1The Making of the IndoPacific Economic Frameworkfor Prosperity (IPEF)

Publisher Information
The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF) is jointly published by the
Konrad-Adenauer-Stiftung’s Regional Economic Programme Asia (SOPAS) and the Institute ofSouth Asian Studies - National University of Singapore (ISAS-NUS).
Editors: Amitendu Palit, Ramita Iyer
Publication Coordination: Cristita Marie Perez, Sakuya Iwakawa, Johanna Bieger, Akshaya Balaji
Design, Layout, and Typeset Artist: Paula Dianiña Duman© 2023, Konrad-Adenauer-Stiftung Japan
ISBN 978-4-910690-11-7
Publisher
Konrad-Adenauer-Stiftung Japan Office / Regional Economic Programme Asia (SOPAS)
Sanno Park Tower 25F, 2-11-1 Nagatacho, Chiyoda-ku, Tokyo, 100-6125 Japan
KAS-Tokyo@kas.de+81 3 6426 5041
https://kas-japan.or.jp/

All rights reserved. No part of this publication may be reprinted, reproduced or utilized in any
form or by any electronic, mechanical or other means, now known or hereafter invented, including
photocopying or recording, or in any information storage or retrieval system, without permission
from the publisher.
Manuscript offers, review copies, exchange journals, and requests for subscription are to be sent
to the editors. The responsibility for facts and opinions in this publication rests exclusively with theauthors and their interpretations do not necessarily reflect the views or the policy of the KonradAdenauer-Stiftung.

1

The Making of the Indo-Pacific
Economic Framework for
Prosperity (IPEF)
Amitendu PALIT, Ramita IYER (Editors)

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Contents
Foreword | KAS										viRabea BRAUER

Foreword | NUS - ISAS									viiIqbal Singh SEVEA

List of Abbreviations									ixIntroduction 											1Amitendu PALIT and Ramita IYER

Asia Pacific, South Asia and Pacific Islands						

11Much Ado about Something? Australia’s Views on IPEF’s Prospects 				Peter DRAPER

13

The IPEF: Japan’s Economic Realism and Approach to Indo-PacificEngagement, Resilience, and Rule-Setting							27Stephen NAGY
IPEF: An Indian Perspective 									41R V ANURADHA
Indo-Pacific Economic Framework: Negotiating and Implementation
Challenges for the US									53Stephen OLSONThe Republic of Korea and the IPEF								65Tony MICHELL
Perspectives on IPEF from Aotearoa New Zealand						79Mia MIKIC
Analysis of the Indo-Pacific Economic Framework for Prosperity for Fiji			Radika KUMAR

95

Southeast Asia										

115Malaysia’s Interests in the IPEF: Managing Trade Frictions and Restoring
Market Access										117Jayant MENON
Thailand’s Perspectives on the IPEF								129Kaewkamol PITAKDUMRONGKIT

iv

Indonesia’s Perspective on the Indo-Pacific Economic Framework (IPEF)			
Siwage Dharma NEGARA and Maria Monica WIHARDJA

145

Philippine Perspective on the IPEF Agreement						Francis Mark A. QUIMBA

157

Table of Contents

Vietnam and the IPEF: Negotiating Prospects, Opportunities
and Challenges										169Linh H. DANG and Linh T. T. TRAN
Engaging and Path-Finding: A Singapore Perspective on the IPEF				
Simon TAY

183

External Perspectives									

195The EU, the Indo-Pacific and the US-led IPEF: Which Way Forward?				
Françoise NICOLAS

197

Impact of regional trade agreements on the IPEF						Priyanka KISHORE

211v

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Foreword | KAS
The launch of the Indo-Pacific Economic Framework (IPEF) in Tokyo last May 2023 marked arenewed commitment of the United States to actively engage in trade rule-making in the region.
The IPEF’s 14 economies account for over forty percent of the world’s economy measured in
nominal GDP (2020). The diverse group is composed of high income economies (i.e., Australia,
Brunei, Japan, New Zealand, Singapore, South Korea, and the US), large developing economies(i.e., India, Indonesia, Malaysia, Philippines, Thailand, and Vietnam) and island economies (i.e., Fiji).
The IPEF also pioneers an unconventional free trade discussion format by setting standards in four
work pillars: connected economy; resilient economy; clean economy and fair economy.
“The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)” is a series of
discussion papers jointly produced by the Konrad Adenauer Stiftung’s Regional Economic
Programme Asia (SOPAS) and the Institute of South Asian Studies (ISAS) at the National Universityof Singapore (NUS). Demographic trends, technological advancements, progress towards regional
integration and the region’s rise as an economic powerhouse is discussed against a backdrop ofrising geopolitical tensions. Emphasis is placed on the value of multilateralism and the role ofinternational cooperation and diplomacy in maintaining stability and sustaining economic gains.
The IPEF Discussion Papers represent the diverse perspectives and viewpoints offered by scholars
in each of the IPEF member countries. The collection includes contributions from various disciplines
such as economics, political science, international relations, and others. This interdisciplinary
approach enriches our understanding of the depth and breadth of the emerging Indo-Pacific
Economic Framework.
The ideas and research presented in the papers could influence economic policies, international
relations, and regional development strategies. These discussion papers are only an initial foray
into the potential trends, challenges, and opportunities that will shape the region’s economic
trajectory in the years to come. Continued research and collaboration is important to define acommon, prosperous, and fair economic future.
We are grateful to the scholars and authors for their insightful contributions. We would also like tothank the researchers, their affiliated institutions, the reviewers and all others who have supported
the development of this publication.
We encourage the readers to look into the IPEF Discussion Papers and explore the diverse rangeof topics covered, engage in discussions and share insights, and consider the implications of the
Indo-Pacific Economic Framework in your own work or studies.

Rabea BRAUER
Representative Tokyo Office, Director Regional Economic Programme Asia (SOPAS)
Konrad Adenauer StiftungviForeword

Foreword | NUS - ISAS
The IPEF, announced by the United States (US) President Joe Biden on 23 May 2022, has become
the centrepiece of the Biden administration’s economic strategy for the Indo-Pacific. Coming five
years after the US withdrew from the Trans-Pacific Partnership (TPP), the IPEF is seen as a tool
to re-emphasise Washington’s economic engagement in the region by advancing rulemaking infrontier areas of trade and investment. At the same time, the countries that are part of the IPEF
do not view it simply as a means of maintaining a balance between the US and China. The IPEF
is also welcomed as it could provide opportunities for inclusive growth, minimise supply chain
disruptions, advance sustainability, and provide a framework for economic diplomacy by setting
the “rules of the road”.
The IPEF is a formidable economic bloc with considerable strategic influence. Its potential
significance is reflected in the fact that it comprises 14 members drawn from Southeast Asia,
South Asia, the Pacific Islands and the broader Indo-Pacific region, and accounts for more than 40
per cent of the global Gross Domestic Product (GDP).
Significantly, the IPEF deviates from the framework of traditional Free Trade Agreements thathave focused on market access concessions and tariff liberalisation. As a framework focusing on
standard-setting and rulemaking, it attempts to provide a blueprint for a new, albeit untested,method of economic engagement in the region. The IPEF negotiations, which are being conductedin a modular approach, have made robust progress through the various negotiating rounds.
The Supply Chain Agreement has been a notable outcome with more decisions and outcomes
expected very soon.
For the Institute of South Asian Studies (ISAS) at the National University of Singapore (NUS) - anautonomous research institute working on contemporary South Asia – the IPEF is a core subjectof research. At ISAS, we are committed to tracking the latest developments around the world
and analysing their impacts on South Asia. The IPEF is a major subject of work for the trade andeconomy research cluster at ISAS. The initiative has a strong South Asian dimension, given India’s
membership in the framework. Moreover, as an institute situated in Southeast Asia, a region fromwhich several countries are a part of the IPEF, the latter becomes a natural area of interest for theInstitute.
We are delighted to be collaborating with the Konrad Adenauer Stiftung’s (KAS) Regional Economic
Programme Asia (SOPAS) on publishing a series of essays comprising perspectives from IPEF
members. The essays collated in this compendium analyse the negotiating goals, expected
outcomes, challenges and implementing concerns of the various IPEF member countries, including
the impact of domestic political economies. This is, by far, one of the most detailed, exhaustiveand rigorous research efforts on the IPEF and will go a long way in contributing to the knowledge
and understanding of the framework.

vii

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

I extend my appreciation to the various contributors, the editors, and the project teams at ISAS
and KAS for their contributions and efforts in bringing this publication together. I look forward
to noting and engaging in the multiple thought-provoking conversations and discussions thispublication would certainly encourage.

A/P Dr Iqbal Singh SEVEA
Director
Institute of South Asian Studies
National University of Singapore

viiiList of Abbreviations

List of Abbreviations
4G/LTE

Fourth Generation/Long Term Evolution

AAGC

Asia-Africa Growth Corridor

AANZFTAASEAN-Australia-New Zealand Free Trade Area

ACFTA

ASEAN-China Free Trade Agreement

ACRC

Anti-Corruption and Civil Rights Commission

ACTU

Australian Council of Trade Unions

ACTWG

Anti-Corruption and Transparency Experts’ Working GroupADB

Asian Development BankAEC

ASEAN Economic Community

AFTINET

Australian Fair Trade & Investment Network

AI

Artificial Intelligence

ALP

Australian Labor Party

APAC

Asia Pacific

APEC

Asia-Pacific Economic Cooperation

APEP

Americas Partnership for Economic Prosperity

ASEAN

Association of Southeast Asian Nations

ASEAN-PAC

ASEAN Parties Against Corruption

ASEAN+

Association of Southeast Asian Nations Plus

AUKUS

Australia, UK and US

AVE

Ad-Valorem tariff Equivalents

BCAs

Border Carbon Adjustment Measures

BCG

Bio-Circular-Green

BEPS

Base Erosion and Profit Shifting

BKPM

Badan Koordinasi Penanaman Modal (Investment Coordinating Board)BP

Bhumjaithai Party

BPO

Business Process Outsourcing

BPS

Badan Pusat Statistik (Central Bureau of Statistics)

BRI

Belt and Road Initiative

BTA

Bilateral Trade Agreement

CHIPS

Creating Helpful Incentives to Produce Semiconductors

CII

Confederation of Indian Industry

CIT

Corporate Income Tax
ix

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

x

CMIM

Chiang Mai Initiative Multilateralization

CMTA

Customs Modernization and Tariff Act

COP

Conference of the Parties

CPTPP

Comprehensive and Progressive Agreement for Trans-Pacific Partnership

CRS

Congressional Research Service

CSIS

Center of Strategic and International Studies

CSOs

Civil Society Organisations

CTPAT

Customs Trade Partnership Against Terrorism

DA

Department of Agriculture

DAV

Diplomatic Academy of Vietnam

DEFA

Digital Economy Framework Agreement

DFAT

Department of Foreign Affairs and Trade

DFFT

Data Free Flow with Trust

DMA

Digital Markets Act

DOC

Department of Commerce

DPM

Deputy Prime Minister

DSA

Digital Services Act

DSM

Dispute Settlement Mechanism

DTI

Department of Trade and Industry

EC

European Commission

EEC

Eastern Economic Corridor

EFTA

European Free Trade Association

EIU

Economist Intelligence Unit

EMI

Eramen Minerals Inc.

EOs

Executive Orders

EPA

Economic Partnership Agreement

ESCAP

Economic and Social Commission for Asia and the Pacific

ESG

Environmental, Social and Governance

ETC

Economic and Technical Cooperation

ETM

Energy Transition Mechanism

EU

European Union

EV

Electric Vehicle

EVFTA

European Union-Vietnam FTA

EVs

Electric Vehicles

FADTC

Foreign Affairs Defence and Trade Committee

FATF

Financial Action Task ForceList of Abbreviations

FDI

Foreign Direct Investment

FICCI

Federation of Indian Chamber of Commerce and Industry

FOIP

Free and Open Indo-Pacific

FTAFree Trade Agreement

FTE

Full-Time Equivalent

G20Group of Twenty

G7Group of Seven

GATT

General Agreement on Tariffs and Trade

GDI

Global Development Initiative

GDP

Gross Domestic Product

GDPR

General Data Protection Regulation

GE

General Election

GEA

Green Economy Agreement

GHG

Greenhouse Gas

GLCs

Government Linked Companies

GSI

Global Security Initiative

GSP

Generalised System of Preferences

GSP+

Generalised Scheme of Preferences Plus

GVC

Gross Value Chain

HS

Harmonised System

IAP2

International Association for Public Participation

ICIOInter-Country Input-Output

ICT

Information and Communication Technologies

IEA

International Energy Agency

IFANS

Institute of Foreign Affairs and National Security

IFRI

Institut français des relations internationales

ILO

International Labour Organization

IMD

International Institute for Management Development

IMF

International Monetary FundIP

Indo-Pacific

IPCs

IPEF participating countries

IPEF

Indo-Pacific Economic Framework for Prosperity

IPS

Indo-Pacific Strategy

IRA

Inflation Reduction Act

ISDS

Investor-State Dispute Settlement

ISEAS

Institute of Southeast Asian Studies

xi

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

xii

IT

Information Technology

ITA

International Trade Administration

ITPs

Industry Transformation Plans

JBIC

Japan Bank for International Cooperation

JET-P

Just Energy Transition Partnership

JETRO

Japan External Trade Organization

KCCI

Korea Chamber of Commerce and Industry

KIET

Korea Institute for Industrial Economics and Trade

KITA

Korea International Trade Association

KORUS

US-Korea Free-Trade Agreement

Lao PDR

Lao People’s Democratic Republic

MAFRA

Ministry of Agriculture, Food and Rural Affairs

METI

Ministry of Economy, Trade and Industry

MFAT

Ministry of Foreign Affairs and Trade

MFN

Most Favoured Nation

MFP

Move Forward Party

MITI

Ministry of International Trade and Industry

MNCs

Multinational Corporations

MOEF

Ministry of Economy and Finance

MOF

Ministry of Oceans and Fisheries

MOFA

Ministry of Foreign Affairs

MOJ

Ministry of Justice

MOLEG

Ministry of Government Legislation

MOTIE

Ministry of Trade, Industry and Energy

MOU

Memorandum of Understanding

MSGTA

Melanesian Spearhead Group Trade Agreement

MSIT

Ministry of Science and ICT

MSME

Micro, Small and Medium Enterprise

MSP

Minerals Security Partnership

NAFTA

North America Free Trade Agreement

NATO

North Atlantic Treaty Organisation

NEDA

National Economic Development Authority

NIA

National Interest Analysis

NQI

National Quality Infrastructure

NTMs

Non-Tariff Measures

NZ

New ZealandList of Abbreviations

OECD

Organisation for Economic Co-operation and Development

OECD-G20

Organisation for Economic Co-operation and Development – Group of Twenty

OJK

Otoritas Jasa Keuangan (Financial Services Authority)

PACER

Pacific Agreement on Closer Economic Relations

PCAF-CIT

Philippine Council for Agriculture and Fisheries Committee on International
Trade

