United States reassert economic leadership through Indo-Pacific Economic FrameworkNIK LUQMAN WAN ZAINODDIN
The US successfully hosted fourteen economic ministers in Los Angeles last week for the inaugural Indo-Pacific Economic Framework (IPEF) in-person ministerial talk.
The convening serves as Washington’s latest economic engagement which aims to set trade standards and boost supply chain resilience and clean energy.
The gathering also laid out the scope of discussion to move forward as members agreed to enter into negotiations.
With the US as the anchor, the framework’s key objective is to build a rules-based economic order together with other nations such as Australia, Brunei, Fiji, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam.
Indeed, the framework is part of the US economic engagement and would be in synergy with the overall US Indo-Pacific Strategy and Asean outlook on the Indo-Pacific.
To be sure, pundits view the framework as efforts toward deepening the US engagement in Asia and Southeast Asia region in particular, as well as a thinly veiled jab at China’s increasing economic clout.
This is given the fact that the US and China are locked in a battle over the leadership of Asia’s economy.
Insofar Asean member states are concerned, more than half of the grouping bloc members joining the IPEF.
As a matter of fact, the IPEF is projected to have a significant impact, as it has re-established the US as the leading global economy leader, especially after its pullback from the Trans-Pacific Partnership trade deal under the Trump administration.
Figure-wise, the fourteen IPEF partners account for approximately 40 per cent of global gross domestic products and 28 per cent of global goods and services trade.
Indeed, this incentivises for the nations to close rank further.
The framework covers four policy pillars – fair and resilient trade, supply chain resilience, clean energy, decarbonisation and infrastructure, and taxes as well as anti-corruption.
However, there is mounting criticism over the framework as ineffective.
Compared to other traditional trade, IPEF lacks any conventional trade nuances such as tariff reductions, market access offers, and other liberalisation aspects.
Regional stakeholders are concerned over the missing market access element in the framework as it is of paramount to reap benefits from the US economic engagement in the region.
Rather, the IPEF focuses on achieving high standards of sustainability, transparency, and resilience in areas such as supply chains for semiconductors and critical minerals, which are already vulnerable amid intensifying geopolitical rivals.
As global trade is battered by the pandemic and Ukraine’s conflict has culminated in further inflationary pressure with soaring prices across the globe, participating IPEF members seek to leverage the platform to withstand supply chain disruptions, to which the framework serves as an appropriate trade platform.
Moreover, the framework also offers flexibility for the participating members.
A departure from any free trade agreement and plurilateral practices, members may opt for either one or more of the pillars.
The epitome to draw would be India, which stops short of agreeing to trade pillar.
Indeed, this has provided policy space and has enabled members to exercise flexibility regarding the framework.
The fact is that the trade pillar encompasses, among others, trade and digital data flow standards which are considered ambitious to some.
As digital and technology are invariably viewed as the lifeblood of the modern economy, the workstream towards setting the standards would be an enormous exercise, hence, the IPEF’s flexibility architecture works best.
In addition, this ministerial-level talk would provide the groundwork for the senior officials-level talk to undertake various economic cooperation programs with the objective to create economic opportunity, improve labor conditions, and promotion of sustainability.
To date, the senior official-level talk is scheduled to take place at the end of the year, most likely in December as Asean member states would be preoccupied with its summit slated to take place in November which will be hosted by Cambodia.
Indeed, future negotiations would somewhat revolve to gain concrete benefits from the framework – often in the form of US-funded programs.
In Los Angeles gathering, the US announced a new upskilling initiative, a capacity-building program to train women in digital skills.
A number of the U.S. tech giants will offer myriad upskilling opportunities that use digital tools, which includes participation from the big four of Apple, Amazon, Google, and Microsoft, among others.
Moving forward, the IPEF partners need to make the most out of the framework and should leverage the platform.
As the IPEF members are comprised of developed and developing nations, the framework provides an avenue of closer cooperation thus enabling to offset the widening economic gap between the developed and developing nations.
A target has been set in which the negotiations should be concluded in November 2023, and it is interesting to watch any early harvest from the negotiations which could be seen as early as the end of this year.
Nik Luqman Wan Zainoddin is an analyst and freelance writer focused on Southeast Asia. Previously he was attached to the IKMAS UKM-Nippon Foundation as a research fellow. He tweets at @NLuqman.
The views expressed in this article are the author's own and do not necessarily reflect those of Sinar Daily.