India has signalled its readiness to be part of a new economic initiative led Indo-Pacific Economic Framework for Prosperity (IPEF) by the US for the region.

What is IPEF?

• The grouping, which includes seven out of 10 members of the Association of South East Asian Nations (ASEAN), all four Quad countries, and New Zealand, represents about 40% of global GDP.
• The negotiations for the IPEF are expected to centre around four main pillars, including trade, supply chain resiliency, clean energy and decarbonisation, and taxes and anti-corruption measures.
• Countries would have to sign up to all of the components within a module, but do not have to participate in all modules.
• The “fair and resilient trade” module will be led by the US Trade Representative and include digital, labor, and environment issues, with some binding commitments.
• The IPEF seeks to strengthen economic partnership amongst participating countries with the objective of enhancing resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness in the Indo-Pacific region.

Features of IPEF

• US officials made it clear that the IPEF would not be a “free trade agreement”, nor are countries expected to discuss reducing tariffs or increasing market access.
• The IPEF will not include market access commitments such as lowering tariff barriers,
• In that sense, the IPEF would not seek to replace the 11-nation CPTPP (Trans-Pacific Partnership) that the US quit in 2017, or the RCEP, which China, and all of the other IPEF countries (minus the US) are a part of.
• Three ASEAN countries considered closer to China — Myanmar, Cambodia and Laos — are not members of the IPEF.

Four pillars of IPEF

1. Trade that will include digital economy and emerging technology, labour commitments, the environment, trade facilitation, transparency and good regulatory practices, and corporate accountability, standards on cross-border data flows and data localisations;
2. Supply chain resiliency to develop “a first-of-its-kind supply chain agreement” that would anticipate and prevent disruptions;
3. Clean energy and decarbonisation that will include agreements on “high-ambition commitments” such as renewable energy targets, carbon removal purchasing commitments, energy efficiency standards, and new measures to combat methane emissions; and
4. Tax and anti-corruption, with commitments to enact and enforce “effective tax, anti-money laundering, anti-bribery schemes in line with [American] values”.

Reasons for creation of IPEF

• The IPEF is also seen as a means by which the US is trying to regain credibility in the region after former President Donald Trump pulled out of the Trans Pacific Partnership TPP).
• Since then, there has been concern over the absence of a credible US economic and trade strategy to counter China’s economic influence in the region.
• China is an influential member of the TPP, and has sought membership of its successor agreement Comprehensive and Progressive Agreement on Trans Pacific Partnership.
• It is also in the 14-member Regional Comprehensive Economic Partnership, of which the US is not a member (India withdrew from RCEP).
• The Biden Administration is projecting IPEF as the new US vehicle for re-engagement with East Asia and South East Asia.

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