PDP

Personal Data Protection

PDP

Philippine Development Plan

PDPA

Personal Data Protection Act

PGII

Partnership for Global Infrastructure and Investment

PH

Philippines

PH-EFTA

Philippines-European Free Trade Agreement

PH-EU FTA

Philippines-European Union Free Trade Agreement

PICTA

Pacific Island Countries Trade Agreement

PIIE

Peterson Institute for International Economics

PJEPA

Philippines-Japan Economic Partnership Agreement

PLI

Production Linked Incentive

PM

Prime MinisterPP

Phalang Pracharath Party

PPP

Public-Private Partnership

PQF-NCC

Philippine Qualifications Framework–National Coordinating Council

PQI

Partnership for Quality Infrastructure

PTAs

Preferential Trade Agreements

PTP

Pheu Thai Party

QUAD

Quadrilateral Security Dialogue

R&D

Research and Development

RGDP

Real Gross Domestic Product

RIVA

Regional Integration Value Chain Analysis

ROK

Republic of Korea

ROOs

Rules of Origin

ROW

Rest of the World

RSCI

Responsible Supply Chain Initiative

RTAs

Regional Trade Agreements

SDGs

Sustainable Development Goals

SEP

Sufficiency Economy Philosophy

SGD

Singapore Dollar

xiii

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

xiv

SMEs

Small and Medium-Sized Enterprises

SNU

Seoul National University

SOEs

State-Owned Enterprises

SPARTECASouth Pacific Regional Trade and Economic Co-operation Agreement

SPOR

Singapore Public Sector Outcome Review

SPS

Sanitary and Phytosanitary

STEM

Science, Technology, Engineering, and Mathematics

TBT

Technical Barriers to TradeTC

Tariff Commission

THAAD

Terminal High Altitude Area Defense

TICAD

Tokyo International Conference on African Development

TINA

Trade Intelligence Negotiations Adviser

TiVA

Trade in Value Added

TPA

Trade Promotion Authority

TPP

Trans-Pacific Partnership

TRIMs

Trade-Related Investment Measures

TRIPs

Trade-Related Aspects of Intellectual Property Rights

TSD

Trade and Sustainable Development

TTC

Trade and Technology Cooperation

TTC

Trade and Technology Council

TTIP

Trans-Atlantic Trade and Investment Partnership

UAE

United Arab Emirates

UK

United Kingdom

UKVFTA

Vietnam – UK FTA

UN

United Nations

UNCAC

United Nations Convention against Corruption

UNGA

United Nations General Assembly

US

United States

USMCA

United States-Mexico-Canada Agreement

USTDA

US Trade and Development Agency

USTR

United States Trade Representative

UTN

United Thai Nation Party

VND

Vietnamese DongWITSWorld Integrated Trade Solution

WROs

Withhold Release Orders

WTO

World Trade Organization

11

Introduction
Amitendu PALIT and Ramita IYER

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Introduction
The Indo-Pacific Economic Framework for Prosperity (IPEF) was launched by United States (US)President Joe Biden on 23 May 2022.1 Announced on the sidelines of the Summit meeting between
the Heads of States of Australia, India, Japan, and the US, as part of the Quadrilateral Security
Dialogue (Quad), the IPEF is the first formal articulation of a rules-based trade and economic
framework for the Indo-Pacific region. The initial members of the Framework included Australia,
Brunei, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore,
Thailand, the US, and Vietnam. Fiji joined the group after its launch. The IPEF aims to set regionalrules for effectively addressing a variety of contemporary and new-generation trade and economic
issues.
The IPEF is a formidable bloc in both economic and strategic heft. It includes three of the world’s
largest economies as measured by market size (Gross Domestic Product [GDP]) – the US, Japan, andIndia – along with some of the world’s wealthiest economies, as measured by national per capita
incomes – Singapore, the US and Australia. India, the US, and Indonesia – three of the world’s mostpopulous countries - are part of the IPEF. The group comprises advanced Organisation for Economic
Co-operation and Development (OECD) economies (Australia, Japan, South Korea, New Zealand,
and the US), large developing economies (India, Malaysia, Indonesia, Philippines, Thailand) andrelatively small economies from the Indo-Pacific region, each with distinct characteristics (Brunei,Fiji, Vietnam). The presence of diverse economies with varying degrees of economic, social andinstitutional features makes the IPEF noteworthy for its heterogeneity.
Accounting for around two-fifth of the world economic output, the IPEF is the world’s largest
economic bloc. It exceeds two other prominent blocs in the region – the Regional Comprehensive
Economic Partnership (RCEP) and the Comprehensive and Progressive Trans-Pacific Partnership(CPTPP) – in economic size. This, by itself, makes it a group with substantial clout in the global andregional economic spaces.
The economic clout of the IPEF is compounded by its strategic clout. It comprises several members
from two of the world’s most influential groupings, the Group of Twenty (G20) and the Group of
Seven (G7), respectively. The G20 members of the IPEF include Australia, India, Indonesia, Japan,
South Korea, and the US. Japan and the US are members of the G7 as well. From a wider regional
perspective, Australia, India, Japan and the US, all members of the IPEF, are also bonded throughthe Quad, which has a comprehensive agenda spanning across traditional and non-traditional
security and strategic issues.2 The IPEF is also distinct in being a bloc comprising US defence
partners and its key strategic allies drawn from the Indo-Pacific region.
There are obvious ramifications of the evolution of a regional rulemaking framework with as
distinct economic and strategic characteristics as the IPEF. These ramifications are far-reaching forthe global economic and political orders. While the full extent of the upshots will be comprehended
over time, more so after the IPEF negotiations conclude and its outcomes are announced, there is

1

2

2

“Fact Sheet: In Asia, President Biden and a Dozen Indo-Pacific Partners Launch the Indo-Pacific Economic
Framework for Prosperity (IPEF)”, The White House, May 23 2022, https://www.whitehouse.gov/
briefing-room/statements-releases/2022/05/23/fact-sheet-in-asia-president-biden-and-a-dozen-indopacific-partners-launch-the-indo-pacific-economic-framework-for-prosperity/#:~:text=Today%20in%20
Tokyo%2C%20Japan%2C%20President,represent%2040%25%20of%20world%20GDP
Sheila A. Smith, “The Quad in the Indo-Pacific: What to Know”, Council on Foreign Relations, 27 May 2021,
https://www.cfr.org/in-brief/quad-indo-pacific-what-know

Editors’ Introduction

considerable curiosity over its long-term impact. The curiosity is enhanced by the novel approach of
the IPEF to rulemaking, which is experimental in its adoption of a flexible attitude, and a conscious
shift from the more familiar structure of conventional Free Trade Agreements (FTAs).

Issues and approach
The IPEF is discussing four core sets of issues organised across four verticals, or Pillars. These
overarching Pillars encompass a large variety of issues in Trade, Supply Chains, Clean Economy, andFair Economy, respectively. The negotiating agenda for each Pillar was set out through Ministerial
Statements delivered at the in-person meeting of the IPEF member economy Ministers in Los
Angeles, US in September 2022.3 The first round of negotiations commenced in Brisbane, Australia,
in December 2022, following which further negotiating rounds comprising senior officials from all
members were held in New Delhi, India (February 2023, special round); Bali, Indonesia (March
2023, second round); Singapore (May 2023, third round) and Busan, South Korea (July 2023, fourthround). The second in-person meeting of Ministers at Detroit, US, held during 26-27 May 2023,
announced a substantial conclusion of negotiations on Pillar 2 (Supply Chains).4
The quick conclusion of negotiations on supply chains has surprised many. This is where the
IPEF’s distinct difference from traditional FTAs assumes significance. One of the reasons for thenegotiations having concluded fast is the absence of discussions on market access.
Dumping market accessMarket access issues, typically, are among the most contentious ones in FTA negotiations. The
latter usually commence after exchange of offers among partners indicating sectors where
members are willing to offer tariff cuts and concessions. Negotiations prolong when offers often
do not match expectations, leading to protracted deliberations. Several FTAs have ‘negative lists’comprising items where market access is denied to other partners. Negotiations also prolong
and get complicated in discussions over criteria for determining the Rules of Origin (ROOs)
that estimate the amount(s) of value added within a particular member country (or among FTA
partners) in the making of a product, for deciding its eligibility for preferential rates of tariffs ortariff-free entry in other partner markets. Currently active FTAs in the Indo-Pacific region, suchas the RCEP, CPTPP and other Association of Southeast Asian Nations Plus (ASEAN+) FTAs,5 alongwith numerous bilateral FTAs, have devoted significant attention to eliminating tariffs and fixing
appropriate ROOs for fostering greater access to members in each other’s markets. However, theIPEF has conspicuously avoided this agenda.
The IPEF’s conscious avoidance of tariffs and ROOs in its Trade and Supply Chain Pillars underscores
its assumption of not considering these issues critical in achieving its objectives. In Supply Chains,for example, instead of deliberating value addition, the focus has been on enhancing the resilience

3

4

5

“United States and Indo-Pacific Economic Framework Partners Announce Negotiation Objectives”, Officeof the United States Trade Representative, 9 September 2022, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2022/september/united-states-and-indo-pacific-economic-frameworkpartners-announce-negotiation-objectives“Substantial Conclusion of Negotiations on Landmark IPEF Supply Chain Agreement”, US Departmentof Commerce, 27 May 2023, https://www.commerce.gov/news/press-releases/2023/05/substantialconclusion-negotiations-landmark-ipef-supply-chain
These include ASEAN’s existing FTAs implemented bilaterally between ASEAN and non-ASEAN regional
economies (Australia & New Zealand; China, India, Korea and Japan).

3

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

of supply chains, with specific emphasis on improving logistics and expanding informationsharing among various actors of supply chains. The focus has clearly been influenced by the
disruptions experienced during the COVID-19 pandemic, which highlighted the importance of
safeguarding supply chains, particularly critical ones, such as semiconductors, food, energy, andpharmaceuticals. There is, therefore, no surprise in the IPEF discussing the identification of criticalsectors and ways for making them shock-proof through better trade facilitation, logistics andinformation exchange. These are priorities that appeal to all members and are considerably easy
to agree and advance on, unlike tariff-focused market access issues, which, in many cases, entail
inviting adverse reactions from domestic constituencies that would be affected by imports.
Not the typical FTA
Dropping market access, though, has sent confusing signals about the IPEF. There are hardly any
FTAs that do not discuss market access. Is the IPEF not an FTA then? Ostensibly no, since until now,there are no allusions in the negotiations to market access. For many traditional trade watchers,
the IPEF’s efforts to make rules on trade and cross-border business without deliberating on market
access, and not calling itself an FTA, has been baffling.
The fact that the IPEF has not been visualised as a traditional FTA was made amply clear at theoutset by the Biden Administration.6 Notwithstanding the clarification, for most other membersof the IPEF, who are used to negotiating trade issues through the structured framework of FTAs,
comprehending the IPEF has not been easy. The US articulation of the IPEF as ‘a 21st century
economic arrangement designed to tackle 21st century economic challenges’ – comprising chiefly
digital economy, resilient supply chains, clean energy infrastructure and energy transition,and transparency and anti-corruption – marks a specific delineation of ‘21st century economic
challenges’, along with an understanding of an effective approach for addressing them. It is not yet
sure whether the larger IPEF community, in spite of several months of negotiations in a different
framework, have been able to fully subscribe to the IPEF template.
The IPEF, though, is not exactly the first of its kind. A new-generation trade agreement like theDigital Economic Partnership Agreement (DEPA) signed by Singapore, Chile and New Zealandon 28 December 20207 excludes market access, in the way it arises in traditional FTAs, throughtariff cuts for goods. However, the scope of market access in a non-traditional sense is possible
to locate within a digital economy rules-based framework like the DEPA that enables service
providers to extend cross-border services digitally in partner country markets. In this respect, the
IPEF’s approach to 21st century economic challenges, while refraining from direct engagement withtraditional market access issues of tariffs, can well extend to other market access, such as digital
economy. Rulemaking efforts in digital economy, and even in supply chains and clean economy, will
have significant bearing on market access in these areas. In this respect, while not being a typical
FTA, IPEF could well be one of the first ones to flag off a new-generation of trade agreements.

6

7

4

“On-the-Record Press Call on the Launch of the Indo-Pacific Economic Framework”, The White House, 23
May 2022, https://www.whitehouse.gov/briefing-room/press-briefings/2022/05/23/on-the-record-presscall-on-the-launch-of-the-indo-pacific-economic-framework/“Digital Economy Partnership Agreement (DEPA)”, Ministry of Trade and Industry Singapore, https://www.mti.gov.sg/Trade/Digital-Economy-Agreements/The-Digital-Economy-Partnership-Agreement

Editors’ Introduction

US leadership
The announcement of the IPEF received a mixed response. The Biden Administration celebrated
its launch by declaring it an economic framework addressed for tackling ‘21st century challenges’
and advancing ‘fair and resilient’ trade. However, the euphoria of the US Administration was notaccompanied by similar exultation from all other members. This was presumably due to thedisappointment in the region over the US withdrawal from the Trans-Pacific Partnership (TPP) in
January 2017.
The withdrawal from a comprehensive new-generation trade framework like the TPP, which had
been proactively led by the US under President Obama, went down as a signal of US disengagementfrom Southeast Asia and the Asia-Pacific region. Subsequent articulation of the US’ Indo-Pacificstrategy by President Trump,8 and the emphasis on Southeast Asia’s centrality in the strategy, could
not obliterate the disappointment over the US exit from the TPP. The disappointment persisted as
throughout the Trump Presidency, the US made little effort to compensate for its exit from the TPP
through other meaningful initiatives for advancing regional rulemaking on trade issues. Neither
did it – under President Trump, or later under President Biden – display the intention of returning
to the TPP, which was persevered with by its other members, and became functional as the CPTPP
from 30 December 2018,9 without the US.
Moving on from the TPP
The IPEF was greeted with cautious optimism by Southeast Asia. There were, however, othervoices that were more enthusiastic about the initiative. These included the Indian Prime Minister
Narendra Modi, who was present during the launch of the initiative and commended it for its
intention to make the Indo-Pacific ‘an engine of global economic growth’.10 Modi also indicatedIndia’s intentions of working with all IPEF members for ensuring its flexibility and inclusivity.
Japanese Prime Minister Fumio Kishida described the IPEF as confirmation of ‘the economic
engagement of the US with the Indo-Pacific region even after its withdrawal from the Trans-PacificPartnership (TPP)’,11 thereby seeking to dispel doubts of several other members on the durability of
the US commitment to regional rulemaking. Indeed, the enthusiasm for the IPEF during its launch
was much more visible among its Quad members, who, in their joint statement issued a coupleof days before the announcement of the IPEF, alluded to it through their shared commitment for
acting on climate and clean energy transition.12

Sebastian Strangio, “What does the US Indo-Pacific Framework Say About Southeast Asia?”, The Diplomat,
13 January 2021, https://thediplomat.com/2021/01/what-does-the-us-indo-pacific-framework-sayabout-southeast-asia/
9 “The Comprehensive and Progressive Agreement for Trans-Pacific Partnership”, Ministry of Trade andIndustry Singapore, https://www.mti.gov.sg/Trade/Free-Trade-Agreements/CPTPP
10 “PM Modi underlines 3Ts for resilient supply chains at Indo Pacific Economic Framework Meet in Tokyo”,
The Times of India, 23 May 2022, https://timesofindia.indiatimes.com/india/pm-modi-underlines-3ts-forresilient-supply-chains-at-indo-pacific-economic-framework-meet-in-tokyo/articleshow/91740814.cms
11 “PM Kishida’s Vision for Building a New International Order from Asia”, Kizuna – The Government ofJapan, 26 May 2022, https://www.japan.go.jp/kizuna/2022/06/new_international_order_from_asia.html
12 “Joint Statement by President Biden, Prime Minister Anthony Albanese of Australia, Prime Minister
Narendra Modi of India, and Prime Minister Fumio Kishida of Japan on the Quadrilateral Security
Dialogue Leaders Summit in Hiroshima, Japan”, 20 May 2023, The American Presidency Project – UC Santa
Barbara, https://www.presidency.ucsb.edu/documents/joint-statement-president-biden-prime-ministeranthony-albanese-australia-prime-minister-0
85The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

The US proactivity in leading the IPEF negotiations might have been motivated by the desire to
win back the ‘good faith’ it lost after exiting the TPP. A return to the CPTPP will, perhaps, be thebest way to recover the lost faith. This is evident from Kishida’s iteration – on the same occasion
where he affirmed the US commitment to the Indo-Pacific through the IPEF notwithstanding theAmerican exit from the TPP – to continue ‘to persistently push for the return of the US to the TPP’.13
For the US, though, returning to the TPP framework, appears to be a remote possibility. This is
primarily on account of the domestic politics in the US that is unsupportive of an economic policy
agenda advancing American engagement in FTAs.
The lack of domestic enthusiasm for the US engagement in FTAs is as bipartisan and broad-based
as the scepticism over China. The appeal of a framework like the IPEF – not billed as a traditional
FTA – for counterbalancing the economic influence of China in the Indo-Pacific has a strong buyin among domestic constituencies. Setting and driving the rules agenda in the IPEF provides
substantial ground for justifying the US engagement in the Framework, ostensibly for balancing
the Chinese role in regional rulemaking, an argument advanced forcefully by President Obama
in his bid to push the TPP through the US Congress in 2016.14 Counterbalancing China, though,is a distinctly awkward prospect for several IPEF members, who, despite being US defence allies
and strategic partners, prefer staying out of the US-China great power competition in their larger
national interests.

