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How Far Can IPEF Go?

May 30, 2022
  • Liu Chang

    Assistant Research Fellow, Department for American Studies, CIIS

The United States formally introduced the Indo-Pacific Economic Framework, or IPEF, on Monday, along with 12 initial partners. The framework has four pillars that can be summed up as:

• Connected economy;

• Supply chain resilience and infrastructure;

• Clean energy and decarbonization;

• Fairness in taxes and anti-corruption.

But it does not include any market access provisions, neither does it provide any rules covering methods of cooperation, investment or legal effectiveness.

All in all, what’s repeatedly underlined is its high standards and exclusiveness. Therefore, the launch must be seen as just the start of negotiations. The framework is burdened by great uncertainty. 

Baker’s dozen 

All ASEAN nations are involved except Myanmar, Cambodia and Laos — which are among the least-developed countries on the United Nations list. Besides Singapore, the Philippines, Malaysia and Vietnam, which previously made clear their intentions to partake, Thailand and Indonesia joined as initial founding members. Even Brunei, which was rumored to have been excluded, is in.

The seven ASEAN countries may have three considerations in joining the framework. For one, they are taking stock of the U.S. economy. As the world’s largest economy, the U.S. has an attractive consumer market and financing platform. Keeping a benign economic and trade relationship with the U.S. is all grist for the mill of these ASEAN states.

Second, they want to retain the U.S. within the Asia-Pacific economy. Washington has alienated itself from the region’s economic cooperation by quitting the Trans-Pacific Partnership and refusing the Regional Comprehensive Economic Partnership. A report from the Australia-based Lowy Institute for International Policy pointed out that the U.S. has actually come to the edge of Asia-Pacific economic integration.

Hence ASEAN members have reiterated that the best way for the U.S. to participate in Asia-Pacific economic activity is a return to the TPP, despite knowing that the country won’t do it. In light of U.S. domestic politics, they have to settle for second-best— joining the IPEF. From this perspective, it’s fair to say that the seven ASEAN members expect the U.S. not to get too far away from the Asia-Pacific. It’s not the framework itself that has lured them to take part.

Third, they look to strengthening supply chain resilience and

infrastructure, among other elements of the framework. They also hope that clean energy and decarbonization pledges can turn into cheap energy supplies. With such anticipations in mind, these ASEAN countries would like to hitch a ride. 

A question mark 

During the TPP era, Washington raised the threshold to exclude China, even though it kept saying the TPP was open to everyone. U.S. Assistant Secretary of State for East Asian and Pacific Affairs Daniel Kritenbrink once clarified that the IPEF would exclude China. Now that it’s been officially launched, U.S. Secretary of Commerce Gina Raimondo said the framework aims to offer an alternative to get rid of China, sending a decoupling signal by creating an economic camp.

This, however, is a questionable strategy.

In the first place, it’s of no help to conceal the lack of market access incentives with “high-standard rules.” U.S. National Security Adviser Jake Sullivan admitted, “There are free trade traditionalists who have raised questions.” Nonetheless, no market access being outlined just reminds people of Donald Trump’s “America first.” If the U.S. continues along this line, few countries will enter long-term, sustained cooperation with it.

Scott Kennedy, senior adviser at the Center for Strategic and International Studies, raised the same question. “The lack of any market access benefits has left many disappointed,” he wrote in a recent article, adding that researchers from Japan and South Korea are skeptical about the new initiative’s prospects.

For virtually all ASEAN countries, the IPEF will not be the only choice. They have had multiple cooperation mechanisms, including the Belt and Road Initiative, the RCEP and the CPTPP, which are inclusive, accommodating and open to new ideas. So they don’t have to bet the farm on a single cooperation framework. Even if the IPEF comes to fruition, it will be taken as a supplement and balance. As Singaporean Prime Minister Lee Hsien Loong said, it’s important that the IPEF enables members to “continue working with many other partners in overlapping circles of cooperation.”

It’s inappropriate to include geopolitical factors in the formation of the framework. The Russia-Ukraine conflict has caused a multitude of economic spillover effects, including worsening inflation in the U.S., which has brought Biden’s approval rating crashing down. Food and energy crises are also dealing blows to the Asia-Pacific economy. At a time when Asian countries are struggling to fix their economies, making remarks about decoupling in the name of national security is in no way wise; instead it will further erode an already ailing economy and probably cause political turmoil. The incidents that occurred recently in South Asia should serve as a warning. 

Will Washington stay? 

What concerns most participants is how long any commitments the Biden administration makes will endure. Well, that depends on plenty of factors. American domestic politics can play a crucial role, especially now that it’s in a state of “strategic contraction.”

The Biden administration had no intention to deliver the IPEF to Congress, so it declared early on that the framework would go beyond a traditional free trade agreement and move away from market access and tariff reductions — components that need congressional approval. Congress has been cautious and hesitant to weigh in on the IPEF. A February report by the Congressional Research Service raised questions about the role of Congress in the new initiative, which will probably wind up in a legal vacuum.

When asked about that, U.S. Trade Representative Katherine Tai only said that the administration will “keep Congress close,” while not answering whether the agreement will go to Congress.

Henry Chan, a scholar in the Cambodian Institute for Cooperation and Peace, wrote that the IPEF will probably come in the form of an executive order from Biden and in the meantime Washington will require participants to deliver relevant documents to their own legislative bodies to get approval. It’s also reported that such procedures need to be completed within roughly 18 months, ahead of the the U.S.-hosted Asia-Pacific Economic Cooperation (APEC) Leaders’ Meeting in November next year.

If the IPEF comes to fruition in the form of an executive order, then there’ll be no constraint on the U.S. It means Washington can quit at any time. If it comes as a kind of international treaty, will Congress agree to undertake new international obligations? To put it simply, if Washington fails to bind itself on this framework, it’s possible that another withdrawal could happen, because it costs nothing.

Perhaps the U.S. reckons a framework it can handle with ease and artistry will not only help with its economy but also achieve its strategic goals. However, what the dozen participants care about is a long-term commitment and enduring sincerity.

The IPEF has so far attracted some countries to negotiate with the U.S. at a rather low threshold. But the uncertainty, in addition to an embedded Cold War mentality, is not a kind of gospel that leads to peace and stability in the Asia-Pacific. 

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