Indo-Pacific Economic Framework

India and the world Geopolitical Issues Add to Study Deck

Context: Recently, India joined the US-led Indo-Pacific Economic Framework, along with 13 other countries.

In October 2021, the US administration announced the development of an Indo-Pacific Economic Framework(IPEF).
IPEF is a new kind of trade agreement which is more of an administrative arrangement which will not include market access commitments.
It would include different modules covering fair and resilient trade, supply chain resilience, infrastructure and decarbonization, and tax and anticorruption.
The participating countries included India, Japan, Australia, Brunei, Indonesia, South Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, and Vietnam.
Aim: strengthening ties in the Indo-Pacific region to define the coming decades for technological innovation and the global economy.
Objective: to establish a platform that would see separate negotiations among participants on varying issues of interest, taking into account their individual demands and needs.

It will seek to ensure greater economic engagement between countries with respect to the Indo-Pacific region.
It seeks to push forward a democratic, rules-based order in the Indo-Pacific, that could de facto exclude China from its economic activities.
It is seen as a means by which the US is trying to regain a credible economic and trade strategy.

Pillars: The IPEF is built on four modules:

1) fair and resilient trade (including digital, labour, environmental and other standards),
2) supply chain resilience,
3) infrastructure, decarbonisation and clean energy and
4) tax and anti-corruption.

Countries would have to sign up for all of the components within a module but do not have to participate in all modules.

However, IPEF will not include market access commitments such as lowering tariff barriers, as the agreement is more of an Administrative arrangement.

IPEF is seen as a means by which the US is trying to regain credibility in the region after former US President Donald Trump pulled out of the Trans-Pacific Partnership(TPP).
Since then, there has been concern over the absence of a credible US economic and trade strategy to counter China’s economic influence in the region.

Some areas proposed in the IPEF do not appear to serve India's interests.
For example, the IPEF talks about digital governance but the IPEF formulation contains issues that directly conflict with India’s stated position. Amongst these are the prohibition/restrictions on cross-border data flows and data localization requirements including for financial services; promotion of the interoperability of privacy rules among others.
The high economic expectations that the US may have from India as a member of the IPEF.
India may not agree with the ambitious decarbonisation targets and goals that will be set by the US.