Specific sensitivities
The IPEF negotiations are being driven by the Office of the United States Trade Representative(USTR) and the US Department of Commerce (DOC). The USTR is leading negotiations for Pillar 1,
while the Department of Commerce is doing the same for Pillars 2,3 and 4. The IPEF’s character of
not being a traditional FTA is further reinforced from the simultaneous engagement of the USTR
and the DOC in the same framework, in contrast to the usual custom of the USTR overseeing US
FTA negotiations.
With the IPEF being substantively driven by the USTR and the DOC, it is only natural that core
American interests will feature prominently in the IPEF.15 Central to these interests is the welfareof American workers, a priority resonating strongly in the US Trade Policy Agenda.16 The IPEF is
negotiating labour standards with the objective of institutionalising standards across the IndoPacific. Similarly, other US core interests, such as standards for environmental sustainability anddecarbonisation, and rules for digital economy, competition policy, and tax practices, are also
prominently featured in the IPEF consultations.

13 op. cit.
14 Barack Obama, “The TPP would let America, not China, lead the way on global trade”, The Washington Post,
2 May 2016, https://www.washingtonpost.com/opinions/president-obama-the-tpp-would-let-americanot-china-lead-the-way-on-global-trade/2016/05/02/680540e4-0fd0-11e6-93ae-50921721165d_story.
html
15 Amitendu Palit, “IPEF’s early fanfare masks risks in the US approach”, Hinrich Foundation, 26 October
2022, https://www.hinrichfoundation.com/research/article/ftas/ipef-s-early-fanfare-masks-risks-in-theus-approach/
16 “Fact Sheet: USTR Releases 2022 President’s Trade Policy Agenda and 2021 Annual Report”, https://ustr.
gov/sites/default/files/USTR%20Trade%20Policy%20Agenda-Annual%20Report%20Fact%20Sheet.pdf

6Editors’ Introduction

Standard-setter vs standard-taker
Several IPEF members will hesitate in accepting US-led standards in politically sensitive issues
such as labour, environment, and digital economy. India, which has till now, stayed disengaged
from Pillar 1, while engaging with the remaining Pillars, is an example. India’s decision mightwell have been motivated by its hesitation to negotiate new-generation complex trade issues
like labour standards and cross-border data flows, since its own domestic regulations are yet to
be institutionalised in these areas.17 The obvious outcome of engaging on these subjects in theabsence of adequate domestic regulations would be to accept US proposed standards as given.
The default choice of being a ‘standard taker’ is not an appealing proposition and is worrying forseveral other IPEF members too.
New-generation trade issues, such as labour and environment, have encountered major negotiating
roadblocks in structured FTAs. The US-led TPP negotiations are an example. The problem in dealing
with such issues arises from the economic heterogeneity and variation in regulatory systems
among members, particularly in large blocs such as the IPEF and the TPP. Several members havecomparative advantages in production that are derived from their abilities to use domestic labour
more efficiently than others. Agreeing on certain labour standards, particularly those that mightentail pegging the cost of domestic labour on par with US labour, can imply these countries losing
out on productivity and efficiency. Similarly, standards proposed for environmental sustainability
might be costly and inefficient for many developing country members of the IPEF to adopt.
The IPEF is expected to offer sufficient flexibilities to its members for ‘leaving’ or ‘taking’ standards.
The emphasis on flexibility and a non-binding approach contrasts with the binding character ofseveral major FTAs, such as the CPTPP and the United States-Mexico-Canada Agreement (USMCA).
While flexibility is a happy prospect for many members, it might refrain the IPEF from achieving acomprehensive region-wide set of rules, with members picking rules in bits and pieces. Time will
reveal whether the IPEF’s commitment to flexibility dilutes its achievements elsewhere.

From the members’ eyes
The IPEF focuses on issues that are among the most preoccupying for global trade and business
policy and regulations. Whether it be labour, environment, trade facilitation and competition
policy in the Trade Pillar, or resilient supply chains, energy security and sustainable solutions, anticorruption and taxation practices in the other Pillars, the issues are high priorities for multilateraland global bodies (for example, at the G20, G7 and the World Trade Organization [WTO]). The
Framework’s dedicated focus on these subjects, and the speed at which it has proceeded since its
inception, demonstrates its intentions of staying ahead of the multilateral rulemaking processes
and creating rules for the Indo-Pacific that become templates for wider adoption. It clearly aspires
to be a trend-setter in global rulemaking.
The IPEF’s efforts will produce a new generation of economic and business rules for the Indo-Pacificregion. Rules implemented across the Indo-Pacific – the most economically vibrant region of theworld – can, over time, become global rules in their respective spheres. As some of the world’s
largest and major economies – both developed and developing – start engaging economically on
a common set of rules, the latter can evolve into benchmarks for upcoming as well as existing
economic frameworks.
17 Amitendu Palit, “The IPEF Advances – Is India ready?”, ISAS Brief, 4 August 2022, https://www.isas.nus.edu.
sg/papers/the-ipef-advances-is-india-ready/

7

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

While its objectives are laudable, the IPEF’s goals are challenging. Pronounced economic
heterogeneities among members make its negotiating objectives daunting. In digital economy,
for example, the IPEF members have major differences in domestic capacities and high variations
in domestic regulations. It is the same with respect to national standards for tackling carbon
emissions, green technologies and labour management practices. The differences in national
capacities and the state of evolution of domestic standards will generate significant challenges inreaching common regional standards.
The challenges for IPEF negotiations are enhanced by the complexities of regional and national
political economies. As developing standards imply engaging on ‘behind the border’ issues
and delving into domestic regulations, the national political economies can pose hurdles for
implementing new standards. These can be particularly visualised for labour, environment anddata standards. Furthermore, legal procedures for implementing the IPEF outcomes will vary
among its members and can pose specific challenges.
A proactive US leadership of the IPEF project also has far-reaching implications. The geopoliticaland strategic implications of the leadership will remain with the IPEF as it evolves into a mature
Framework. These implications will shape the regional political and security dynamics in the IndoPacific region, impacting various strategic choices of its members.
Understanding the IPEF closely is essential for obtaining clearer insights on its implications. This
understanding requires specific perspectives on the IPEF reflected from the vantage points of
its individual members. The discussion papers in this series aim to provide these perspectives.
They look closely at negotiating challenges and anticipated outcomes for the IPEF in the areas ofdigital economy, resilient supply chains, clean energy and decarbonisation, and financial practice;
implementation challenges for the IPEF arising from domestic regulatory complexities and political
economies of members; the IPEF’s compatibility with existing regional frameworks and prospectsof the IPEF’s engagement with extra-regional actors like Europe in the foreseeable future. Between
them, these papers comprise a remarkable set of informed perspectives that are instrumental forunderstanding the IPEF.

Thinking aloudThe conclusion of negotiations in Pillar 2 has been a rather remarkable achievement, given the
delays that normal trade negotiations experience. The conclusion has brightened the prospects ofsimilar declaration of outcomes for other Pillars too. Pillars 3 and 4 are likely to be ahead of Pillar 1
in this regard. The Trade Pillar might experience more delays as achieving meaningful outcomes incomplex issues like digital economy and labour standards will not be easy. Indeed, in this regard,
the US Administration might also prefer a somewhat cautious approach, given the impending
domestic elections in the US, and the possibility of certain issues, such as technology, labour andclimate rules, having some impact on electoral prospects.
There is also speculation over whether the US would stay committed to the IPEF in the event of the
Biden Administration being voted out of office. The spectre of a TPP-like scenario unfolding for the
IPEF continues to be a worry. Notwithstanding such fears, there is no doubt that the IPEF process
will survive. The stakes – both commercial and political – in a rules-based economic framework for
the Indo-Pacific are too substantial, making it a process that is unlikely to get crippled. Future US
Administrations will be aware of the strategic compulsions that justify the IPEF. So will be its othermembers. It will, therefore, be a process that will continue to evolve and keep posing questions.

8

Editors’ Introduction

Getting to learn the IPEF is a strategic necessity, not just for the Indo-Pacific region, but also for
all other extra-regional global actors. As a new-generation experimental rulemaking process, the
IPEF’s successes and failures will be precious knowledge for all future efforts aiming to address 21st
century economic challenges.

9The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

About the authors
Dr Amitendu PALIT is Senior Research Fellow and Research Lead (Trade and Economics) at theInstitute of South Asian Studies, National University of Singapore. He is an economist specialisingin international trade and investment policies, free trade agreements, supply chains, connectivity,
cross-border data flows and the Indian economy. He sits on the World Economic Forum’s Global
Future Council on Trade and Investment. He is Senior Research Fellow (Honorary) at the Wong
Centre for Study of MNCs and Adviser for Athena Infonomics.
Earlier, Dr Palit worked for several years in the Ministry of Finance, Government of India, and in
the Ministries of Industry and Civil Supplies. He managed macroeconomic policies, including trade,investment, industrial development, Small and Medium Enterprises, entrepreneurship and futures
trading. He wrote annual economic surveys and participated in annual budgetary consultations.
He was on Advisory Committees of the Planning Commission of India and the International Labour
Organization.
Dr Palit has edited and authored several books. The latest ones are Seeking Middle Ground: Land,
Markets and Public Policy (OUP, 2019; co-edited); Seven Decades of Independent India (Penguin,
2018; co-edited) and Employment Policy in Emerging Economies (Routledge, 2017; co-edited).
His other books include The Trans-Pacific Partnership, China and India: Economic and Political
Implications (Routledge, 2014), China India Economics: Challenges, Competition and Collaboration(Routledge, 2011) and Special Economic Zones in India: Myths and Realities (Anthem Press, 2008;
co-authored). He has published in several peer-reviewed academic journals. He is a columnist
for India’s Financial Express and a regular contributor for East-West Centre, East Asia Forum andChina Daily. He is an expert for BBC, Bloomberg News, CNA, CNBC, ABC, CGTN and Doordarshan(India). He has been a resource person for Commonwealth Secretariat, ILO, UNDP, Copenhagen
Consensus and IIFT India.
Ms Ramita IYER is a Research Analyst at the Institute of South Asian Studies (ISAS), National
University of Singapore (NUS). Her research focus is on geoeconomic and geopolitical developmentsin the Indo-Pacific region. In addition to conducting research at ISAS, Ms Iyer also oversees andmanages the ISAS weekly podcast – South Asia Chat – that offers a quick analytical take oncontemporary political and economic developments in the region.
Prior to joining ISAS, Ms Iyer worked with a number of Indian and international organisations
on public policy issues including global health policies for transwomen, education and skill
development, and trade issues, among others. She has presented in various conferences, notably
at the Global Public Policy Network Conference in London School of Economics, United Kingdom,
and the STI-HIV 2019 Conference in Vancouver, Canada.
Ms Iyer graduated with a Master in International Affairs from the Lee Kuan Yew School of Public
Policy in NUS and holds a Bachelor of Arts (Honours) in Political Science from Delhi University.

10

12
1

Asia Pacific, South Asia andPacific IslandsMuch Ado about Something? Australia’s Views on IPEF’s Prospects

Much Ado about Something?
Australia’s Views on IPEF’s Prospects
Peter DRAPER

The Indo-Pacific Economic Framework for Prosperity (IPEF) negotiations represent an opportunity
for Australian stakeholders, albeit one relatively less tantalising – or costly – than traditional free
trade agreements. The IPEF’s market access content is limited to digital trade, and less ambitious
than the current United States (US) benchmark in the United States-Mexico-Canada Agreement(USMCA). Moreover, the IPEF’s regulatory initiatives are largely cooperative, rather than binding.
While the US may intend to use the IPEF to spread its preferred standards agenda, unless the
adoption of those standards is firmly linked to both finance and investment flows from advanced
IPEF members, developing country counterparts may remain aloof. Consequently, Australianbusiness stakeholders seem to have downgraded their expectations of the outcomes, whereas
civil society stakeholders remain wary of the IPEF’s potential regulatory content. Nonetheless,
Australian stakeholder groups are largely united around using the IPEF to anchor the US inregional economic arrangements. Therefore, eventual ratification will not present insurmountableobstacles.

13

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Introduction
The Indo-Pacific Economic Framework for Prosperity (IPEF) represents an eclectic combination ofold and new in the world of trade agreements. While clearly not constituting a traditional market
access-oriented free trade agreement (FTA) of the kind the region is familiar with, it does containa partial market access agenda in Pillar 1’s digital focus. The other three Pillars traverse regulatory
terrain and emphasise the construction of cooperative frameworks based on adopting common
standards: an agenda familiar to non-trade officials working in multilateral settings such as theOrganisation for Economic Co-operation and Development’s (OECD) Base-Erosion and ProfitShifting initiatives (BEPS)1 vis-à-vis the IPEF Pillar 4’s focus on tax and anti-corruption.
Therefore, while there are good reasons to be sceptical about the IPEF’s utility, its substance is not
unfamiliar to Australian negotiators. Moreover, in recent years, Australia has been at the forefrontof negotiating sectoral regulatory pacts containing combinations of market access and regulatory
frameworks, albeit on a bilateral basis and with the like-minded Singapore.2
A core difference between the IPEF and multilateral negotiation settings, however, is that theUnited States (US) is driving it, in contrast to its relative neglect of the World Trade Organization(WTO), in particular. From a negotiating perspective, a multilateral setting offers greater balancing
potential or coalitional settings and the opportunity to arbitrage amongst large trading powers
whose economic sizes roughly offset each other, particularly for middle powers such as Australia.
While the IPEF does contain significant economic powers, in Japan and India particularly, the US
remains dominant. Hence, to the extent that the US sees the IPEF as an opportunity to entrench
its standards in the region, channelling that agenda in ways that are productive for the Australianeconomy would be more difficult where US standards diverge from Australian norms. Moreover,Australian negotiators are very interested in further embedding the US into regional economic
frameworks, not least to counter China’s growing regional influence. Therefore, they need tobalance their own economic objectives, which are often aligned with those of the US, with the need
to occasionally blunt US demands that might alienate IPEF partners. This has been a longstanding
issue on the WTO, notably concerning US Democratic Administrations’ pursuing of stronger
environment and labour rights in trade agreements – a core factor in the collapse of the WTO’s
1999 Seattle Ministerial conference. This makes for a complex negotiation dance, particularly in
relation to the more sensitive issues on the table.
This paper discusses Australian perspectives on the IPEF’s anticipated outcomes, negotiation
challenges and implementation issues. Given that these negotiations are still underway and at an
early stage, the material is sourced primarily from internet sources and confidential backgroundinterviews with Australian stakeholders. Thereafter, Australia’s participation in the IPEF negotiations
is assessed, including a limited case-study on the Pillar 3 – Clean Economy – negotiations. The final
section concludes.

