On May 23, American President Joe Biden launched the Indo-Pacific Economic Framework for Prosperity (IPEF), with 13 majors of this region on board. Together, these countries represent 40% of world GDP.
The countries joining IPEF are Australia, Brunei, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. The 13 countries have invited participation from additional Indo-Pacific partners that share common goals, interests, and ambitions for the region. So, more countries are likely to join this initiative in the coming days.
In the past few years, America’s investment in this region is continuously increasing. U.S. foreign direct investment in the region totaled more than $969 billion in 2020 and has nearly doubled in the last decade. A connected, resilient, clean, and fair economy is the key pillar of America’s new initiative. This is a new effort to engage in this region economically after the U.S withdrew from Trans-Pacific Partnership known as TPP.
The aim of the new framework is to contain China’s growing economic influence in the Indo-Pacific Region. Soon after the inaugural, American Secretary of Commerce Gina Raimondo said that it marks an important turning point in restoring U.S. economic leadership in the region and presenting Indo-Pacific countries with alternatives to China’s approach to these critical issues.
India whose relationship with China remains strained after 2020 has fully backed the Biden’s initiative. Speaking at the inaugural session, Indian Prime Minister Narendra Modi said it is a declaration of our collective will to make the region an engine of global economic growth. He said there should be three main pillars of resilient supply chains: trust, transparency, and timeliness. Like another regional trade pact, the new one, however, does not provide any details.
China has strongly opposed IPEF saying that it is designed to advance US geopolitical strategy. In the name of cooperation, the framework seeks to exclude certain countries, establish US-led trade rules, restructure the system of industrial chains, and decouple regional countries with the Chinese economy, Chinese Foreign Ministry Spokesperson Wang Wenbin said on May 25. He further said: “The fact is, many countries in the region are worried about the huge cost of “decoupling” with China. People will see clearly that the Indo-Pacific Economic Framework is a design to disrupt regional cooperation and a tool to coerce regional countries.”
The new framework seeks to build high-standard, inclusive, free, and fair trade commitments. Further, it aims to develop new and creative approaches in trade and technology policy that advance a broad set of objectives that fuel economic activity and investment, promote sustainable and inclusive economic growth, and benefit workers and consumers.
The framework has committed to promoting fair competition by enacting and enforcing effective and robust tax, anti-money laundering, and anti-bribery regimes in line with existing multilateral obligations, standards, and agreements to curb tax evasion and corruption in the Indo-Pacific region. This involves sharing expertise and seeking ways to support capacity building necessary to advance an accountable and transparent system. The framework also plans to advance regional economic connectivity and integration through consultations among partners.
