By Claude Barfield

As noted in my latest piece, on May 23, 2022, in Tokyo, President Joe Biden kicked off a process leading to a future US-led Indo-Pacific Economic Framework (IPEF). It consists of some 14 partners at this point.

With a Month’s Perspective, What Can Be Discerned About the Initiative?

First, the “sort of” in the title refers to the fact that in pushing for inclusivity—pulling in India and Indonesia—the Biden administration diluted its original goals. At the insistence of India, the IPEF’s launch was merely a “consultation” that could lead to formal negotiations in the coming weeks or months (more details to follow).

Second, clearly the most advanced IPEF economies, such as Japan, Singapore, and South Korea, place the highest substantive priority on common rules for data flows. As the chairman of Japan’s External Trade Organization noted recently, global e-commerce transactions will grow from $900 billion to some $5 trillion between now and 2027, and it is thus imperative for the US and regional allies to build a common set of digital trade rules.

Third, the IPEF nations that also belong to the Association of Southeast Asian Nations (ASEAN)—namely, Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam—were quick to underscore that they did not want to take sides in the developing strategic and economic conflicts between the US and China. Singapore Prime Minister Lee Hsien Loong diplomatically stated that in joining the IPEF, “Most countries would prefer not to be forced to choose between the US and China.” Speaking more candidly at a recent Washington, DC, conference, Singapore trade expert Simon Tay warned the US that for Singapore and the nations of ASEAN, the idea of “friend shoring” and explicit bans on Chinese goods and services would not fly. Tay specifically pointed to the hot spot of technology competition (including semiconductor chips) and the role of export controls and investment limitations such as those bruiting about the US Congress.

What We Know—and Don’t Know—as “Consultations” Begin

As previously laid out, the IPEF will consist of four pillars: trade (including labor, environmental, agricultural, digital, and regulatory practices), infrastructure (clean energy and decarbonization), resilient supply chains, and taxation and anti-corruption. The trade pillar will be chaired by the US trade representative (USTR), with the other pillars headed by the secretary of commerce. Each pillar will be negotiated separately, with no formal crossovers. It is unclear whether IPEF participants will be required to sign up for all disciplines within a pillar. (If that is compulsory, Southeast Asian members, plus India, are unlikely to join the trade pillar.)

Despite criticism from members of Congress and the business community, the Biden administration has refused to put tariff revision or other market-opening provisions on the table—and the ultimate agreement will be merely an executive agreement that could be revised or dropped by subsequent US presidents. In the absence of US market access inducements, it is unlikely that IPEF members will agree to US priorities on issues such as labor rights, the environment, and the free flow of commercial data. Administration officials say they will use “incentives” such as infrastructural development projects in place of traditional legal obligations to achieve the standards they will pursue in the IPEF. However, there remains great doubt, even among those quite sympathetic to the administration, that such vague promises will suffice to achieve the purported “new and creative approaches” to trade policy in the Indo-Pacific.

On a more mundane (but vital) administrative level, the lack of a single point of leadership in such a sprawling set of challenging issues will almost certainly cause confusion and delays. The Biden administration should carefully consider the option of creating a White House post that will coordinate both USTR and the Commerce Department’s involvement in the IPEF—along with the numerous other agencies implicated in the ambitious and substantive IPEF agenda.

When the “consultation” phase is
completed this summer, we will come back to assess which issues will actually
be on the negotiating table.

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