The Indo-Pacific Economic Framework For Prosperity

What is the IPEF?

The “Indo-Pacific Economic Framework for Prosperity” is the US’s latest strategy to be the global rule-maker on trade, food production, digital and data, the climate crisis, regulating services, corporate power to influence new laws, multinationals’ tax rates, and much else. It
is likely to be launched on 9 September 2022 at a Ministerial meeting in Los Angeles.

Where in the world is the “Indo-Pacific”?

It’s the old “Asia Pacific”, rebranded to exclude China and aims to ensure the US writes the region’s rules for the 21st century – not China. The Obama administration used the same rhetoric for the Trans-Pacific Partnership Agreement (TPP). So IPEF is a way to line countries up on the US side in the growing cold war with China.

Which countries are involved in IPEF?

Beside the US, they are Australia, Brunei, Fiji, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand, Viet Nam. They include old US allies in the region. But the US also wants to attract big ASEAN players, such as Indonesia, Thailand, Philippines, and India, and South Pacific countries where China is making a big play.

What actually is IPEF meant to do?

That’s still very vague.

We just know there are four generalised “pillars” and the US will drive an agenda that reflects existing US laws, so everyone adapts to US standards.

What are IPEF’s four pillars and what do they cover?

Pillar 1: “Trade” repeats many chapters in Free Trade Agreements (FTAs) that restrict domestic policies and laws, including digital, state-owned enterprises (SOEs), food standards, product labelling, agriculture, fisheries subsidies, customs, competition policy,
services, and rights of corporations to lobby over proposed new laws.

These are likely to mirror the TPP and other US-led FTAs.
Pillar 2: “Supply chains” to become “more resilient”, better integrated and efficient, while protecting workers. This includes security of digital technologies, including raw materials and semi-conductors.

Again, this is code for less dependency on China.

Pillar 3: “Clean Economy” takes a market and technology approach to climate mitigation. There’s a long list of goals and promises, including clean energy technologies, energy efficiency, energy sector security and transformation, de-carbonise high emissions sectors, and “just transition” to more sustainable jobs.

But it doesn’t include major climate villains,like fossil fuels and agriculture emissions, that really matter to the US, and others like Australia and NZ.

Pillar 4: “Fair Economy” targets corruption, and promotes the OECD tax agreement which heavily favours transnational companies (TNCs) and leaves many tax avoidance strategies in place. Stronger stakeholder engagement of civil society, unions and the private sector comes under this heading – but it will be optional and may not apply to the other pillars.

Do countries have to sign up to all four pillars?

Countries can choose which pillar/s they adopt.

They have to accept all of Pillar 1 on trade but have some choice within pillars 2-4. There is talk that India won’t join in pillar 1 on trade (and digital) but just participate as an observer.

Will there special and differential treatment (S&D) for developing countries?

The US wants to get rid of S&D in the WTO, especially for developing countries that compete with them, so it’s not surprising there is no reference to development flexibilities so far in IPEF.

Recent US FTAs just give more time and make unenforceable references to technical assistance for parties to adopt rules that the US and other developed countries already apply in whole or part.

How does IPEF differ from free trade agreements like TPP?

The US Trade Representative describes traditional FTAs as a 20th century tool.

IPEF is meant to be more “progressive” by including stronger promises on labour, environment, gender, SMEs, maybe indigenous peoples, while excluding traditional commitments to liberalise tariffs on goods and deregulate services. But the topics suggest much of IPEF may be lifted from existing US-driven pro-corporate FTAs like US-Mexico-Canada 2020 deal and the original TPP.

How will the IPEF rules be implemented and enforced?

IPEF – or at least pillar 1 on trade – is expected to “bind” countries that sign up. But the usual way to enforce trade rules is through a dispute system where penalties are applied to tariffs. As IPEF doesn’t include tariffs commitments, it’s unclear how they would enforce it.

How much control will the US have over the outcome?

The US won’t agree to anything that requires it to change its law, because then it would have to take the IPEF to Congress for approval. That means the US won’t have to do anything, but most other countries will – and developing countries will have to do the most to change their laws to replicate the US’s even if it does not advance their development.

Why is the US pushing IPEF?

FTAs are very unpopular with the Democratic Party base. They are blamed by trade unions, environmental groups, and some states, for “offshoring” jobs to countries with lower labour and environment standards.

So a deal that doesn’t cut tariffs, makes labour and enviroment
standards binding, and strengthens supply chains that exclude US’s main competitor China is attractive.

At the same time, US corporations want other countries to have to adopt US rules that were designed to benefit them, especially digital. It’s unclear if US labour and capital can agree – and whether a future Republican Administration would support IPEF.

Why would non-US countries buy into IPEF?

There is no obvious reason, aside from a geo-strategic desire to get the US more involved in the region (which assumes that is a good thing). There are no gains for exporters into the US market, only vague promises that greater certainty about the rules will make these countries more attractive for US investors (again, despite studies showing such rules are not drivers of FDI).

In return, countries will have to adopt the US-style rules, from hands-off approaches to Big Tech, SOEs, food standards and market-based approaches to the climate crisis, to guaranteed rights for the US and its corporations to have a say on proposed new laws – again, with the US not having have to change any of its own laws.

Is this strategy specific to the Asia Pacific or a new US approach generally?

It looks like the Biden Administration is promoting the same agenda everywhere, so countries participating in IPEF can expect to inherit rules developed in other negotiations, and vice versa. For example, the US has proposed almost identical “pillars” for the Americas Partnership for Economic Prosperity that it announced at the Summit of the Americas in June 2022.

They are also the centrepiece of the United States-Kenya Strategic Trade and Investment Partnership launched in July 2022.

What’s the timeline for IPEF?

The US is pushing this hard and fast, presumably so it becomes the centre-piece for the US hosting of APEC in 2023 (but APEC includes China!).

It’s hard to see IPEF being completed by then, given the diversity of parties and topics. They may aim for an “early harvest” of some elements.

How do we find out what’s in IPEF and influence their decisions?

The “scoping” discussions to set the IPEF agenda have been shrouded in secrecy. That reinforces old suspicions of pro-corporate deals that are bad for democracy and development.

There is no suggestion so far that they will make the negotiating texts public.

But it has already begun to leak.

The US and other participating countries are under pressure from members of the US Congress and civil society to be fully transparent and participatory. If they don’t, they will face the same opposition as the TPPA, Trade In Services Agreement (TiSA) and other mega-deals did.