Language : English 简体 繁體

The Momentum and Possible Direction of the Indo-Pacific Economic Framework Negotiations

Sep 19, 2022
  • Liu Chang

    Assistant Research Fellow, Department for American Studies, CIIS

On September 8–9, the first in-person ministerial meeting of the Indo-Pacific Economic Framework (IPEF) was held in Los Angeles, USA. The meeting discussed the four IPEF pillars: Trade; Supply Chain; Clean Economy; and Fair Economy, and issued a joint statement on each of them. All four statements were signed by 13 participating counties, with the exception of India. India withdrew from the negotiations on the trade pillar and withheld its signature from the joint statement, stating that they “have to see what benefits member countries will derive [from joining].” U.S. Trade Representative Katherine Chi Tai and Commerce Secretary Gina Raimondo, who led the meeting, said the gathering was a "milestone" in the IPEF and formed a new model for the rest of the world to "follow.” On the sidelines of the negotiations, some countries also held bilateral talks and expressed their willingness to deepen economic and trade cooperation under the IPEF. 

The four joint statements that emerged from the meeting were in general terms and did not exceed outside expectations, nor did they answer the longtime question posed to Washington: What will the U.S. use to win people over to maintain the momentum of the negotiations? According to the U.S. side's statement, the IPEF follow-up negotiations will be carried out "soon,” so the pressure is high. 

It is generally believed that the U.S. side may require other participants to complete negotiations and domestic ratification procedures before the U.S. hosts the Asia-Pacific Economic Cooperation summit next year, or by November 2023. The next best option would be to complete the work before the end of the Biden administration's first term. However, multilateral economic and trade negotiations are very time-consuming, such as the Regional Comprehensive Economic Partnership, which took 10 years and 28 rounds to finalize, plus more than a year for each country to process domestic ratification. Ultimately, it will be difficult if the U.S. side requires the IPEF negotiations to be completed in a short time. In addition, the IPEF has some structural and strategic difficulties, such as India's denial of the negotiation framework, ASEAN countries' pragmatism and "step-by-step" strategy, strong domestic "trade skepticism" in the United States, and the unequal legal status of the final text. The U.S. will have to come up with very attractive terms to overcome the above difficulties and solve the seemingly insurmountable problems in order to successfully advance the negotiations. In fact, most of the participants have not shied away from this issue and have openly stated that they want to see what good things Washington has to offer. 

At present, the possibility of the U.S. coming up with real money to promote follow-up negotiations is very low, so it is likely to push other parties to cooperate with it by further provoking economic and trade conflicts with China. The United States' stinginess toward economic and trade cooperation and economic integration in the Asia-Pacific region is in stark contrast to its "generosity" toward military aid to Ukraine. The U.S. doesn’t seem to be keen on investing in peace, stability, or prosperity in the Asia-Pacific region. The $252 million invested in ASEAN countries on two occasions appears to be the best the U.S. can do. In this context, the "benefits" that the U.S. can directly provide to the participants (as many Southeast Asian countries expect) should be extremely limited. For the U.S., it would be more cost-effective and efficient to intensify Sino-U.S. economic and trade friction, increase the number of allies, and strengthen defense against China. This should transmit the pressure of competition between China and the United States to the participants of the IPEF, "urging" all parties to take a position and even "choose sides.” 

Among the four, the joint statement on the supply chain pillar is the most completed, the most operable, and also clear in terms of the path to materialize, which may become a priority area for the U.S. to make use of. The statement shows the roadmap and operational steps set by the U.S. in the supply chain, such as identifying key supply chains and key commodities that may be disrupted, and then establishing corresponding prevention and response mechanisms based on the identification results. The overall idea is a replica of the Biden administration's domestic policy, i.e. to conduct a supply chain review first, and then advance in each key area based on the review results. The recent development of the U.S. CHIPS and Science Act against China and the launch of the National Biotechnology and Biomanufacturing Initiative are the latest results of this process. It is likely that the U.S. will maintain the momentum of subsequent IPEF negotiations by increasing the "restrictions" on China and spreading pressure to other participants with the relevant pillars of the IPEF. 

Of course, the U.S. calculations are twofold. One is to "defeat China,” and the other is to "make more allies" and increase political and economic coercive pressure on other participants. Recently, Japan and the Republic of Korea protested against the U.S. chip and electric vehicle policies because the ultimate result of the U.S. initiative to compete with China in related areas is that allies are forced to transfer key production and supply chains to the United States. It is foreseeable that the U.S. has a motive to introduce the IPEF negotiations into this track to get more benefits from its allies, and the game around this issue is likely to determine the ultimate direction of the IPEF.

You might also like
Back to Top