12“Inclusive Framework on Base Erosion and Profit Shifting”, Organisation for Economic Co-operation andDevelopment, https://www.oecd.org/tax/beps/. The BEPS concerns corporate tax planning strategies toshift profits from higher tax jurisdictions to lower tax jurisdictions in order to maximise group profits,
thereby eroding higher tax jurisdictions’ revenue bases.
“Australia-Singapore Digital Economy Agreement”, Australian Government – Department of Foreign
Affairs and Trade, 8 December 2020, https://www.dfat.gov.au/trade/services-and-digital-trade/australiaand-singapore-digital-economy-agreement;“Singapore-Australia Green Economy Agreement”, Australian Government – Department of Foreign
Affairs and Trade, 18 October 2022, https://www.dfat.gov.au/geo/singapore/singapore-australia-greeneconomy-agreement

14

Much Ado about Something? Australia’s Views on IPEF’s Prospects

Anticipated Outcomes
At the broadest level, the IPEF is a cooperative framework (Pillars 2 to 4) with market accessfeatures (Pillar 1). As such, the anticipated outcome is the establishment of a matrix of cooperationagreements, and limited market access. The high-level anticipated outcomes per Pillar are
represented in Figure 1.
Figure 1: Summary of IPEF’s Negotiation FociPILLAR 1

PILLAR 2

PILLAR 3

PILLAR 4

Trade

Supply chains

Clean energy

Tax & anticorruption

High-standard

Transparency

Technology
deployment

Fair competition

Free

Diversity

Decarbonisation

Enforcement

Fair

Security

Resilience

Sharing expertise

Sustainable

Sustainability

Finance

Capacity building

Workers

Resilience emphasis

Infrastructure

Digital emphasis

Technical assistanceSource: IPEF Ministerial Statements

Clearly, the Pillar 1 market access agenda has limited scope and applicability, with the emphasis
on workers’ interests, as well as fairness, representing a particular framing that circumscribes
stakeholder interest and engagement. Still, the anticipated outcome is binding market access,particularly for digital services, and associated rules to govern cross-border data flows and storage.
Pillars 2 and 3, on the other hand, respond to current concerns being expressed by many
countries over economic resilience and decarbonisation, and as such enjoy much wider buy-in. In
both cases, anticipated outcomes are anchored on the establishment of cooperative frameworks,
for example, consultation mechanisms and information sharing, and elaboration of common
standards — particularly concerning decarbonisation technologies — over time.
Pillar 4’s emphasis on fair competition resonates with the BEPS conventions and derivative
global minimum tax3 in relation to tax, and OECD as well as other multilateral codes covering
corruption. As such, the overall objective is the focused implementation of existing arrangements
and the provision of assistance to the IPEF’s developing country members for this purpose. This
is in keeping with western economies’ generalised shift to more values-based approaches to thegovernance of their large firms supply chains.

3“International community strikes a ground-breaking tax deal for the digital age”, OECD Tax, 8 October
2021,
https://www.oecd.org/tax/international-community-strikes-a-ground-breaking-tax-deal-for-thedigital-age.htm

15

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Negotiation Challenges
At least four negotiation challenges are clearly discernible.
No market access agenda (except Pillar 1)
This is a well-known IPEF limitation. In a traditional FTA negotiation, there is generally abundant
market access on the table covering both goods and services. This creates scope for the trade-offs
to ensure there is enough for everyone to sign the deal.
The IPEF does have a very limited market access agenda in Pillar 1, but it concerns an issue —digital trade governance — that is highly sensitive for some members. For example, India andIndonesia advocate for stronger domestic data storage provisions and the right to impose taxes
on digital trade flows, and / or e-commerce. By contrast, the US has historically pursued free dataflows and prevention of data storage provisions in its trade agreements. Furthermore, the other
Pillars contain distinct regulatory domains with the emphasis being on establishing cooperative
frameworks rather than market access per se. This means there is little scope for reciprocity withineach pillar, never mind across the Pillars. That said, since each Pillar effectively stands alone in
principle there is nothing to prevent concluding them distinctly, and out of sequence. Notably, thishas already occurred for Pillar 2.
Is the US pursuing a ‘Brussels effect’ outcome?
In its public statements on the IPEF, US representatives consistently emphasise their expectationthat the IPEF signatories will adopt high standards across the four pillars, anchored in US
preferences for a ‘worker-centric’ trade policy, in what could be construed as a ‘Washington effect’
to mirror the well-known ‘Brussels effect’4. Is this realistic? And what could it mean in practice?
The answers to these questions depend on how the other participants respond, especiallydeveloping country members such as India and Indonesia. Obviously, that is also contingent on
the Pillar in focus, with some (market access for digital trade) being particularly difficult, and others(Pillar 2’s supply chain resilience) less so. This arguably also explains why Pillar 2 was substantively
concluded first, and quickly. Each country will have to make its own judgments concerning theimplementation requirements and adjustment costs, in relation to the potential benefits on offer
through locking into higher standards, on an issue-by-issue basis.
Many countries, and diverse economies and needs
The regulatory agenda is complex. It encompasses largely private (voluntary) standards as well as
mandatory standards, across a wide domain. Countries are positioned very differently within this
rapidly evolving complexity, and given their diverse economic structures and needs, they will belooking for different things from the negotiations. By contrast, notwithstanding this heterogeneity,
it is likely that there will be common interests in adopting common standards approaches incertain areas, for example, in relation to the uptake of green hydrogen as an energy source. The
IPEF can provide a focus for such identified common interests, and by establishing cooperative
frameworks, the details can be worked out in subsequent detailed working groups.

416

Anu Bradford, The Brussels Effect: How the European Union Rules the World (Oxford University Press,
2020)

Much Ado about Something? Australia’s Views on IPEF’s Prospects

Would standards alignment deliver the anticipated investment outcomes?
The ‘standards uptake for investment’ principle is a core bargain at the heart of IPEF’s standards
agenda. In essence, this means that by adopting cutting-edge standards, developing countries
expect investment from private sector firms to flow to their economies. They also expect thatdeveloped countries will facilitate the uptake of those standards through implementation support
packages. Against this, developing countries have budget constraints and opportunity costs for
scarce funds. It raises the question on whether capacity building, technical and financial assistancepromise sufficient incentives to promote uptake of higher standards, given the institutional
resourcing requirements to implement such packages, versus, for example, deploying scarce funds
to build more schools. These trade-offs are present in all four Pillars although their manifestations
will vary from developing country to developing country, depending on each country’s domestic
institutional and political economy constraints.

Implementation Issues
These really depend on the outcomes, specifically, who stays the course and on what issues, andthe content of agreed outcomes. Put another way, this will be a function of levels of ambition
and associated implementation appetite. Considering the anticipated outcomes, we can speculate
about the resultant mix of outcomes.
First, developed countries and US security allies, including Australia, Japan, New Zealand,
Singapore, South Korea, and the Philippines, are likely to stay the course and commit to a packageof outcomes. In the US case, this would be primarily to satisfy geopolitical imperatives, namely
remaining economically engaged in the region. US security allies share this motivation and hopefor meaningful economic concessions. The Australian case is discussed in the next section.
Second, and for a variety of reasons already canvassed above, the remaining developing countries
are more likely to go for an à la carte approach. The three prominent reasons are:
1. They may struggle to reach the regulatory ‘bar’.
2. While financial and technical assistance will help, design and implementation capacities areimportant and sometimes lacking.
3. In this light, would recipients prioritise this agenda over other, potentially more pressing,governance matters and resourcing trade-offs?
Given that the IPEF is designed to be amenable to opt-in and opt-out approaches, this means that
there is no longer the need for an overarching IPEF Agreement per se, but rather a collection offull and partial scope architectures with developing countries occupying different points of theimplementation spectrum.
Australian Perspectives
General observations
According to one stakeholder consulted for this research, Australia’s embrace of the IPEF cements
the evolution of Australian trade policy away from a singular focus on achieving commercial

17

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

outcomes, towards privileging security considerations.5 Australia’s top trade priority is US
engagement in the Indo-Pacific region to buttress the US-anchored rules-based order and resist
Chinese dominance. First prize is for the US to return to the Comprehensive and Progressive TransPacific Partnership (CPTPP) Agreement, but that is not going to happen. The IPEF, notwithstanding
the negotiation challenges, is the only game in town. These dynamics are reflected in the evolving
Pillar 1 digital trade negotiations, with Australian business groups consulted for this researchpreferring to prioritise existing regulatory frameworks, notably the CPTPP, rather than the likely‘worker-centric’ provisions to be established under the IPEF. One business stakeholder notedthat the IPEF is relatively marginal in terms of Australian trade policy priorities and the country’s
extensive domestic regulatory agenda. That said, Australian businesses will participate, but insupport of the security alliance, not because they expect meaningful commercial outcomes.
The Australian Labour Party (ALP) government, by contrast, is comfortable with a ‘worker-centric’trade project as espoused by the Biden Administration. One stakeholder interviewed for thisresearch observed that the US’ trade policy approach is evolving towards the European model,
with similarities across approaches to labour and human rights, as well as digital trade, becoming
apparent. Moreover, Australian civil society groups and trade unions — the core of the ALP’s
voting base — are in favour of embedding labour, environmental, and inclusivity provisions into
trade agreements and in this regard, they see the IPEF as an opportunity. The Australian Councilof Trade Unions (ACTU)6 is enthusiastic, and advocates for embedding strong, enforceable, labour
rights across all four Pillars. Moreover, they see an opportunity to develop a robust labour rights
framework for future trade agreements, building on the IPEF platform. In this light, the IPEF could
be made to work to the current Australian government’s advantage.
Nonetheless, civil society, while broadly supportive of the IPEF’s goals, has expressed some
scepticism. On top of the list is the legal non-enforceability of the final set of IPEF agreements, withthe probable exception of Pillar 1, meaning that the agreed texts will be aspirational.7 Similarly,
with the IPEF’s core value proposition consisting of a ‘reforms for investment’ bargain, civil society
has expressed concerns that implementation of IPEF’s values content (labour rights for example)
will exclude them.8 Similarly, there are concerns over the negotiations process and associateddecision-making, specifically the secrecy provisions that will govern access to negotiations texts
that are seen as more stringent than those governing CPTPP negotiations.9
There are broader concerns in the Australian trade policy community. One centres on whether the
IPEF will compete with existing initiatives, notably the Asia-Pacific Economic Cooperation (APEC)
process. In this view, the IPEF may contribute to regional fragmentation by promoting standards
that diverge from evolving regional norms. Moreover, while the US remains strongly supportiveof the APEC, it may no longer be driving the organisation in the ways it used to, since its energies
have diverted to driving the IPEF.

5

6
7

8
9

18

Robert Glasser, Cathy Johnstone and Anastasia Kapetas (eds), Australian Strategic Policy Institute, The
geopolitics of climate and security in the Indo-Pacific, (Canberra: Australian Strategic Policy Institute),
24 February 2022, https://www.aspi.org.au/report/geopolitics-climate-and-security-indo-pacific“Indo-Pacific Economic Framework”, Australian Council of Trade Unions (ACTU), 12 January 2023, https://www.dfat.gov.au/sites/default/files/ipef-submission-actu.pdf“AFTINET Submission to the Department of Foreign Affairs and Trade on the Indo-Pacific Economic
Framework”, Australian Fair Trade and Investment Network, 2 November 2022, http://aftinet.org.au/
cms/sites/default/files/221024%20%20AFTINET%20IPEF%20submisssion%20to%20DFAT%20fiinal.pdf
Ibid.
Ibid.

Much Ado about Something? Australia’s Views on IPEF’s Prospects

Nonetheless, the lead government agency, the Department of Foreign Affairs and Trade (DFAT) is
supportive of the IPEF, which is seen as a new kind of trade agreement that responds to the postCOVID-19 era by addressing contemporary concerns over supply chain resilience, green economy,
and digital trade. Moreover, together with Japan and Singapore, DFAT negotiators are focusedon assisting the US to find landing zones for the various pillars that would work in the regional
context.
Pillars 1, 2 and 4
Regarding Pillar 1, several positives have been identified by various Australian stakeholders. First,
unlike the other Pillars, a single undertaking approach will be applied, meaning that nothing isagreed until everything is agreed. In principle, this widens the scope for trade-offs within the Pillar,
although not across Pillars, and ensures commitment to the whole package. As a result, some
Australian stakeholders advocating for strong outcomes on digital trade issues express optimismthat the Pillar 1 Agreement may end up buttressing Australia’s Digital Trade Strategy,10 thereby
bolstering Australian competitiveness.11 In this regard, it could conceivably be a useful supplement
to existing bilateral arrangements such as the digital trade provisions in the CPTPP. Furthermore,
it could conceivably leverage Australian strengths in cyber-security capacity-building (inter alia) toassist the IPEF’s developing country participants with bolstering their cyber-security defences.12
However, at the time of writing, Australian business stakeholders were sceptical that an ambitious
outcome could be achieved, with US official negotiation positions apparently being ‘UnitedStates-Mexico-Canada Agreement (USMCA) minus’, and noted that their US counterparts wereconsidering exiting the negotiations. According to several stakeholders consulted during thecourse of conducting research for this paper, the issue has become highly politicised in the US
Congress and is anchored on a tacit alliance between liberal Democrats led by Senator Warren,
and the extreme right, led by Senator J. D. Vance.
These US politics are reflected in some Australian stakeholder criticisms. Civil society worries
that the emphasis on food security will be used to bolster investments into the IPEF’s developing
country participants from countries that heavily subsidise their agriculture, thus potentially
undermining their production capabilities.13 Similarly, civil society and labour groups expressed
concerns regarding the potential digital trade provisions of Pillar 1, notably that these might mirror
those in the USMCA, where the provisions strongly favour free data flow and minimal restrictions
on the US technology giants. These groups worry that it would represent a substantial step backfor Australian regulation of those companies, given that prior Australian trends were towards
regulating for more accountability, gig-economy workers’ rights, higher privacy standards, more
stringent cyber-security obligations, and greater market contestability.14 Moreover, the civil society
submission expressed concern that Pillar 1 might be used to negotiate access to public services,
thereby restricting governments’ rights to regulate,15 and that market access negotiations might

10 “Digital Trade Strategy”, Australian Government – Department of Foreign Affairs and Trade, 1 April 2022,
https://www.dfat.gov.au/trade/services-and-digital-trade/e-commerce-and-digital-trade/digital-tradestrategy#executive-summary.
11 Huon Curtis, Samantha Hoffman, and Gatra Priyandita “Australian views on the Indo-Pacific Economic
Framework”, ASPI Strategic Insights, 171, July 2022, https://ad-aspi.s3.ap-southeast-2.amazonaws.com/202207/Australian%20views%20on%20the%20IPEF_0.pdf?VersionId=i5uDFFh3AJOPG8a5rphC0rkXakarNeQs
12 Ibid.
13 op. cit.
14 op. cit.
15 op. cit.

