ISAS-KAS Workshop
THE IPEF AND THE CONTOURS OF ECONOMIC SECURITY IN THE INDOPACIFIC
1 March 2024 | Kitano Hotel, Tokyo
OUTCOME DOCUMENT
Opening Session
The Indo-Pacific Economic Framework (IPEF) was announced by President Joe Biden in 2022 in Tokyo.
It brings together 14 developed and developing countries, comprising about 40% of the global
economy, and home to a population of about 6.2 billion. The framework is not a traditional free trade
agreement (FTA) but its ala carte approach has the potential to be a model for future tradenegotiations. It also remains to be seen if the IPEF can be considered as a framework for future
economic diplomacy. Observers point out that the IPEF is Biden’s geopolitical strategy to re-engage
with and in the Indo-Pacific. But critics also point out that the effectiveness of this reengagement is
contingent on US domestic politics.
The IPEF is about 70% concluded, with the Trade Pillar, the only remaining pillar to be finalized. The
roundtable will discuss challenges that the IPEF members face in implementing the framework as wellas the perspectives of external actors, such as the European Union, other members of the G20, and
the APEC. Questions on rule-making in the Indo-Pacific will be tackled, specifically on supply chain
resilience and the clean economy. Who sets the rules and how? How can critical supply chains beprotected? Did the IPEF’s supply chain construct convey a sense of security? How will the IPEF handle
challenges on the environment and sustainability? Political developments and their impact on the IPEF
will also be discussed. To what extent will US domestic politics impact the character of the IPEF? How
will changes in the US administration impact the IPEF’s outlook? Are external actors such as the EU
and Taiwan interested in the IPEF’s developments?

Session I: The IPEF and Regional Economic Security – Supply Chains
The IPEF and Regional Rule-Setting
Opinions differ on the effectiveness of the IPEF as a rules-based framework. Some assert that the IPEF
is a cooperative framework that may lead to rules formation overtime, but it is not necessarily theright forum for rule-making. Harmonization in the regional context is very difficult. Rather, thanattempting to set rules, the IPEF can bring officials, business groups, and other stakeholders to discuss
how to cooperate on forward-looking issues such as identification mechanisms for critical supply
chains and crisis response mechanisms through standard settings or convergence.
Important issues impacting critical supply chains such as export restrictions, subsidies, and local
content regulations should be taken up at the WTO. But the WTO is also beset with internal issues
that it is unlikely that it’ll be able to tackle any of these concerns. Most significant to the current
discussion would be the unilateral actions that big economies such as the US and the EU are taking orPage 1 of 7

planning to take in response to China and how these unilateral actions can be harnessed from thestandpoint of middle powers in the context of the IPEF.
China-centric Supply Chains and the IPEF’s Limitations on Compliance
For small countries like Malaysia, Pillars 1 (Trade) and 2 (Supply Chains) are the most important; these
are interrelated, and it doesn’t make sense to separate them. But these are separated in the IPEF
because of a US-driven geopolitical standpoint. Although the IPEF does not include the traditional
exchange of market access concessions, it provides opportunities to reverse binding restrictions andrestore market access for countries like Malaysia.
Supply chains in the ASEAN have been and are likely to remain China-centered. Any supply chain
agreement that is perceived to isolate China could be highly disruptive for ASEAN counties. The IPEF’s
supply chain early warning system has the possibility to be useful, but experience from past ASEAN+3
initiatives showed that parties are often very reluctant to share data, hence, limiting the effectivenessof early warning systems. Digital trade in the region is growing and will add tremendous value if a“splinternet” is avoided.
The main challenge facing the IPEF members is how much the IPEF asks of them in return for how
little it promises. This “all stick, no carrots approach” paired with the absence of enforcement
mechanisms increases the likelihood of widespread non-compliance. Any agreement based on
aspirational language, and vague pledges of cooperation will need political will power to makeanything happen. A substantial discussion on how the political aspirations of member states affectthe IPEF and what happens when political and geopolitical calculations for IPEF members point in the
opposite direction of what the IPEF says they should be doing needs to be undertaken.
Limited Cooperation on Critical Supply Chains
The IPEF aims to be a more diversified, non-China option for the region. While the sectors under theclean economy are overarching and can mean different sectors based on interest and prioritization,
sectors identified under the supply chain pillar are key goods and services that impact national
security, health and safety, and economic resilience. These also have a high degree of dependence ona single or small group of suppliers, and the availability and reliability of alternative suppliers andsupplies is erratic. There is also limited domestic production capacity, and finally, these areinterconnected with other critical sectors or key goods.
Key raw materials for future industries from green energy technology to electric vehicles (EV) andartificial intelligence (AI) are mostly concentrated geographically making these resources very valuablebargaining chips for countries which possess large quantities of these minerals. There is limited
international cooperation on critical supply chains; most agreements are bilateral in nature. The IPEF
offers a bigger platform and can bring in lots of players and encourage other plays to join.
Several challenges show up in the IPEF supply chains pillar. First, resource nationalization and inparticular, export restrictions and domestic interests drive most countries’ foreign policy agenda.
Second, the private sector does not have the motivation and interest to share sensitive information
to help detect early warning signals of supply chain disruption. Also, supply chains and sustainability
issues surrounding them have implications for manufacturing in Asia. A significant issue in need of
examination would be to discuss if the IPEF will end up adopting European standards through the
Carbon Border Adjustment Mechanism (CBAM).

