Despite the region’s digital economic growth, there have limited mechanisms to mitigate or ease the flow of cross-border trades and data flows. While devising strategies to mitigate China’s dominance across sectors, the Asian region has been riddled with challenges within their economies. Historically, the West has always managed to mitigate the region’s issues with agreements have may have helped achieve economic stability. Deals such as the recent IPEF suggest to gain further stability in the region by building
The Biden Administration is taking the first moves toward elevating the economic stature of economies and forming a counterweight to China. As the instability in Europe worsens with no hope of a rapid settlement, it’s clear that the United States is looking for greener pastures to assert its economic leadership. The IPEF, or Indo-Pacific Economic Framework, was announced late last week, and it includes Asian countries but not China. Among the many claims made by the agreement, it aims to unite 13 nations in the pursuit of a digital economy, improved supply chains, clearer economic growth, more accountability, and less corruption.
Signed on 23 May 2022, the Indo-Pacific Economic Framework for Prosperity (IPEF) in Tokyo, was conceived and led by the US, and it includes nations like Australia, India, Japan, South Korea, Indonesia, Malaysia, New Zealand, the Philippines, Thailand, Singapore and Vietnam. Not a free trade agreement, the deal has been touted as a bit underwhelming and is perhaps a throwback to Obama’s ‘pivot to Asia’. Yet, several reports are claim that Biden faces political pressure from within the nation to avoid free trade deals. Not a security pact either, the deal is also separate from the Quad defense group that has the US, Australia, Japan and India.
Biden has made it plain that he wants the United States to reclaim its ‘economic leadership’ in the Indo-Pacific area. Apart from addressing supply chain difficulties, one of the top tasks is to combat inflation. Will the IPEF provide an opportunity for the US to shift its focus away from its military-centric approach and toward economic growth as a means of countering China’s rise?
India’s participation is also significant for the United States, as no Indo-Pacific agreement can be complete without India’s involvement. For India, which already has multiple free trade agreements with other countries, this comes three years after it withdrew from the 15-nation RCEP (Regional Comprehensive Economic Partnership). The framework would be one of the three foundations necessary for resilient supply chains, according to Hon’ble Prime Minister Narendra Modi. Among the encouraging indicators from the Indian government, it’s worth noting that Biden is under enormous pressure internally to withdraw from making trade concessions and grant latitude to support US manufacturing. Aspects such as following in the footsteps of the ‘blue dot network,’ which certifies infrastructure projects started by the US, Australia, and Japan in 2019, have emerged from the post-deal aspects.
There are several reasons why this deal is unlike FTAs and the Regional Comprehensive Economic Partnership (RCEP) Agreement, which included Australia, Brunei Darussalam, Cambodia, China, Japan, Lao PDR, New Zealand, Singapore, Thailand, and Vietnam, and entered into force early this year, paved the way for the creation of the world’s largest free trade block. It is also unlike the Asia-focussed free trade agreement (FTA) like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which was originally created by the US and then they walked out of it, during the Trump Administration.
Despite their dissent against China, Asian economies are attempting to change the course of history given the recent events in the last two years. As part of the agreement, India appears to be in a frantic rush to stay in pacts that exclude China, such as the RCEP. According to CNBC, Arvind Virmani, the former chief economic counsel to the Indian government stated that the RCEP’s biggest flaw is that it includes China. This adds to India’s aversion to any pact that involves China at its core, implying that it will only agree to pacts that consolidate trade deals that do not add to the Chinese economy. It also fuels the conjecture that increased coercion between China and Russia may lead to closer ties with the US and possibly more transactions in the future.