19

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

extend to restrictions on government procurement programmes acting as industry development
programmes.16 Given the US’s own ‘Buy America’ procurement provisions, such concerns seem
misplaced.
There is broader support for Pillar 2’s objectives. In the wake of the COVID-19 pandemic and China’s
economic coercion of Australia, the opportunity to address Australian supply chain vulnerabilities
is embraced.17 Moreover, the ALP government’s election platform included rebuilding the domestic
manufacturing base, towards which end, several subsidies have already been developed. And asother nations look to reduce their own supply chain vulnerabilities, substantial opportunities are
emerging for Australia to play a key role, notably in the mining and production of critical minerals.
Therefore, Pillar 2 builds on existing momentum and will complement other initiatives such as the
India-Japan-Australia Supply Chain Resilience Initiative.18
However, in its submission to DFAT’s stakeholder consultations, the Australian Fair Trade &Investment Network (AFTINET) expressed concerns that the US goal of ‘decoupling’ from China will
be expressed through the IPEF in ways that could negatively affect partner countries, including
Australia. Moreover, the ACTU recommends that companies in IPEF countries be obliged toundertake human rights due diligence investigations to access any Pillar 2 benefits. In this light,
the Pillar 2 deal struck at Detroit19 was positively received in Australia and seemed to push theright political buttons in terms of keeping all stakeholders on board. The establishment of threestructures to oversee implementation20 will bring focus and engagement, if implemented in goodfaith by all parties. Moreover, the Australia-Republic of Korea joint initiative to boost IPEF partners’
capacities for identifying, monitoring, and managing critical supply chain vulnerabilities, gives
practical expression to Pillar 2’s objectives.21
Finally, Pillar 4 is not controversial in Australia, since the country has long advocated for a good
governance agenda and has implemented various development assistance projects towards thisend. Corruption can not only undermine Australian business participation in the region, but also
democratic norms, institutions, and the rule of law. Given this, Australian stakeholders are alignedwith the IPEF’s objective of promoting shared norms, based on common definitions and practices,
for dealing with these issues.22

16 Ibid.
17 “Vulnerable Supply Chains”, Study Report, Productivity Commission – Australian Government, 22 July
2021, https://www.pc.gov.au/inquiries/completed/supply-chains/report
18 “Joint statement on the Supply Chain Resilience Initiative by Australian, Indian and Japanese tradeministers”, Australian Government – Department of Foreign Affairs and Trade, 27 April 2021, https://www.dfat.gov.au/news/media-release/joint-statement-supply-chain-resilience-initiative-australianindian-and-japanese-trade-ministers
19 “Substantial Conclusion of Negotiations on Landmark IPEF Supply Chain Agreement”, US Departmentof Commerce, May 27 2023, https://www.commerce.gov/news/press-releases/2023/05/substantialconclusion-negotiations-landmark-ipef-supply-chain
20 An IPEF Supply Chain Council to oversee development of sector-specific action plans; an IPEF Supply
Chain Crisis Response Network to act as an emergency communications channel; and a “tripartite” IPEF
Labor Rights Advisory Board to address labour rights concerns.
21 “IPEF Supply Chains Agreement – more resilient supply chains for uncertain times”, Senator the Hon Don
Farrell, Minister for Trade and Tourism, Special Minister of State, 28 May 2023, https://www.trademinister.
gov.au/minister/don-farrell/media-release/ipef-supply-chains-agreement-more-resilient-supply-chainsuncertain-times
22 op. cit.

20

Much Ado about Something? Australia’s Views on IPEF’s Prospects

Some reflections on ratification issues and processes
Regarding concerns over the US political system and whether it might arbitrarily overturn the IPEF,
Australian negotiators note that the IPEF generally does not touch on ‘hot button’ US domestic
political issues and as such, it is not likely to be controversial. That said, the digital trade-competitioninterface is well-known to be sensitive in the US, and this may affect the construction of Pillar 1 as
well as its reception in Congress. Similarly, if an attempt is made to use Pillar 3 to grant access to
the US’ green subsidies via the Inflation Reduction Act (IRA), that could invite some Congressional
scrutiny.
In Australia, given the bipartisan consensus on the centrality of the Australia-US military alliance,
eventual ratification and implementation is not likely to be controversial, possibly excepting Pillar
1 – depending on what is eventually agreed. Since the Pillars are likely to be separated out andratified, potentially four ratification procedures could be required. This would be cumbersome,
but will not likely result in substantial controversy, potentially barring Pillar 1.
Case Study: Pillar 3 — Clean Economy
Australian Approaches
Recent extreme weather events, combined with the election of an ALP government facing pressure
from an independent climate activist political movement (the ‘Teals’)23 delivered a government
favourably inclined to take substantial action on decarbonisation and addressing climate change
more generally. This builds on several prior policy and regulatory pillars established by previous
governments, most significantly the Safeguard Mechanism,24 as recently reformed.
On the foreign policy front, the new government is keen to push back on Chinese diplomatic
incursions into Southeast Asia and the South Pacific. Climate change is the South Pacific Islands’
single most important foreign policy priority, and thus, being seen to take visible action to address
the issues is consequential not only for the planet but also for Australia’s regional positioning. Fiji’s
participation in the IPEF is notable in this regard. These imperatives are captured in the Australian
government’s Climate Change Action Strategy,25 which gives priority to mainstreaming climatechange mitigation into Australia’s development assistance. Other trade-related initiatives areimportant. Australia and Singapore recently concluded their ‘Green Economy’ Agreement (GEA)26.

23 Sam Hawley and Stephen Smiley, “Who are the ‘teal independents’? Your questions answered about thecandidates fighting for some of Australia’s wealthiest electorates”, ABC News, 20 April 2022, https://www.
abc.net.au/news/2022-04-20/teal-independents-who-are-candidates-what-electorates/101000412.
Funded by billionaire climate activist Simon Holmes à Court, these Members of Parliament prioritise
ambitious action on climate issues.
24 The Safeguard Mechanism covers the 215 largest heavy industry carbon emitters, for whom an annually
declining carbon budget is set.
“Safeguard Mechanism”, Australian Government – Department of Climate Change, Energy, the Environment
andWater,
https://www.dcceew.gov.au/climate-change/emissions-reporting/national-greenhouseenergy-reporting-scheme/safeguard-mechanism#:~:text=The%20Safeguard%20Mechanism%20is%20
the,gas%20emissions%20of%20these%20facilities
25 “Climate Change Action Strategy”, Department of Foreign Affairs and Trade – Australian Government,
November 2019, https://www.dfat.gov.au/about-us/publications/climate-change-action-strategy
26 “Australia Singapore Green Economy Agreement”, Australian Government – Department of Foreign
Affairs and Trade, 18 October 2022, https://www.dfat.gov.au/sites/default/files/singapore-australia-geaofficial-text-signed.pdf

21

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

In broad outline, this has a similar foundation to IPEF’s Pillar 3, being constructed along practicaland implementation-oriented lines.27
A review of select stakeholder Parliamentary testimony on the GEA reveals broad support for
it. The bilateral institutional arrangements are seen to bring focus and certainty to private
sector exchanges in relation to the rapidly evolving regional decarbonisation landscape and theregulatory, as well as business uncertainties this gives rise to.28 Moreover, Australia can learn
from Singapore in some areas, notably the adoption of international reporting standards andframeworks in relation to financial disclosure, potentially unlocking environmental, social andgovernance (ESG) funds Australian companies do not currently have access to.29 Similarly, the twoparties – both IPEF members – could use the Agreement to develop linked carbon offset markets, inclose collaboration with regulators and stakeholders, to pioneer Article 6 of the Paris Agreement30
carbon trading mechanisms.31 Similarly, the Hydrogen Council sees the GEA as an opportunity tointernationalise the emerging Australian hydrogen certification scheme, or Guarantee of Origin,
thereby facilitating export of green hydrogen produced in Australia.32
Still, the GEA is not without its critics, with one stakeholder observing that it runs the risk of adding
to the ‘noodle bowl’ of trade agreements already in place whilst not adding additional value giventhat other forums are pioneering most of the issues covered by the GEA.33 In this regard, one
stakeholder argued that other forums such as the Group of Seven (G7) and the OECD are likely
to result in more consequential outcomes than what the IPEF is likely to produce vis-a-vis Pillar 3.
27 The overarching purpose is to promote cooperation in seven targeted areas of common interest toadvance economic growth whilst transitioning to net zero emissions. These are:
1.
2.
3.
4.
5.
6.
7.

Trade and investment
Standards and conformance
Green and transition finance
Carbon markets
Clean energy decarbonisation and technology
Skills and capabilities for green growth
Engagements and partnerships, especially with the private sector.

Annex A of the Australia Singapore Green Economy Agreement contains a list of joint initiatives meant
to give practical expression to these cooperation objectives, with the implementation status of each
initiative also provided.
28 “Singapore-Australia Green Economy Agreement Submission”, Business Council of Australia, 27 January2022, https://www.dfat.gov.au/sites/default/files/singapore-gea-submission-business-council-australia.
pdf;

29
30

31
32
33

22

“Singapore-Australia Green Economy Agreement: Export Council of Australia Submission”, Export Councilof Australia, 31 January 2022, https://www.dfat.gov.au/sites/default/files/singapore-gea-submissionexport-council-australia.pdf“Singapore-Australia Green Economy Agreement Submission”, Carbon Disclosure Project, n.d, https://www.dfat.gov.au/sites/default/files/singapore-gea-submission-carbon-disclosure-project.pdf“Article 6 acknowledges that countries can pursue voluntary cooperation in the implementation of their
Nationally Determined Contributions to allow for higher mitigation ambition and to promote sustainable
development.” See Alexandra Soezer, “What is Article 6 of the Paris Agreement, and why is it important?”,
United Nations Development Programme, 9 November 2022, https://www.undp.org/energy/blog/whatarticle-6-paris-agreement-and-why-it-important#:~:text=Article%206%20acknowledges%20that%20
countries,and%20to%20promote%20sustainable%20development
op. cit.
Australian Hydrogen Council, Letter to Kathryn Campbell AO CSC, Secretary Department of Foreign
Affairs and Trade, 20 December 2021.
“Singapore Green Economy Agreement: Submission to the Department of Foreign Affairs and Trade”,
Australian Chamber of Commerce and Industry, January 2022, https://www.dfat.gov.au/sites/default/
files/singapore-gea-submission-acci.pdf

Much Ado about Something? Australia’s Views on IPEF’s Prospects

Nonetheless, the Australian government’s ambition is for the GEA to serve as the template for
the IPEF’s Clean Energy Pillar. In this regard, Australian negotiators see Pillar 3’s outcome as
being establishment of cooperative frameworks, using standards development to give content.
Subsequent work programmes would lead to concrete activities including the development ofspecific standards, with countries’ participation motivated by the desire to attract investments
into decarbonisation initiatives. There will be substantial crossover with Pillar 2, for example
that Pillar’s hydrogen initiative. An example of concrete activities might be a clean economy
investment conference, designed to lead to investment pledges. Similarly, Australia is pioneering
standards development in key low-carbon technologies. It is far down the track in designing ahydrogen guarantee of origin and moving towards standardisation of carbon emission accounting
frameworks.
If the IPEF members were to adopt Australian designs, then Australia would have a first-moveradvantage: a potential ‘Canberra effect’.
IssuesFor trade and investment to flow smoothly in relation to clean energy products, common carbon
emissions accounting approaches are required. As per the Paris Agreement, developed countries
are required to abate their greenhouse gas emissions at a faster pace than developing countries,
with the latter being accorded ‘Common but Differentiated Responsibilities’.34 This builds on andreplaces the 1997 Kyoto Protocol,35 which exempted developing countries from implementing
greenhouse gas (GHG) emissions abatement.36 Therefore, it is generally true that developed
countries, such as Australia, are substantially ahead of developing countries in measuring
GHG emissions, including through the operation of value chains. Moreover, to the extent thatdeveloped countries have national approaches to the measurement of GHG emissions along value
chains, or embedded emissions accounting –Australia does not have one – each has its own design
and measurement problems. By contrast, developing countries are further behind in measuring
carbon emissions, never mind accounting for them through value chains. This raises the premiumon developing common approaches, although it does not make it easier. In addition, it is notclear what role the IPEF might play in this relative to multilateral forums, particularly the OECD,
which is already quite far down the track with developing its Inclusive Forum on Carbon Mitigation
Approaches,37 for which the agenda seems to be similarly framed to the IPEF’s Pillar 3.
As the OECD’s Inclusive Forum reiterates, countries are pursuing both priced and non-priced
approaches to carbon mitigation, a broad divergence that is consistent with the Paris Agreement.
However, as developed countries start to develop and implement Border Carbon Adjustment
Measures (BCAs) to minimise potential carbon leakage, with these schemes based on carbon pricedifferentials, developing country movements towards adopting carbon mitigation policies becomes
more complicated. In fact, to the extent that they rely on exports from carbon-intensive industries

34 “The Explainer: The Paris Agreement”, United Nations Framework Convention on Climate Change, 26February 2021, https://unfccc.int/blog/the-explainer-the-paris-agreement
35 “KYOTO PROTOCOL TO THE UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE CHANGE”, United
Nations Framework Convention on Climate Change, 1998, https://unfccc.int/resource/docs/convkp/kpeng.
pdf
36 “Marking the Kyoto Protocol’s 25th anniversary”, United Nations, https://www.un.org/en/climatechange/
marking-kyoto-protocol%E2%80%99s-25th-anniversary
37 “Inclusive Forum on Carbon Mitigation Approaches”, Organisation for Economic Co-operation andDevelopment, https://www.oecd.org/climate-change/inclusive-forum-on-carbon-mitigation-approaches/

23

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

to developed countries implementing BCAs, developing countries are in effect being pushed toadopt domestic carbon pricing and at levels like their developed country trading partners. This
raises the tricky question: Given the core ‘common but differentiated responsibilities’ principle
embedded in the Paris Agreement process, should this be a priority for developing countries? It
will be interesting to see if, and if so how, these dynamics might play out in the IPEF.
Overall, these dynamics raise the premium on adopting regulatory best practice, forcing the issue
up developing countries’ domestic policy agendas. That raises the bar on their expectations,particularly for the “policy reforms for investment nexus” at the heart of the IPEF’s construction.

Conclusion
Clearly, the IPEF is not like the FTAs traditionally negotiated by IPEF partners, whether developedor developing, although it does contain elements of old and new. This gives rise to a complex
negotiation dynamic, but one not likely to seriously threaten ultimate success, given the emphasison establishing cooperative frameworks rather than binding market access arrangements subject
to dispute settlement. For Australia, it offers the additional benefit of keeping the US engaged in
the region via negotiation of economic arrangements, and as such is welcomed. That said, certain
issues under negotiation will be closely scrutinised by civil society groups as well as businessorganisations, albeit their motivations and concerns differ substantially. However, the level ofbusiness interest in the IPEF appears to be lower than for the traditional deep FTAs pursued byAustralia in the past. Overall, given the relative lack of controversy, the likely piecemeal adoptionof Pillars as they are concluded, and cross-party support for keeping the US engaged in regional
processes, ratification procedures are unlikely to be controversial. It only remains to be seen what
the content of the outcomes will be.

24Much Ado about Something? Australia’s Views on IPEF’s Prospects

About the author
Professor Peter DRAPER is Professor and Executive Director of the Institute for International
Trade (IIT) in the Faculty of the Professions, University of Adelaide, Australia. He holds a Jean
Monnet Chair in Trade and Environment and directs the IIT’s Jean Monet Centre in Trade andGlobal Affairs. He is also Deputy Dean – International – of the Faculty of Arts, Business, Law, andEconomics at the University of Adelaide.
Professor Draper is a Board member of the Australian Services Roundtable, and member of theSouth Australia Committee of the Australia-India Chamber of Commerce. He is a member ofthe Board of Trustees of the International Chamber of Commerce’s Research Foundation; nonresident senior fellow of the Brussels-based European Centre for International Political Economy;
Associated Researcher at the German Development Institute (DIE); and a Board member of theAustralian Services Roundtable. For ten years he was, respectively, member, chair, vice chair, andco-chair of the World Economic Forum’s Global Future Council on the Global Trade and FDI system.
Professor Draper was also a Senior Research Fellow at the South African Institute of International
Affairs. In South Africa’s national Department of Trade and Industry he was head of bilateral
economic relations (East Asia then Mercosur), and head of the economic analysis and research
unit in the Department’s International Trade and Economic Development Division. Prior to that he
was an academic teaching economic history and political economy and headed the Departmentof Economics and Economic History at the then University of Durban-Westville (now Universityof KwaZulu-Natal). He is a recipient of an honorary Doctorate degree from the Friedrich-SchillerUniversity in Jena, Germany.

