The Indo-Pacific Economic Framework (IPEF), initiated by the United States in May 2022, represents a significant effort to establish a comprehensive economic engagement with countries in the Indo-Pacific region. The framework aims to address a variety of economic challenges and opportunities through four pillars: supply chains, clean economy, fair economy, and trade. However, as the recent virtual IPEF ministers’ meeting in Thailand highlighted, there are substantial challenges in fully concluding and implementing the framework, especially ahead of the US presidential election in November.
Challenges Facing the IPEF
1. Completion of the Trade Pillar: The Biden administration announced before the November 2023 APEC Summit that it would not conclude the trade pillar, a decision driven by domestic political concerns and criticism from former President Donald Trump. The trade pillar, despite being crucial, does not include market access and faced obstacles, notably in digital trade, where concerns about the influence of large tech companies on cross-border data flows and data localization were prominent.
2. Political Dynamics: The uncertainty of US commitment, exemplified by the Trump administration’s withdrawal from the Trans-Pacific Partnership (TPP), poses a risk to the durability of IPEF. Domestic political dynamics, such as elections and political campaigns, have influenced the approach and commitments to international economic frameworks, affecting the confidence of other IPEF members in the framework’s longevity.
Milestones and Progress in 2024
Despite these challenges, there are milestones and areas of progress within the IPEF that could bolster its impact and durability:
1. Supply Chain Agreement: In 2023, IPEF members announced a landmark supply chain agreement, marking the world’s first multilateral supply chain agreement aimed at enhancing resilience and competitiveness. This agreement, which went into effect in February 2024, includes the establishment of a Supply Chain Council, a Crisis Response Network, and a Labour Rights Advisory Board.
2. Clean Economy Pillar: Progress on the clean economy pillar includes the creation of an IPEF Catalytic Capital Fund and the launch of the IPEF Clean Economy Investor Forum. These initiatives aim to pool resources for bankable climate infrastructure projects and catalyze investment for sustainable infrastructure in the region, providing incentives for participation in the absence of market access commitments.
Outlook for the IPEF
The completion and effectiveness of the IPEF depend on addressing the highlighted challenges and building on the progress within its pillars. A clear agenda with tangible deliverables across all pillars is essential for ensuring the framework’s durability, especially in light of the upcoming US presidential election. The engagement and commitment of IPEF members to these objectives will be critical for overcoming skepticism and reinforcing the framework as a pivotal economic partnership in the Indo-Pacific region.
SRIRAM’s
