DH Deciphers | What is the Indo-Pacific Economic Framework? What is in it for India?

The US has launched the Indo-Pacific Economic Framework (IPEF) to counter the Regional Comprehensive Economic Partnership (RCEP) trade agreement led by China. India has joined three of its four pillars while staying away from the key trade pillar. Here's more on it:

Is it a Free Trade Agreement?

The IPEF is not yet a Free Trade Agreement but is seen as a precursor to a full trade agreement and consists of four pillars: fair and resilient trade, supply chain resilience, clean energy and tax and anti-corruption. Members may opt into any or all of the pillars.

Which countries are part of it?

Currently, the IPEF consists of 14 Indo-Pacific nations viz. Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, Malaysia, New Zealand, Philippines, Singapore, South Korea, Thailand, Vietnam and the US.

How is it different from the RCEP or the TPP?

The IPEF is different from the RCEP and the Trans-Pacific Partnership (TPP) insofar as it does not constitute a full-blown trade agreement. That is to say, it will not ensure lower tariffs or market access for participating states. It's more about setting standards and facilitating trade. Since it is not a trade agreement, it does not require US Congressional approval, a key roadblock to any FTA in the USA since Trump pulled out of the TPP. Furthermore, since members may choose which pillars to opt into, it is seen as watered down. This is to ensure that as many concerns of member states are considered.

Will it effectively counter China’s influence in the region?

Too soon to tell. However, since many member states – particularly among ASEAN countries – are wary of having to choose between China and the US, the IPEF as it evolves may not be robust enough to counter the RCEP. For example, Singapore’s Prime Minister said: "It is important that the IPEF remains open, inclusive and flexible. Enabling members to continue working with many other partners, in overlapping circles of cooperation, and leaving membership open to others to join later on, as and when they are ready to do so.” This clearly indicates that Singapore is keen on not antagonising China.

What is India’s stand?

India has decided to join three out of four pillars: supply chains, tax and anti-corruption, and clean energy. However, due to possible binding commitments on labour, environment and digital trade, New Delhi opted out of its trade pillar. Commerce Minister, Piyush Goyal, said in a briefing that the benefits to India are still unclear from trade commitments related to issues around the environment, labour and digital trade. He added that India wants to avoid any conditions that will harm developing countries. India would stay engaged and "wait for the final contours to be decided before we formally associate with the trade track," he said.

Is India turning protectionist?

It must be noted that this is the second trade-related agreement that India has walked away from, after pulling out of the RCEP in late 2020. While they are different agreements, and the rationale is different for walking away from each, it is significant in that it seems that India is keener on bilateral FTAs - it has already begun with an agreement with Mauritius on April 1, 2021, followed by fast-track negotiations with the UAE, Australia, the UK, Canada and the European Union (EU). Thus, India may be keen on trade, but trade on its terms rather than as part of broad multilateral agreements.