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Important Elements to Move Technical Discussions Moving Forward
The IPEF pillars are interrelated. US actions show that it is no longer interested in trade multilateralism
but is more interested in bilateral and regional trade partnerships. It can be argued that it is using thisstrategy to put more of their weight on partnerships, and on the “leader-follower” model. In addition,
trade, and developments on the global economy in general, are heavily focused on national economic
security and the competition with China.
There are three important elements to keep in mind when moving technical discussions forward andwhen looking at the larger context of the IPEF. First, would be the regulatory set-up when it comes todiscussions on workers’ welfare (and its implications to market access) and environmental
sustainability. Second, would be the process of defining critical sectors. Lastly, would be a discussion
on the seeming bent towards a more strategic trade policy regime.
An implementation audit, especially on sectors covered under the supply chain pillar, will help identify
and understand implementation challenges. Trade facilitation in services also needs to be discussed
as supply chains involve both trade in goods and trade in services. Perhaps the basic WTO structure
on trade facilitation can be improved upon under the IPEF. Trade creation and/or diversion in the IPEF
context also needs to be examined when discussing sector- or product-specific supply chains.
Questions on welfare impact also needs to be tackled and challenges on joint prosperity seriously
addressed. Technical assistance and capacity building can also be integrated into the IPEF’s
implementation.

Session II: The IPEF and Regional Economic Security – Clean Economy
IPEF’s Potential to Support Members’ Clean Economy Transition
The IPEF can focus on supporting its members’ transition to the clean economy by accelerating theemployment of clean technologies and facilitating investments. Initiatives developing and employing
green technology to cut greenhouse emissions, carbon capture utilization storage can be supported.
However, the success of this pillar rests on the availability of funds and investments, the role oftechnological transfer and capacity building.
Countries are becoming more systematic and strategic in directing parts of their economies. The
implications of both industrial policy and innovation policy also need to be discussed. In addition, IPEF
member countries do not have same capacity level. It is still doubtful if they would actively engage inthe clean economy and resilient trade. Although a regional approach is important, the Indo-Pacific isvery heterogeneous. Perhaps, first movers can focus on norm-setting and overtime, developing
countries will share these norms.
Contraditions between Resilient Supply Chains and the Pursuit of a Clean Economy
It seems that there is a significant contradiction in the efforts towards a resilient supply chain andsustainable and clean economy. Some countries want a resilient supply chain with minimal Chinarelated risks, but China needs to play a crucial role in the transition to a cleaner economy. The bestand cheapest way to tackle climate change is to work with China and invest with China. But this has
become a very contentious and geopolitical issue for both the US and the EU. Should the green
transition be slowed down to build domestic capacity? Or should working with China to combat
climate change be prioritized? Can cooperation within the IPEF reduce China’s advantage and fightPage 3 of 7

