connection to Japan’s relationship with China and the US, and the actions being taken for successful implementation of the IPEF.
This paper articulates the rationale behind New Zealand’s decision to join the Indo-PacificEconomic Framework for Prosperity (IPEF) based on a study of official documents, publiclyavailable submissions and other printed materials, as well as conversations with a number ofexperts. It discusses the challenges that might be faced in the negotiation process and later in theimplementation of the negotiated agreements. The paper argues that the rationale is not to befound in the conventional market opportunity (or trade creation) arguments. Instead, it is linkedto opportunities to pursue non-trade and non-economic objectives incorporated in the strategiesput in place by New Zealand in recent years.
This paper by Peter Draper discusses Australian perspectives on the IPEF’s anticipated outcomes, negotiation challenges and implementation issues. Given that these negotiations are still underway and at an early stage, the material is sourced primarily from internet sources and confidential background interviews with Australian stakeholders. Thereafter, Australia’s participation in the IPEF negotiations is assessed, including a limited case-study on the Pillar 3 – Clean Economy – negotiations. The final section concludes.
The Konrad-Adenauer-Stiftung Regional Economic Programme Asia (SOPAS) has collaborated with the NUS Institute of South Asian Studies (ISAS) to produce a series of papers written by esteemed researchers on unique perspectives on the Indo-Pacific Economic Framework for Prosperity (IPEF) from different member nations.
This introductory chapter, written by Amitendu Palit and Ramita Iyer, serves as an entry point to the IPEF Discussion Paper Series and offers an overview of the IPEF’s approach, challenges, and prospects.
Global supply chains connect world industry and international trade in manufactures. East Asia’s dominance with China as the preferred assembly hub in global supply chains has brought unprecedented regional prosperity, but South Asia remains a latecomer. However, pandemic-related and post-pandemic continuing disruptions to supply chains and slowing growth are being keenly felt, dampening China’s attractiveness. In an uncertain global economy, increasingly footloose foreign investors are looking for alternative production locations. Is it South Asia’s turn to prosper through supply chains in this uncertain world? This is the topical public policy question facing India and the others in South Asia.
This paper discusses the concept of global supply chains, the industrial rise of East Asia, drivers of supply chain relocation from China, South Asia’s prospects, India as a complementary hub and policy lessons from East Asia’s industrial success. For the purposes of this paper, South Asia is broadly defined as the India and its contiguous countries: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.
The government and ruling parties proactively worked towards revisions of the three key defense documents, including the National Security Strategy, and these have recently received Cabinet approval. At the time of writing of this paper, Russian aggression against Ukraine, China’s military actions, and North Korea’s intermittent missile launches have had a major impact on the general public’s awareness of national security. Given the current situation, it is reasonable to assume that the security environment around Japan will continue to deteriorate. Japan has long maintained an exclusively defense-oriented policy. Thus, in the event of an armed attack, Japan is constrained to using force to the “minimum extent necessary” beyond proportionality.