Insight & Analysis

Biden’s IPEF agreement draws mixed response

Published: Jun 2022

The launch of the Indo-Pacific Economic Framework, which ties the United States to a dozen partners in the Asian region, has brought a mixed response. Some don’t like the lack of details and negotiations on tariffs, while others say the agreement goes way beyond that.

Wooden blocks spelling IPEF in an office

Last week, during his visit to Tokyo, US President Joe Biden announced the launch of the Indo-Pacific Economic Framework (IPEF), an economic agreement that is not quite a trade agreement. Some argue that it goes beyond a traditional trade agreement; others say it falls short. Meanwhile China and other critics see it as a bid by the United States to limit China’s economic dominance in Asia.

The announced partners are Australia, Brunei, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. They were described as the “initial partners”, indicating that there were more to come. And sure enough, a few days later, Fiji joined the party.

It’s not like there aren’t already enough parties in the region. There was the Trans-Pacific Partnership, which President Trump pulled the United States out of in 2017. It pushed on regardless, under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and is in the process of signing up new countries. And then there is the Regional Comprehensive Economic Partnership (RCEP), a free-trade agreement which the United States was not part of.

Biden’s new effort has raised questions about why the United States didn’t join the CPTPP instead. The answer, perhaps, is in the content of the framework, which – depending on who you speak to – is either light on details and not much of a trade agreement, or it is forward-thinking because it is consensus building and focuses on a lot more than tariffs.

The IPEF has four pillars: the connected economy, the resilient economy, the clean economy, and the fair economy. Under the connected economy, there is no mention of tariffs and trade negotiations. Rather the United States will engage “comprehensively” with its partners on a range of issues. “We will pursue high-standard rules of the road in the digital economy, including standards on cross-border data flows and data localisation,” according to a statement from the White House.

Under the banner of the “resilient economy”, the statement said the United States “will seek first-of-their-kind supply chain commitments that better anticipate and prevent disruptions in supply chains to create a more resilient economy and guard against price spikes that increase costs for American families.” The clean economy will seek commitments on clean energy, decarbonisation and tackling the climate crisis. And the fair economy seeks commitments on enforcing effective tax, anti-money laundering, and anti-bribery regimes to promote a fair economy.

The response to this has been mixed. The Economist Intelligence Unit commented how the framework was “light on detail” and stated the announcement affirms “our long-held view that the US will struggle to deepen its economic influence in Asia, particularly considering China’s economic prominence in the region”.

Meanwhile China scoffed at the announcement. Bloomberg reported that China’s Foreign Minister Wang Yi said the IPEF was “doomed to fail”.

Steph Sterling writes for the Roosevelt Institute that the framework’s lack of focus on reducing tariffs has been criticised, but this is misplaced. She writes that trade agreements have become more about other issues – not just tariffs. “In that sense, IPEF is simply further along in the direction of travel of all modern trade arrangements like the TPP, though with more countries and without the TPP’s neoliberal take-all-or-leave it character.”

In an explanation of this framework not being a free trade agreement, US National Security Advisor Jake Sullivan “The fact that this is not a traditional free trade agreement is a feature of IPEF not a bug. There are free trade traditionalists who have raised questions about it. Our fundamental view is that the new landscape and the new challenges we face need a new approach, and we will shape the substance of this effort together with our partners,” he said.

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