25

The IPEF: Japan’s Economic Realism and Approach toIndo-Pacific Engagement, Resilience, and Rule-Setting

The IPEF: Japan’s Economic Realism andApproach to Indo-Pacific Engagement,
Resilience, and Rule-Setting
Stephen NAGY

Japan has wedded its Free and Open Indo-Pacific (FOIP) Vision to various initiatives, including
the Indo-Pacific Economic Framework (IPEF), to embed itself in the regional political economy.
However, several factors such as COVID-19, geopolitics, policy choice, and costs are shaping
Japan’s engagement. The IPEF is an inclusive agenda that sets rules and lays the foundation for theAmerican-led economic framework, anchoring the United States (US) in the region. It should beviewed through several initiatives, including the Resilient Supply Chain Initiative (RSCI), Data Free
Flow with Trust (DFFT), and the Japan-European Union (EU) Economic Partnership Agreement (EPA)
amongst others. The Japan-US alliance informs all aspects of the Indo-Pacific engagement, but
Japan has its own nuanced view of the region. Japan seeks to build resilience into the relationshipwith China through selective diversification and economic engagement while rejecting zero-sum
approaches, decoupling and containment policies toward the world’s second largest economy.

27

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Introduction
Japan’s interest in the Indo-Pacific Economic Framework for Prosperity (IPEF) stems from its
strategic priorities to maintain economic growth and economic security in the region. These
strategic priorities are based on two realities.
First, the economic relationship between Japan and China. In 2021, bilateral trade relations
reached a record high of US$391.4 billion (S$524.9 billion) for the first time in 10 years since 2011,
according to the Japan External Trade Organization (JETRO).1 Chinese state-run newspapers like
China Daily and Global Times highlighted the fact that Japan and China are not only neighbours but
also inseparable economic partners,2 with more than 30,000 Japanese companies active in China.3
Second, despite China’s disapproval of Japan’s involvement in the IPEF, which China views as posing
risks to Japan’s economic and trade cooperation4 not only with China but also with the United States(US), Japanese businesses hope that their participation will lure the US back to the Comprehensive
and Progressive Agreement for Trans-Pacific Partnership (CPTPP)5 or a Trans-Pacific Partnership(TPP) 2.0 led by the US. According to Japan’s Foreign Minister Yoshimasa Hayashi, it is the US thatshaped the TPP into its current form of strategic importance and therefore, the US should returnto the broad cross-Pacific free trade agreement.6
To achieve these strategic priorities, the Kishida administration is practising economic realism,
which suggests that the maintenance of the seikei bunri (separation of politics and economics)
relationship with China at the highest levels of government seems unlikely.7 The use of nationalism
in both China and Japan to consolidate political support for the current leadership makes it difficultfor political leaders to return to conducting bilateral relations with a singularly economic focus.8
This shift is based on a growing track record of economic coercion,9 supply chain disruptions,10

Kenji Munekane and Rei Kobayashi, Japan External Trade Organization, Japan-China trade in 2021 hits record
high for first time in 10 years since 2011, 25 March 2022, https://www.jetro.go.jp/biz/areareports/2022/
ef313e747ccd01d8.html
2 Yang Bojiang, “Build Japan-China relations for next 50 years”, China Daily, 26 September 2022, https://www.chinadaily.com.cn/a/202209/26/WS6330dfd6a310fd2b29e799b6_3.html
3 Zhang Wei, “Japan’s proposed export controls on semiconductors to disrupt supply chain, undermine
economic order”, Global Times, 29 April 2023, https://www.globaltimes.cn/page/202304/1289973.shtml
4 Yu Hailong, “Japan’s embrace of IPEF brings no benefits and only risks”, Global Times, 26 May 2022, https://www.globaltimes.cn/page/202205/1266648.shtml
5 Rumi Aoyama, “Will Tokyo’s IPEF membership mix with Japan–China relations?”, East Asia Forum, 14 July
2022, https://www.eastasiaforum.org/2022/07/14/will-tokyos-ipef-membership-mix-with-japan-chinarelations/
6 Sayumi Take, “US should be at center of CPTPP, Japanese foreign minister says,” Nikkei Asia, 22 October
2022,
https://asia.nikkei.com/Politics/International-relations/Indo-Pacific/U.S.-should-be-at-center-ofCPTPP-Japanese-foreign-minister-says
7 Stephen Nagy, ‘Balancing Trade and Security Relationships in the Asia Pacific: The Advent of a Trilateral
Seikei Bunri Relationship between Japan, China, and the US’, Journal of Asian Politics & History, no.6 (April2015): 5-24.
8 Ibid., 21.
9 “China’s economic coercion: Evolution, characteristics and countermeasures”, Think Tank European
Parliament, 15 November 2022, https://www.europarl.europa.eu/thinktank/en/document/EPRS_
BRI(2022)738219
10 Christina Lai, ‘Acting one way and talking another: China’s coercive economic diplomacy in East Asia andbeyond’, The Pacific Review, Vol.31, no.2 (July 2017): 169-187.
1

28

The IPEF: Japan’s Economic Realism and Approach toIndo-Pacific Engagement, Resilience, and Rule-Setting

weaponisation,11 and erratic policy decisions in China during the COVID-19 pandemic.12 It is also
related to the energy and food security-related issues that emerged following Russia’s invasion of
Ukraine on 24 February 2022.13
For Tokyo, the IPEF represents a new era of economic engagement driven by concerns about
economic security, resilience, and the prioritisation of rule-setting in the areas of trade, supply
chains, clean economy and fair economy.14 Through the IPEF, Japan hopes to inculcate the US
into the Indo-Pacific region, build shared institutions and norms, and strengthen its economic
synergies with the region for bolstering its economic security and resilience vis-à-vis China whilestaying economically engaged with the latter. As a US-led, China-excluding coalition, the IPEF could
also have a major impact on the Japanese economy by encouraging member countries to leave or
decrease their economic reliance on China.15
This paper examines Japan’s strategic priorities pertaining to the IPEF, their connection to Japan’s
relationship with China and the US, and the actions being taken for successful implementation of
the IPEF.

Why does the IPEF matter to Japan?
Japan’s interests in the IPEF can be traced back to its long-standing commitments to free tradeand open markets. Since it became a major trading nation in the late 1800s, with limited natural
resources, Japan has relied heavily on international trade to fuel its economic growth.16 Thisreliance has necessitated a rules-based order and access to resources and consumer markets.
With the US stepping away from the TPP in January 2017, Japan and other TPP partners were left
standing at the trade altar. Even though the possibility was unlikely, many had hoped that the US
would return to the TPP. In an exclusive interview with CNBC and Broadcast Satellite Japan, former
Prime Minister Shinzo Abe said, “Since the US understands the importance of having free and fairtrade rules, it is our wish, by all means our strong wish is that the US will return to TPP.”17
The Biden administration, understanding that advocating for joining the CPTPP was a non-starterfor the US due to domestic political divisions, launched the IPEF in May 2022 with 14 diverse
partner countries representing 40 per cent of global Gross Domestic Product (GDP) and 28 per cent

11 Dechun Zhang and Ahmed Jamali, ‘China’s Weaponized Vaccine: Intertwining Between International andDomestic Politics’, East Asia, Vol.39 (January 2022): 279-296.
12 Arendse Huld, “Are China Port Closures to Blame for Continued Supply Chain Disruption?”, China Briefing,
25 January 2022, https://www.china-briefing.com/news/china-port-closures-to-blame-for-continuedsupply-chain-disruption/
13 Xi-Yin Zhou, Gang Lu, Zhicheng Xu, Xiaoqing Yan, Soon-Thiam Khu, Junfeng Yang and Jian Zhao, “Influenceof Russia-Ukraine War on the Global Energy and Food Security”, Science Direct, Vol.188 (January 2023),
https://www.sciencedirect.com/science/article/abs/pii/S0921344922004906
14 “Indo-Pacific Economic Framework for Prosperity (IPEF) Ministerial”, Ministry of Foreign Affairs of Japan,
27 May 2023, https://www.mofa.go.jp/press/release/press4e_003269.html
15 Kazuma Kishikawa and Kensuke Hosoda, “Impact of Indo-Pacific Economic Framework (IPEF) on
Japan”, Daiwa Institute of Research, 1 December 2022, https://www.dir.co.jp/english/research/report/
analysis/20221201_023441.html
16 Yasuo Masai, Shigeki Hijino and Gil Latz, “Economy of Japan”, Encyclopedia Britannica, 14 March 2023,
https://www.britannica.com/topic/economy-of-Japan
17 Akiko Fujita, “Japanese PM Abe says it is his ‘strong wish’ that the US returns to the TPP”, CNBC, 17
May 2017, https://www.cnbc.com/2017/05/15/japanese-pm-abe-says-it-is-his-strong-wish-that-the-usreturns-to-the-tpp.html

29

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

of global goods and services.18 Despite not discussing market access,19 the IPEF offers numerous
advantages to its members that distinguish it from traditional trade agreements. These include theability for IPEF participants to choose from a range of initiatives falling under the IPEF umbrella, as
well as its focus on trade, supply chains, the clean economy, and a fair economy. The emphasis onthese areas aims to promote sustainable economic growth and development for all participating
countries.20 The à la carte approach to the IPEF membership ensures that states with different
politico-economic systems and at different levels of development can join the Framework without
being compelled to adopt all parts of the initiative. This feature contributes to the IPEF’s inclusivity.
The four pillars of the IPEF are core foundations for stable and rules-based growth in the region
that will translate into a clean, green, resilient, technological, and fair economy.
The Trade Pillar21 stresses “trade and technology policies that advance a broad set of objectives
and that fuel economic activities and generate investments; promote resilient, sustainable, andinclusive economic growth and development; and benefit workers, consumers, indigenous peoples,
local communities, women, and micro-, small-, and medium-sized enterprises (MSMEs).” The Pillar
links the growing theme of economic security to technology and development to resilience. In
the former, Tokyo sees its economic security related to being at the forefront of technologicaldevelopment and also in setting of rules for inculcating these technologies into the Indo-Pacific’s
economic growth. In the latter, the Pillar links development to building resilience into economies
reducing their vulnerabilities to economic destabilisation from financial crises, natural disasters,
supply chain breakdowns, or economic coercion by other states.
The Supply Chains Pillar22 aims to “ensure secure and resilient supply chains and to minimise
disruptions and vulnerabilities, which may require evolving our public institutions and improving
coordination with the private sector. Recognising the different economic characteristics andcapacity constraints of Members, we seek to coordinate crisis response measures and to expand
cooperation to better prepare for, and mitigate the effects of, disruptions to better ensure business
continuity and improve logistics and connectivity, particularly in critical sectors.”
The realisation of acute vulnerabilities of an overconcentration of supply chains in one country is
related to economically coercive behaviour, conflict, and erratic policy choices in China over the
COVID-19 pandemic. With regard to economic coercion,23 Japan, South Korea, Australia, Canada,

18 “FACT SHEET: In Asia, President Biden and a Dozen Indo-Pacific Partners Launch the Indo-Pacific Economic
Framework for Prosperity”, The White House, 23 May 2022, https://www.whitehouse.gov/briefing-room/
statements-releases/2022/05/23/fact-sheet-in-asia-president-biden-and-a-dozen-indo-pacific-partnerslaunch-the-indo-pacific-economic-framework-for-prosperity/
19 Aidan Arasasingham and Emily Benson, “The IPEF gains momentum but lacks market access”, East Asia
Forum, 30 June 2022, https://www.eastasiaforum.org/2022/06/30/the-ipef-gains-momentum-but-lacksmarket-access/20 “Statement on Indo-Pacific Economic Framework for Prosperity”, The White House, 23 May 2022, https://www.whitehouse.gov/briefing-room/statements-releases/2022/05/23/statement-on-indo-pacificeconomic-framework-for-prosperity/
21 “Pillar I – Trade: Ministerial Text for Trade Pillar of the Indo-Pacific Economic Framework for Prosperity”,
US Department of Commerce, https://ustr.gov/sites/default/files/2022-09/IPEF%20Pillar%201%20
Ministerial%20Text%20(Trade%20Pillar)_FOR%20PUBLIC%20RELEASE%20(1).pdf
22 “Pillar II – Supply Chains: Ministerial Text for Supply Chains Pillar of the Indo-Pacific Economic Frameworkfor Prosperity”, US Department of Commerce, https://www.commerce.gov/sites/default/files/2022-09/
Pillar-II-Ministerial-Statement.pdf
23 Duanjie Chen, “Countering China’s Economic Coercion”, Macdonald-Laurier Institute, 5 September 2019,https://macdonaldlaurier.ca/countering-chinas-economic-coercion-new-mli-report-duanjie-chen/

30

The IPEF: Japan’s Economic Realism and Approach toIndo-Pacific Engagement, Resilience, and Rule-Setting

Taiwan24 and other states have experienced coercion by China,25 and see selective diversificationof supply chains26 as being essential for building resilience into their economies.
Conflict – current and possible in the case of Taiwan – also weighs heavily in the minds of Japan andother IPEF members. The downstream effects of Russia’s invasion of Ukraine on food security27 andenergy security have amplified concerns about global supply chains with Prime Minister Kishida
Fumio stressing “today’s Ukraine could be tomorrow’s East Asia”,28 an indirectly labelled concern
about China’s assertive behaviour and militarisation in the region as threats towards Taiwan. The
supply chains disruptions experienced after the COVID-19 pandemic and those associated with
China’s Dynamic Zero COVID-19 policies29 have also led to the realisation that politically-based
policy choices within China can destabilise supply chains prompting the IPEF members to diversify,build resilience and de-risk from volatile policy environments.
The Clean Economy Pillar30 aims to promote “clean energy transitions, scaling and reducing thecost of innovative technologies, and advancing low greenhouse gas emissions in priority sectors.
Specifically, the proposal seeks to create a framework through which [the] IPEF [p]artners canidentify new opportunities and advance existing efforts in shared areas of interest to promote
the resiliency, innovation, sustainability, and security of a clean economy and to support ongoingcollaboration among IPEF Partners and stakeholders.” The Pillar recognises that sustainable andenvironmentally friendly growth is a prerequisite for developed and developing nations with manyof the latter (for example, the Pacific Island countries) facing existential climate change challenges.31

24 Ja Chong, David Huang and Wen-Chin Wu, “Stand up like a Taiwanese!: PRC coercion and public
preferences for resistance”, Japanese Journal of Political Science, 24 March 2023, https://www.
cambridge.org/core/journals/japanese-journal-of-political-science/article/stand-up-like-a-taiwaneseprc-coercion-and-public-preferences-for-resistance/845D4D81B481C7E141771AF00519F941?utm_
source=hootsuite&utm_medium=twitter&utm_campaign=JJP_Mar23
25 Fergus Hunter, Daria Impiombat, Yvonne Lau, Adam Triggs, Albert Zhang and Urmika Deb, “Countering
China’s coercive diplomacy: prioritising economic security, sovereignty and the rules-based order”,
Australian Strategic Policy Institute, 22 February 2023, https://www.aspi.org.au/report/counteringchinas-coercive-diplomacy
26 Stephen Nagy and Hanh Nguyen, ‘Asymmetric Interdependence and the Selective Diversification of
Supply Chains’, Journal of Contemporary Eastern Asia, Vol.20, no.2 (2021).
27 Caitlin Welsh, “Russia, Ukraine, and Global Food Security: A One-Year Assessment”, Center for Strategic
and International Studies, 24 February 2023, https://www.csis.org/analysis/russia-ukraine-and-globalfood-security-one-year-assessment
28 “War in Ukraine has bolstered Japan’s support for a stronger army”, The Economist, 15 September 2022,
https://www.economist.com/asia/2022/09/15/war-in-ukraine-has-bolstered-japans-support-for-astronger-army?utm_medium=social-media.content.np&utm_source=twitter&utm_campaign=editorialsocial&utm_content=discovery.content
29 John Manners-Bell, “China’s zero Covid policy still causing supply chains chaos”, Foundation for Future
Supply Chain, https://futuresupplychains.org/chinas-zero-covid-policy-still-causing-supply-chains-chaos/
30 “Pillar III – Clean Economy: Ministerial Statement for Pillar III of the Indo-Pacific Economic Framework for
Prosperity”, US Department of Commerce, https://www.commerce.gov/sites/default/files/2022-09/PillarIII-Ministerial-Statement.pdf
31 Busani Bafana, “Climate Change is No ‘Future Scenario’ for Pacific Island Nations; Climate Change is ‘Real’”,Inter Press Service, 15 November 2022, https://www.ipsnews.net/2022/11/climate-change-is-no-futurescenario-for-pacific-island-nations-climate-change-is-real/?utm_source=rss&utm_medium=rss&utm_
campaign=climate-change-is-no-future-scenario-for-pacific-island-nations-climate-change-is-real

31

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Lastly, the Fair Economy Pillar32 recognises that “fairness, inclusiveness, transparency, the ruleof law, and accountability are essential to improving the investment climate, ensuring sharedprosperity, and promoting labo[u]r rights based on the ILO Declaration on Fundamental Principles
and Rights at Work, which the Partners have adopted.” Overlapping with the labour componentsof the CPTPP,33 the Pillar aims to create a level playing field for the IPEF members, for ensuring
economies compete on mutual understanding of labour rights and the necessity to invest in
greener and labour-friendly economic practices.

