The United States has launched the "Indo Pacific Economic Framework" for over a year
Biden loudly announced the launch of the "Indo Pacific Economic Framework". US President Biden first proposed the concept of the Indo Pacific Economic Framework (IPEF) during his attendance at the East Asia Summit in October 2021, and officially announced the launch of IPEF during his visit to Japan in May 2022. Japanese Prime Minister Fumio Kishida and Indian Prime Minister Modi attended the on-site launch ceremony. The founding members of IPEF include 13 countries including the United States, Japan, South Korea, India, Australia, New Zealand, and 7 ASEAN countries. Three days later, IPEF welcomed its 14th member country - the South Pacific island country of Fiji. The United States regards IPEF as the main focus of the "Indo Pacific Strategy" in the economic and trade field, attempting to use it to set high standard economic and trade rules for the Asia Pacific region in the 21st century, while promoting the so-called "de sinicization" and "de risk".
IPEF includes the "four pillars" of content. The "four pillars", namely an interconnected economy (trade), a resilient economy (supply chain), a clean economy, and a fair economy. Each of the four pillars contains different issues: firstly, the interconnected economy mainly focuses on trade issues, including the digital economy and digital trade, trade facilitation, labor environmental standards, and corporate responsibility. Secondly, resilient economies mainly focus on supply chain issues, including seeking to establish first-class supply chains, preventing supply chain disruptions, establishing early warning systems for supply chains, key mineral supply chains, and improving the traceability of key sector supply chains. Thirdly, a clean economy mainly focuses on clean energy and infrastructure issues, including seeking high-level commitments in the fields of clean energy, decarbonization, infrastructure that can bring high paying jobs, and addressing climate change. Fourthly, a fair economy mainly focuses on tax and anti bribery issues, including developing and implementing effective tax burdens consistent with current multilateral goals, anti money laundering, anti bribery policies, and tax information exchange, criminalizing bribery according to United Nations standards, and combating corruption.
New developments in the "Indo Pacific Economic Framework" in the United States
Concerns of some member states after the launch of IPEF. One is concerned about the legal effectiveness of the IPEF and whether the IPEF policy can continue after the change of US leaders. The second concern is that negotiations may not be easy to achieve results, including: Japan may not want to open up its agricultural product import market; ASEAN countries may be concerned that stricter labor and decarbonization standards will affect economic development; India may be more ambitious, hoping to establish a South Asia Indian Ocean Economic Zone centered around it; Some member states may not be willing to choose sides between China and the United States.
IPEF has made new progress. In May 2023, the ministerial meeting of participating countries in the "Indo Pacific Economic Framework" announced the substantive conclusion of the IPEF supply chain agreement negotiations in Detroit, Michigan, USA. The specific objectives of the IPEF supply chain agreement include: participating in the identification and monitoring of key products in key sectors by state-owned enterprises, and deepening collective understanding of major supply chain risks; Establish a crisis coordination and response mechanism for supply chain disruptions, and cooperate to ensure timely delivery of impacted products during the crisis; Ensure that workers and enterprises, especially small and medium-sized enterprises, benefit from resilient, robust, and effective supply chains; Enable enterprises to better identify, manage, and solve supply chain bottlenecks, and improve the level of supply chain logistics and infrastructure in participating countries; Participating countries should strengthen cooperation, increase investment, enhance regulatory transparency, and prevent large-scale economic disruptions in departments and products related to national security and public health; Recognize the crucial role of workers in enhancing supply chain resilience, and respect and enhance labor rights; Improve worker skills, ensure sufficient numbers of skilled workers in key departments and key product production, promote inclusivity and equal opportunities, and improve the comparability of skill certificates; The United States provides technical assistance and capacity building to other participating countries; Respect market principles, minimize market distortions and unnecessary trade restrictions and obstacles, and protect confidential commercial information. To achieve the goals of the supply chain agreement, IPEF will also establish three new entities: the Supply Chain Council, the Supply Chain Crisis Response Network, and the Labor Rights Advisory Committee; The lead country, the United States, will take seven major actions, including training, STEM (Science, Technology, Engineering, Mathematics) exchange programs, mutual recognition arrangements (MRA) for certified operator programs (AEOs), and digital shipping cooperation.
Be vigilant about the impact of IPEF supply chain agreements on China's economy and trade. The IPEF supply chain agreement mainly serves supply chain cooperation in the fields of digital economy and clean energy. The supply chain cooperation of IPEF is exclusive. As a huge economy located in the Asia Pacific region, China needs to be vigilant about the impact of IPEF on its supply chain participation in strategic industries in the region, including clean energy, semiconductors, key minerals, key raw materials, and processed goods.
The Future of the Indo Pacific Economic Framework in the United States
IPEF is expected to continue to make progress in other pillar areas. Among the "four pillars" of IPEF, supply chain is the first area where negotiations are substantively concluded. Starting from its strategic interests, the United States is expected to continue to strengthen the implementation of IPEF, and IPEF will also make progress in the other three pillar areas in the future. Trade issues and clean economy issues are two core issues related to cooperation in new economy and technology. Whether and how these two agreements can be reached has attracted much attention and further observation is needed.
IPEF has had an impact on the economic landscape of the Indo Pacific region. Since the Cold War, the United States has always regarded the Indo Pacific region as a strategic competitive hub. The Bush and Obama administrations intend to participate in and lead the Trans Pacific Partnership Agreement (TPP). Biden continued the main approach of Obama's "Asia Pacific Rebalance" and Trump's "Indo Pacific Strategy", committed to leveraging its global alliance and partnership advantages, and establishing a cross Indian Pacific Atlantic regional network. The United States hopes to establish its influence in the Indo Pacific region through a so-called new alliance by leading the IPEF in the emerging trade and economic fields, and to achieve "small multilateralism" guided by the so-called common values, which will hinder the economic and trade development of China and neighboring countries. The "Indo Pacific Economic Framework" advocates strengthening regional cooperation and promoting regional economic openness and prosperity, but excluding China is essentially forming a "small circle" and violating the spirit of WTO free trade.
China actively responds to IPEF. Currently, there are significant deficits in the economic development and governance areas of the Indo Pacific region, and China should strive to promote equal and mutually beneficial economic and technological cooperation with its neighboring partners. China can address the adverse impact of supply chain agreements on China by strengthening supply chain cooperation with other countries. China can hedge the impact of the "Indo Pacific Economic Framework" supply chain agreement on China by promoting the establishment of a normalized mechanism for supply chain cooperation, such as establishing a supply chain crisis response mechanism for ASEAN+China, Japan, and South Korea ("10+3"), and upgrading the Regional Comprehensive Economic Partnership Agreement (RCEP) to establish a supply chain cooperation mechanism between RCEP participating countries. China can take advantage of its accession to the CPTPP and DEPA to participate in the formulation of international digital economy rules, promote digital economy diplomacy in the Indo Pacific region around digital trade, digital infrastructure, digital supply chain, and digital standards, and enhance the regional discourse power of digital trade rules. The US government's words and actions are inconsistent, and its commitment to China's "four no one" policy has not been implemented. The so-called "de sinicization" and "de risk" practices of the US are counter globalization and hinder the progress of human civilization. China and the United States should play the pillar role of major powers in regional and global development and governance, and seek more practical cooperation in various fields such as the environment, climate change, anti-corruption, economy, finance, technology, education, etc.
(The author is Xu Deshun, a researcher at the International Trade and Economic Cooperation Research Institute of the Ministry of Commerce)