climate change at the same time? Also, there are various definitions of economic security at thenational level; issues of power distribution, national governance, and finance, make it even more
complicated to translate economic security at the regional level.
Country Perspective: Indonesia and Resource Nationalization
Indonesia just finished their general elections and although there is still no official decision, Prabowo
will win as President with Gibran, Jokowi’s son, emerging as the Vice President. Prabowo’s win mean
stability and continuity as far as the IPEF is concerned. President Jokowi’s policies and programs willcontinue and so will the government’s resource nationalist approach. However, Prabowo will use the
network of oligarchs to support key projects rather than harness state-owned enterprises. Indonesia’s
relations with China will continue considering that Beijing is a strong supporter of Indonesia’s
industrial policy and energy transition policies. Negotiations with the US will continue under the IPEF
and its engagement will continue through the creation of common rules pertaining to critical minerals(nickel), EV batteries, and supply chains. Indonesia will continue its non-alignment policies, aiming tomaintain good relations with both China and the US, Australia, and the Middle East.
There are three main challenges to Indonesia’s transition to a cleaner economy. First is the need forpolitical commitment to reduce the use of fossil fuels and fuel subsidies. The coal industry supported
Prabowo’s campaign and their interest in maintaining the fossil fuel-based economy will be asignificant constraint in Indonesia’s move towards cleaner sources of energy. Second, Indonesia does
not have enough fiscal space to finance big programs associated with the green transition And lastly,
there remains significant regulatory uncertainties as well as the lack of institutional capacity to
implement these programs.
Country Perspective: IPEF can Support Philippines’ Green Transition
The clean economy pillar within the IPEF aims to address climate change, promote clean energy bysustainable methods which are critical aspects for countries like the Philippines. It aligns with thePhilippine government's priorities by focusing on clean energy, sustainable infrastructure, and clean
technology.
The IPEF’s clean economy pillar can support the Philippines’ green transition and address the broader
objective of development through (1) enhancing environmental sustainability and climate resilience,(2) providing access to climate finance, (3) transferring green technologies and best practices, (4)building institutional and industrial capacity in adopting green energy and sustainable practices, and(5) fostering sustainable trade and investment.
Country Perspective: Vietnam’s Hesitations on the Clean Economy Pillar
Vietnam’s strategic location contributes to the transportation network in the Indo-Pacific. It is rich innatural resources, has an increasingly educated population, and is becoming more open tointernational trade. The IPEF’s high standards on the clean economy is difficult for developing
countries such as Vietnam to attain. Developing countries have limited financial and institutional
capacities and will prioritize raising incomes over sustainability. Hence, there is a hesitation from
Vietnam to fully commit to implementing this pillar.

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Session III: Political Developments and Their Impact on the IPEF
US Politics and the IPEF
US politics and governance is increasingly dominated by parties (progressive democratic leftward
leaning wing vs rightward leaning “Make America Great” republicans). Both sides distrust trade
agreements. The progressive left-leaning wing is concerned about labor and environmental issues
and is concerned that these trade agreements give too much power to big tech, potentially limiting
the ability of Congress to rein in big tech. The “Make America Great” group recoil against globalizationand is concerned about the impact of these trade agreements (real or perceived) on working classjobs. There is no coherent "United" States of America, no type of coherent pro IPEF, pro free trade
constituencies anymore.
The Biden Administration committed a political blunder by not getting the IPEF approved throughtraditional trade promotion authorities’ routes. Members of Congress felt left out and are concernedthat their considerations were not adequately addressed. At best, the IPEF can be used as acommunication platform and a standard export mechanism for the US on issues such as emissions
control, decarbonization, digital taxes, and corruption. Many countries feel the need to be included in
the IPEF.
However, The IPEF’s prospects especially on trade looks grim as nothing substantial gets done during
an election year. Resuscitating the IPEF will be entirely dependent on Biden’s reelection. If Trump
becomes President again, the IPEF will suffer the same fate as the TPP.
The reliability of the US as a major player in keeping the IPEF functional is opens a lot of questions.
First, at what point do US regional partners, simply give up on working constructively with the UnitedStates? Second, to what extent would China be able to capitalize on US missteps from a trade andgeopolitical perspective? And lastly, what are the implications for global trade of a US that is no longer
able to lead?
It is also worthwhile to examine the IPEF without IS involvement. An alternative would be to revisit the
WTO’s Multi-Party Interim Appeal Arbitration Arrangement (MPIA) to settle trade disagreements
among members. And perhaps, countries should sometimes just proceed without the US and then let
the US see the value in coming back to it.
Japan’s Regional Approach to Economic Security
Japan wants to anchor the US in the region and would like to see it be more multi-polar. At the sametime, it wants to constrain China through supply chain resilience, selective diversification, and strategic
engagement. Japan is already on the forefront of resilient supply chains initiative, environment,
regulation. It is engaged in these initiatives through many different instruments and not just throughtrade agreements. It is thinking about regional engagement, not just through the IPEF, and how it cancomplement this approach without US involvement. There will be no significant change in Japan’s
approach to the region regardless of who wins the next election.
Domestic Politics Will Impact the IPEF’s Implementation
Outcomes of national elections in major IPEF members can impact the IPEF’s implementation
prospects. Security figures prominently in most country’s national foreign policy and entanglement inenhanced in times of national elections. The sustainability and longevity of the IPEF is uncertain. As