Multi-layered approach to Indo-Pacific economic engagement
Japan’s support for this initiative was unsurprising given its abiding interest in promoting a rulebased order through the Free and Open Indo-Pacific Vision (FOIP)34 since its inception in 2017.
Recently, Japan has updated the FOIP through its “New Plan for a Free and Open Indo-Pacific(FOIP)”,35 which includes enhancing the connectivity of the Indo-Pacific region and fostering
the region into a place that values freedom and rule of law, is free from force or coercion, andprosperous.
The Economic Partnership Division under the Ministry of Economy, Trade and Industry (METI) of
Japan described the IPEF as a new approach to regional collaboration, where diverse countries
from the region work together to create a balanced package between rules and cooperation,and tackles contemporary issues such as digital economy, strengthening supply chain resilience,
decarbonisation and clean energy. As such, Japan will cooperate with individual countries to realiseinnovative, inclusive, and sustainable economic growth in the Indo-Pacific region.36
A key driver of Japan’s interests in the IPEF is the growth of the digital economy. Tokyo views thedigital economy rapidly becoming a key contributor of economic growth37 and job creation.38 It
also sees the global digital economy as underregulated and believes the IPEF will be useful inallowing Japan, alongside like-minded members within the IPEF, to be the first movers in standardsetting for laying ground rules on operations of the digital economy, the relationships of data with

32 “Pillar IV – Fair Economy: Ministerial Statement for Pillar IV of the Indo-Pacific Economic Framework for
Prosperity”, US Department of Commerce, https://www.commerce.gov/sites/default/files/2022-09/PillarIV-Ministerial-Statement.pdf
33 “Consolidated TPP Text – Chapter 19 – Labour”, Government of Canada, https://www.international.gc.ca/
trade-commerce/trade-agreements-accords-commerciaux/agr-acc/tpp-ptp/text-texte/19.aspx?lang=eng
34 “The Future of the Indo-Pacific: Japan’s New Plan for a Free and Open Indo-Pacific – Together with India,
as an Indispensable Partner”, Speech by Kishida Fumio, Prime Minister of Japan, 20 March 2023, https://www.mofa.go.jp/files/100477739.pdf
35 “New Plan for a Free and Open Indo-Pacific (FOIP)”, Ministry of Foreign Affairs of Japan, March 2023,
https://www.mofa.go.jp/files/100484990.pdf
36 “Basic Economic Knowledge: The Indo-Pacific Economic Framework (IPEF), a New Framework for
Economic Collaboration”, Ministry of Economy, Trade and Industry, https://www.meti.go.jp/english/
mobile/2022/20221107001en.html
37 Piyaporn Sodsriwiboon, Purva Khera and Rui Xu, “Japan’s Digitalization Can Add Momentum for Economic
Rebound”, International Monetary Fund, 1 June 2022, https://www.imf.org/en/News/Articles/2022/05/31/
CF-Japan-Digitalization-Can-Add-Momentum-for-Economic-Rebound38 “How Japan can make digital ‘big moves’ to drive growth and productivity”, McKinsey Digital, 24 February2021,
https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/how-japan-can-makedigital-big-moves-to-drive-growth-and-productivity

32

The IPEF: Japan’s Economic Realism and Approach toIndo-Pacific Engagement, Resilience, and Rule-Setting

data protection, and between government and citizens’ data.39 Japan recognises the importanceof the digital economy and is keen to ensure that it can fully participate in this growing sector.
Another key driver of Japan’s interests in the IPEF is the increasing importance of data in the
global economy. With data becoming a key asset in the global economy,40 and the ability to collect,analyse, and utilise data becoming increasingly important for businesses and governments alike,
Japan is committed to fully participating in the global data economy41 while maximising the benefits
that data can provide.
Essentially, by participating in the IPEF, Japan aims to promote the digital economy and ensure thefree flow of data across borders. This goal encompasses the advancement of digital infrastructure,such as 5G networks42 and data centres,43 as well as the development of digital technologies andservices.44

Japan’s strategic priorities
Japan has for long been a regional economic power. However, its economic growth has slowed
considerably in the current century, particularly in the last decade, with the economy contracting
sharply after the COVID-19 pandemic.45 To sustain its economic position and achieve sustainableeconomic growth, Tokyo has sought to increase economic ties with other countries in theregion through multiple trade agreements and economic partnerships such as the Regional
Comprehensive Economic Partnership (RCEP), the CPTPP, and the Japan-European Union (EU)
Economic Partnership. The US has been noticeably absent from all these agreements. The IPEF,
tabled by the US, aims to promote economic cooperation in the Indo-Pacific, as well as advanceobjectives that are congruent with Japan’s economic and national security interests.
A major strategic priority for Japan is maintaining its security in the region. Japan is geographicallyvulnerable, with China to the west and North Korea to the north. In recent years, China has
challenged the rules-based order in sea lines of communication in the South China Sea, theTaiwan Strait, and the East China Sea.46 Collectively, these critical arteries transport approximately

39 Clete Willems and Niels Graham, “TTC, IPEF, and the road to an Indo-Pacific trade deal: A new model”,
Atlantic Council, 27 September 2022, https://www.atlanticcouncil.org/in-depth-research-reports/issuebrief/ttc-ipef-and-the-road-to-an-indo-pacific-trade-deal-a-new-model/
40 “A Nation’s Drive Towards a Data-first Digital Society Future”, Japan External Trade Organization, https://www.jetro.go.jp/en/invest/insights/japan-insight/nation-drive-datafirst-digital-society-future.html
41 Kazuaki Nagata, “Japan looks to enable cross-border data flows at G7 tech meeting”, The Japan Times,
28 April 2023, https://www.japantimes.co.jp/news/2023/04/28/business/g7-tech-ministers-crossborderdata/
42 “Japan, U.S. to agree to promote open 5G standards in Indo-Pacific”, The Yomiuri Shimbun, 21 May 2022,
https://japannews.yomiuri.co.jp/politics/politics-government/20220521-30476/
43 “Japan’s booming data center market draws multinationals as digitization, 5G and AI drive growth”, Japan
External Trade Organization, https://www.jetro.go.jp/en/invest/insights/japan-insight/booming-datacenter-market-draws-multinatioals.html
44 Lena Broeckaert, “Digital Transformation in Japan: Assessing business opportunities for EU SMEs”, EUJapan Center for Industrial Cooperation, https://www.eu-japan.eu/sites/default/files/publications/docs/
Digital-Transformation-Japan-Assessing-opportunities-forEU-SMEs.pdf
45 The World Bank, “GDP growth (annual %) – Japan”, https://data.worldbank.org/indicator/NY.GDP.MKTP.
KD.ZG?locations=JP
46 Stephen Nagy, “Deepening the Japan-NATO Partnership: Connecting synergies and concerns to promote
rules-based stability”, Japan Up Close, 10 February 2023, https://japanupclose.web-japan.org/policy/
p20230210_1.html

33

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

US$5.5 trillion (S$7.3 trillion) in imports and exports annually.47 They also transport critical energy
resources fuelling the Japanese, Chinese and the South Korean economies. This has led Japan toseek closer security ties with the US and other countries in the region.
Japan also prioritises enhancing regional connectivity, particularly in the Indo-Pacific region, tofacilitate trade and investment. To achieve this goal, Japan is keen on promoting the developmentof physical infrastructure,48 such as ports and airports, and digital infrastructure,49 including highspeed internet connections.
To sum up, Japan’s strategic priorities include sustaining economic growth, maintaining regional
security and the rules-based order.

Japan’s strategic priorities in relation to its relationship with China and the US
Relationship with China
Japan’s relationship with China is complex. The two countries have a history of conflict, dating backto the second Sino-Japanese War in the 1930s and 1940s.50 More recently, tensions have risenover territorial disputes in the East China Sea.51 However, Japan also has a significant economic
relationship with China, with Beijing being its largest trading partner.52 Additionally, China is also
the top trading partner for more than 120 countries.53
Japan’s engagement in the IPEF has implications for its relationship with China, given that China
is a key player in the Indo-Pacific region and is not a member of the initiative.54 This has led someto speculate that the IPEF aims to contain China’s economic influence in the region.55 Launched inTokyo, the IPEF excludes China and some of its close Southeast Asian partners such as Cambodia,
Laos, and Myanmar, not least because the IPEF is meant to counter the geo-economic rise of

47 “How Much Trade Transits the South China Sea?”, China Power, https://chinapower.csis.org/much-tradetransits-south-china-sea/
48 Anita Prakash, “Connectivity Plans in Indo-Pacific: Infrastructure for Expanded Supply Chains andResilient Growth”, ERIA Research Project Report, March 2023, https://www.eria.org/uploads/media/
Research-Project-Report/RPR-2022-19-Regional-Integration-in-Indo-Pacific%3A-Connectivity%2CCooperation%2C-and-New-Supply-Chain-Linkages/06_Ch.2-Connectivity-Plans-in-Indo-Pacific.rev.pdf
49 Jonathan Soble, “It’s time to reset Japan’s digital infrastructure”, The Japan Times, 2 August 2020, https://www.japantimes.co.jp/opinion/2020/08/02/commentary/japan-commentary/digital-infrastructurereset/
50 “Second Sino-Japanese War 1937-1945”, Encyclopedia Britannica, https://www.britannica.com/event/
Second-Sino-Japanese-War
51 Yoichiro Sato and Astha Chadha, “Understanding the Senkaku/Diaoyu Islands Dispute: Diplomatic, Legal,
and Strategic Contexts”, in Asian Territorial and Maritime Disputes: A Critical Introduction, ed. by Moises
Souza, Gregory Coutaz and Dean Karalekas (E-International Relations, 2022), 48-64.
52 “China passes US as top Japanese export buyer, topping 20%”, Nikkei Asia, 22 January 2021, https://asia.
nikkei.com/Economy/Trade/China-passes-US-as-top-Japanese-export-buyer-topping-20
53 Mark Green, “China Is the Top Trading Partner to More Than 120 Countries”, Wilson Center, 17
January2023,
https://www.wilsoncenter.org/blog-post/china-top-trading-partner-more-120countries#:~:text=China%20is%20the%20largest%20trading,like%20South%20Africa%20and%20Kenya
54 Wang Xu, “US agenda seen as no more than move to contain China”, China Daily, 2 June 2022, https://global.chinadaily.com.cn/a/202206/02/WS6297f49fa310fd2b29e605ab.html
55 Dingding Chen and Yingfan Chen, “Will IPEF Help the US Counter China?”, The Diplomat, 15 June 2022,
https://thediplomat.com/2022/06/will-ipef-help-the-us-counter-china/

34

The IPEF: Japan’s Economic Realism and Approach toIndo-Pacific Engagement, Resilience, and Rule-Setting

China.56 However, Japanese officials have denied this, stating that the initiative is open to all
countries that share its goals of promoting economic cooperation and connectivity in the region
based on a common set of transparent rules.57
Japan’s participation in the IPEF can be seen as a way to promote economic growth and regional
supply chain connectivity without over-reliance on China. Hence, the IPEF’s design aligns withJapan’s vision and targets the wider Indo-Pacific region, rather than focusing solely on Japanand China. By promoting regional connectivity through the Indo-Pacific Framework, Japan
can reduce its dependence on China and promote greater economic and political diversity inthe region. Simultaneously, Japan’s interest in the IPEF is not necessarily incompatible with its
relationship with China. Both Japan and China recognise the importance of the digital economy
and the free flow of data, and both nations are making substantial investments in these domains.58
Japan’s interest in the IPEF may provide an opportunity for greater cooperation59 between Japanand China in these areas. This can be carried out through positioning of Tokyo as a digital economy
norm-maker within the IPEF which create conditions that may shape Beijing’s digital economy
standards and regulations so that they are more in-line with IPEF members.
Relationship with the US
Japan’s relationship with the US is also important in the context of the IPEF. The US has historically
been Japan’s closest security ally, and the two countries have a strong economic relationship.
In 2022, Japan enjoyed a US$47 million (S$63 million) trade surplus with the US but registered a
US$42 million (S$56.3 million) deficit with China.60 The election of Donald Trump as US President
in 2016 had brought some uncertainty to the relationship,61 as Trump was critical of Japan’s trade
policies62 and called for Japan to pay more for its own defence.63
Despite these challenges, Japan has continued to prioritise its relationship with the US. The
two countries have a shared interest in maintaining stability in the region, and Japan sees the

56 Mohammadbagher Forough, “Born in Tokyo, Indo-Pacific Economic Framework Crawls in LA; Will it Ever
Walk?”, Institute for Security and Development Policy, 14 September 2022, https://www.isdp.eu/born-intokyo-indo-pacific-economic-framework-crawls-in-la-will-it-ever-walk/
57 “Indo-Pacific Economic Framework for Prosperity (IPEF) Ministerial”, Press Release, Ministry of Foreign
Affairs of Japan, 27 May 2023, https://www.mofa.go.jp/press/release/press4e_003269.html
58 Yi Wu, “Understanding China’s Digital Economy: Policies, Opportunities, and Challenges”, China Briefing,
11 August 2022, https://www.china-briefing.com/news/understanding-chinas-digital-economy-policiesopportunities-and-challenges/
59 “Extensive Cooperation between China and Japan in Digital Society and AI”, Science and Technology Daily,
1 November 2021, https://www.prnewswire.com/news-releases/extensive-cooperation-between-chinaand-japan-in-digital-society-and-ai-301413030.html
60 “Japan Posts Record ¥20 Trillion Trade Deficit in 2022”, Nippon, 1 February 2023, https://www.nippon.
com/en/japan-data/h01569/
61 Shimbun Akahata, “Trump victory throws uncertainty into Japan-US relations”, People’s World, 22
November 2016, https://peoplesworld.org/article/trump-victory-throws-uncertainty-into-japan-u-srelations/
62 Aurelia Mulgan, “The ‘Trump Factor’ in the US–Japan trade deal”, East Asia Forum, 13 October 2019, https://www.eastasiaforum.org/2019/10/13/the-trump-factor-in-the-us-japan-trade-deal/
63 Lara Seligman and Robbie Gramer, “Trump Asks Tokyo to Quadruple Payments for US Troops in Japan”,
Foreign Policy, 15 November 2019, https://foreignpolicy.com/2019/11/15/trump-asks-tokyo-quadruplepayments-us-troops-japan/

35

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

US as an important partner in countering China’s assertiveness.64 In addition, Japan has sought
to strengthen its economic ties with the US through initiatives such as the US-Japan Economic
Dialogue,65 which was launched in 2017.
Japan’s interest in the IPEF can be seen as a tool to promote greater economic cooperation andsupply chain connectivity with the US. The IPEF is designed to promote economic growth andregional supply chain connectivity across the Indo-Pacific region, including between Japan and theUS. By promoting greater economic cooperation and supply chain connectivity through the IPEF,
Japan can strengthen its relationship with the US and promote greater economic and politicalstability in the region. Japan’s involvement in the IPEF can be interpreted as an attempt to anchor
the US into the region through shared trade priorities.66
Overall, Japan recognises the importance of maintaining good relations with both the US andChina. The IPEF provides a framework for greater cooperation with the US and the IPEF partners
while it concurrently continues to engage with China through the RCEP.