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repeatedly pointed out during the previous sessions, the IPEF as a Washington-driven initiative issusceptible to changes in the US administration. As a non-FTA, the IPEF’s effectiveness and legitimacy
is doubtful because of its non-binding nature. This raises concerns about equity and access toprivileges. Also, the scarcity of compensations in the form of reduced tariffs and market access raises
questions about the economic feasibility of compliance. Finally, skeptics brand the IPEF as an antiChina alliance. They see the IPEF as creating division and increasing confrontation. The potential for
IPEF to intensify US-China competition in the Indo-Pacific poses risk to regional stability and security.
Sustainability, effectiveness and inclusivity can be seen as tradeoffs to national and regional security
and economic security but paying attention to these three factors is the best way to increase the IPEF's
chances of success.

Session IV: Engaging with the Indo-Pacific and the IPEF
The EU’s De-risking Strategy
A country’s economic security strategy is packaged into 3Ps (protect, promote, and partner). “Protect”
refers to its trade defense mechanisms, “promote” refers to its industrial policy. However, industrial
policy is against the EU's ideology based on free trade and open economy, and not part of the EU's
toolkit. The promotion of an industrial policy depends on the member states and not the Commission.
In addition, financing industrial policy at the EU level is complex.
But the IPEF can play a role in the EU’s “partner (partnership)” strategy. The EU fears that its power isdeclining in economic and normative terms. Its industrial base is also shrinking as competition isincreasing from China, the US, and the rising Asian economics. The EU is very concerned about how
to preserve and enrich its industrial base. It uses the Indo-Pacific to engage with older Asia (without
China) and the wider Asian region and to contain China.
The EU still finds value in engaging with the IPEF because it sees India as an important player andwould like to engage more with it. In addition, China’s increasing manufacturing might and its large
investments in clean technology and other cutting-edge technologies are forcing other countries tocooperate more in the IPEF. The EU needs to find a solution to de-risking. If the IPEF wants to be
attractive, it needs to be a safe harbor for reducing the cost of de-risking. The EU and other countries
in IPEF should also consider a strategy of re-risking that doesn't count on the US.
The EU will also continue engaging with individual IPEF countries, not only through the IPEF. This iscurrently being done through several bilateral agreements. Also, there are various mechanisms thatcan be used for the EU to engage without formally being a member of IPEF. These are useful because
if IPEF crumbles, the EU can still engage with IPEF countries through these various mechanisms.
IPEF as Avenue to Increase South Korea-Japan-India Cooperation
South Korea sees the IPEF as another avenue to bolster trilateral cooperation between India, South Korea
and Japan. Excluding the US, India is the most important strategic partners for South-Korea and Japan.
For South-Korea and Japan, India is the most obvious China+1 and the most important development
cooperation partner (ODA).
Cooperation can be fostered through the IPEF’s clean energy pillar through a green hydrogen joint
development project. India has advantages in hydrogen production, Japan also can produce hydrogenand has transportation-related facilities and technologies while South Korea can utilize it for its

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hydrogen mobility and smart city initiatives. Among the three countries, a green hydrogen value chain
can be set-up and sustained. In addition, the cooperation in clean energy can continue to be promoted
without the IPEF. Its promotion as a bilateral or multilateral cooperation could create greater synergy.

Concluding Session
There seems to be a general agreement about which sectors and supply chains are important froman economic security perspective. Further examination can delve into the choke points of these
sectors and whether current initiatives are adequate in addressing these bottlenecks. There is noagreement though on to what extent the IPEF will be able to deliver its promises on the environmentand clean economy. The US elections and IPEF member countries’ domestic policies are also impacting
the IPEF and signaling that a certain degree of political convergence and consensus among members
hasn’t happened yet. Much also needs to be done to look at how the G20, APAC, and other external
actors will engage with the IPEF and how it can be a framework for economic diplomacy.

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