Japan’s concrete steps to translate the IPEF into reality
Japan has taken several concrete steps to ensure the realisation of the IPEF. By way of example,
Japan has the capacity to transfer capabilities for managing and strengthening supply chains in
the manufacturing sector and infrastructure projects, making it well-suited to support sustainable
development efforts around the world.67 Japan hosts the Tokyo International Conference on African
Development (TICAD),68 which provides an open forum for stakeholders to engage in innovative
discussions related to African development programmes. Since its inception in 1993, TICAD has
made significant contributions to socio-economic development in Africa through aid grants andtechnical assistance.69 Another important initiative is the Partnership for Quality Infrastructure(PQI),70 which was launched by Japan in 2015. The PQI aims to promote high-quality infrastructuredevelopment in the region, with strong emphasis on transparency, openness, and sustainability.71
One aspect of this Partnership is the focus on quality. The PQI sets itself apart by prioritising the64 Thomas Christensen, ‘China, the US-Japan Alliance, and the Security Dilemma in East Asia’, International
Security, Vol.23, no.4 (1999): 49-80.
65 Matthew P. Goodman, “US-Japan Economic Dialogue: Two Steps Forward, More Needed”, Center for
Strategic and International Studies, 30 November 2021, https://www.csis.org/analysis/us-japan-economicdialogue-two-steps-forward-more-needed
66 Stephen Nagy, “Invigorating ASEAN-US relations: The necessity of mutual understanding and proactive
reciprocity”, Tuoi Tre News, 14 November 2022, https://tuoitrenews.vn/news/politics/20221114/
invigorating-aseanus-relations-the-necessity-of-mutual-understanding-and-proactive-reciprocity/70004.
html
67 Ibid.
68 “What’s TICAD”, Japan International Cooperation Agency, https://www.jica.go.jp/TICAD/en/ticad/whats/index.html#:~:text=Tokyo%20International%20Conference%20on%20African,leadership%20of%20
the%20Japanese%20government
69 “Three Decades of Promoting Ownership and Partnership: A Look at the History of TICAD”, Japan
International Cooperation Agency, 14 July 2022, https://www.jica.go.jp/TICAD/en/approach/special_report/news_220714.html
70 “Quality Infrastructure Investment”, Ministry of Foreign Affairs of Japan, 10 May 2023, https://www.mofa.
go.jp/files/000117998.pdf
71 Ibid.

36

The IPEF: Japan’s Economic Realism and Approach toIndo-Pacific Engagement, Resilience, and Rule-Setting

quality of investments over quantity.72 This approach ensures that investments are made with along-term perspective, taking into account the sustainable development character of the projects.73
The Government of Japan has committed to investing US$110 billion (S$148.7 billion) for quality
infrastructure investment in Asia over the next five years, in collaboration with the AsianDevelopment Bank (ADB).74 According to the Ministry of Foreign Affairs of Japan, this investment
is expected to have a catalytic effect on mobilising financial resources from private companies
around the globe to support Asia’s development needs. To this end, Japan will expand andaccelerate assistance through a range of organisations and aid tools, while also enhancing therole of the Japan Bank for International Cooperation (JBIC) and strengthening collaboration
with the ADB.75 By leveraging its expertise and resources, Japan is well-positioned to play aleadership role in promoting sustainable economic development in a multipolar Indo-Pacific.76
Furthermore, environmentally sustainable infrastructure investment initiatives can complement
the environmental initiatives associated with Pillar 3 of the IPEF.
In addition to these initiatives, Japan has sought to strengthen its economic ties with othercountries in the region through bilateral and multilateral trade agreements.77 One of the mostsignificant is the CPTPP,78 which was signed in 2018 by 11 countries, including Japan. With member
countries representing 13 per cent of the global GDP,79 the CPTPP is a landmark agreement thataims to lower trade barriers in goods and services, promote economic cooperation, and enhance
regional integration.80 It is noteworthy that Japan played a significant role in saving the TPP after
the sudden withdrawal of the US under the Trump administration.81 Japan’s efforts to revive theAgreement demonstrate its commitment to promoting free trade and economic development,even in the face of significant challenges and uncertainties.82

72 Amelia Duggan, “Japan, China and the Contest for Influence in Contemporary Asia”, Asia Pacific Foundationof Canada, 6 November 2018, https://www.asiapacific.ca/fr/blog/japan-china-and-contest-influencecontemporary-asia
73 Motoko Aizawa, ‘Sustainable development through quality infrastructure: emerging focus on quality overquantity’, Journal of Mega Infrastructure & Sustainable Development, Vol.1, no.2 (2019): 171-187.
74 “Quality Infrastructure Investment”, White Paper 2015-ODA Topics, Ministry of Foreign Affairs of Japan,
https://www.mofa.go.jp/files/000175945.pdf
75 Ibid.
76 Hiroyuki Suzuki, “Japan’s Leadership Role in a Multipolar Indo-Pacific”, Center for Strategic and International
Studies, 23 October 2020, https://www.csis.org/analysis/japans-leadership-role-multipolar-indo-pacific
77 Shin Ito, “Japan’s Critical Leadership Role on Free and Fair Trade”, Center for Strategic and International
Studies, 15 May 2018, https://www.csis.org/analysis/japans-critical-leadership-role-free-and-fair-trade
78 Aurelia Mulgan, “CPTPP a boost for Japan’s regional trade leadership”, East Asia Forum, 27 February 2018,https://www.eastasiaforum.org/2018/02/27/cptpp-a-boost-for-japans-regional-trade-leadership/
79 Jeffrey Schott, “Which countries are in the CPTPP and RCEP trade agreements and which want in?”,Peterson Institute for International Economics, 3 April 2023, https://www.piie.com/research/piie-charts/
which-countries-are-cptpp-and-rcep-trade-agreements-and-which-want
80 Ibid.
81 Terada Takashi, “How and Why Japan Has Saved the TPP: From Trump Tower to Davos”, The Asan Forum,
19 February 2018, https://theasanforum.org/how-and-why-japan-has-saved-the-tpp-from-trump-towerto-davos/
82 Robbie Gramer, “Japan Wants to Revive the Trans Pacific Partnership Even Without the US”, Foreign Policy,
24 April 2017, https://foreignpolicy.com/2017/04/24/japan-wants-to-revive-trans-pacific-partnershipeven-without-united-states-asia-trade-agreements/

37

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

The IPEF proposed by the US and the FOIP strategy introduced by Japan both aim to address China’s
growing influence in the region. China’s Belt and Road Initiative (BRI),83 a massive infrastructuredevelopment project, has been a cause for concern for many countries in the region, including
Japan84 and the US. China’s BRI has been criticised for its lack of transparency, the potential to create
debt traps85 for developing countries, and strategic implications for China’s regional influence.86
In response, the IPEF and FOIP strategies seek to provide an alternative and more transparent
approach to infrastructure development and economic integration in the region.87
The IPEF and FOIP strategies prioritise the development of quality infrastructure88 that is sustainable
and benefits local communities. This contrasts with China’s BRI, which has been criticised forfocusing on low-quality infrastructure89 that may not be sustainable in the long term.90 By focusing
on quality infrastructure, the IPEF and FOIP strategies seek to promote economic developmentthat benefits all countries in the region, rather than just China. The IPEF and FOIP strategies alsoemphasise the importance of regional connectivity and integration through the development oftransport infrastructure such as ports, airports, and highways, to facilitate trade and economic
growth. By promoting regional connectivity, the aim is to reduce barriers to trade and investment,
which can help to counter China’s growing economic influence in the region.
Furthermore, both strategies recognise the significance of regional security in promoting economic
development and connectivity. This includes promoting the rule of law, freedom of navigation,and maritime security. By enhancing regional security, the strategies seek to counter China’s
growing military assertiveness in the region and promote greater stability and cooperation among
countries in the Indo-Pacific region.

Conclusion
Japan’s interests in the IPEF are driven by its strategic priorities to maintain economic growth andsecurity in the Indo-Pacific region. Given Japan’s significant economic and security relationships
with both China and the US, its involvement in the initiative is of significance. To ensure the

83 Aurelio Insisa and Giulio Pugliese, ‘The free and open Indo-Pacific versus the belt and road: spheres ofinfluence and Sino-Japanese relations’, The Pacific Review, Vol.35, no.3 (2022): 557-585.
84 Jakob Grissler and Lars Vargö, “The BRI vs FOIP: Japan’s Countering of China’s Global Ambitions”, Institutefor Security and Development Policy, February 2021, https://www.isdp.se/publication/the-bri-vs-foipjapans-countering-of-chinas-global-ambitions/
85 Jessica Liao, “How BRI Debt Puts China at Risk”, The Diplomat, 27 October 2021, https://thediplomat.
com/2021/10/how-bri-debt-puts-china-at-risk/
86 Xue Gong, ‘The Belt & Road Initiative and China’s influence in Southeast Asia’, The Pacific Review, Vol.32,
no.4 (2019): 635-665.
87 Stephen Nagy, ‘Sino-Japanese Reactive Diplomacy as Seen Through the Interplay of the Belt Road Initiative(BRI) and the Free and Open Indo-Pacific Vision (FOIP)’, China Report: A Journal of East Asian Studies, Vol.57,
no.1 (February 2021): 7-21.
88 Mikkal Herberg, “High-Quality Infrastructure and the Free and Open Indo-Pacific Vision”, The National
Bureau of Asian Research, 17 December 2020, https://www.nbr.org/publication/high-qualityinfrastructure-and-the-free-and-open-indo-pacific-vision/
89 Teddy Ng, “China’s Belt and Road Initiative criticised for poor standards and ‘wasteful’ spending”, South
China Morning Post, 12 June 2019, https://www.scmp.com/news/china/diplomacy/article/3014214/
chinas-belt-and-road-initiative-criticised-poor-standards-and
90 Alice Politi, “How Green is China’s Belt and Road Initiative?”, Istituto Affari Internazionali, 12 April 2021,
https://www.iai.it/en/pubblicazioni/how-green-chinas-belt-and-road-initiative

38

The IPEF: Japan’s Economic Realism and Approach toIndo-Pacific Engagement, Resilience, and Rule-Setting

realisation of the IPEF, Japan has already taken several concrete steps, including the developmentof initiatives such as the Asia-Africa Growth Corridor and the Partnership for Quality Infrastructure,
as well as bilateral and multilateral trade agreements, including the CPTPP.
Although the IPEF is still in its early stages, Japan’s strong commitment to the initiative indicatesthat it is likely to maintain a leading role in the region’s economic and security landscape in theyears to come. This follows Japan’s previous success in salvaging the TPP and negotiating the
CPTPP.

39

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

About the author
Professor Stephen NAGY91 is Senior Associate Professor at the Department of Politics andInternational Studies, International Christian University in Tokyo, Japan. He is also a Distinguished
Fellow at the Asia Pacific Foundation (APF) in Canada, a Fellow at the Canadian Global Affairs
Institute, and a Visiting Fellow at the Japan Institute for International Affairs (JIIA). Professor
Nagy obtained his PhD from Waseda University in International Relations (2009) and worked at the
Department of Japanese Studies at the Chinese University of Hong Kong as an Assistant Professor
from December 2009 to January 2014. His recent research projects have included Sino-Japanese
Relations in the Wake of the 2012 Territorial Disputes: Investigating changes in Japanese Business’
trade and investment strategy in China and Non-traditional Security Cooperation in Northeast
Asia.
In conjunction with his research focus on Asian regional integration, in March 2010, he wasappointed a Senior Fellow with the Global Institute of Asian Regional Integration, Waseda
University. He is also a member of the Hong Kong Institute of Asia Pacific Studies’ International
Affairs Research Centre at the Chinese University of Hong Kong.

91 The author would like to acknowledge the editorial assistant of Ms Linh HA, MA graduate from theInternational Christian University.

40

IPEF: An Indian Perspective

IPEF: An Indian Perspective
R V ANURADHA

The Indo-Pacific Economic Framework for Prosperity (IPEF) is a predominantly United States (US)driven initiative that intertwines the economic and geopolitical strategic dimensions. The overall
strategic dimension appears to be the driving force for India’s IPEF engagement as well. The
mobilisation of inbound investments, the potential shift of production centres in critical sectors,
deeper integration with global supply chains, and access to low cost and long-term climate finance,
are some of the expectations that India has from the IPEF. But there are several challenges as well.
India has so far not acceded to labour conditionalities in any agreement pertaining to trade or
economic cooperation, the underlying concern being the potential for the use of labour standards
for protectionist purposes. The IPEF will, however, necessitate commitments on labour-related
issues across each of the IPEF Pillars. While India has stayed out of the IPEF Trade Pillar, thesubstantial conclusion of the IPEF’s Supply Chain Pillar indicates the possibility of advance noticeof changes to tariffs and curtailment of export restrictions. The IPEF’s Fair Economy Pillar is likely
to necessitate adherence to digital taxation rules – an area where India and the US had called for a
temporary truce pending the multilateral outcome of the Organisation for Economic Co-operation
and Development – Base-Erosion and Profit-Shifting (OECD-BEPS) negotiations, which is yet tomaterialise. Finally, while the IPEF may not result in enforceable dispute settlement, it is likely torely on monitoring of its rules through various institutional bodies and committees. Implicationsof this new architecture for global rules remains to be seen.

41

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Introduction
Twelve months after the launch of the Indo-Pacific Economic Framework for Prosperity (IPEF), it
has achieved “substantial conclusion of the negotiations of a first-of-its-kind international IPEF
Supply Chain Agreement”, in one of its four Pillars.1 The remaining three Pillars are Trade, Clean
Economy and Fair Economy (taxation/anti-corruption). Significant progress on each of theseremaining Pillars has also been announced, raising the expectation of conclusions by the end of
this year.
This paper reflects on what the IPEF means for India. The structure of the paper is as follows: thefirst part traces the principal drivers for engagement in the IPEF, both from the United States (US)and the Indian perspectives; the second part identifies some of the key challenges for negotiation,
anticipated outcomes as well as implementation challenges for India across its four Pillars, whiledwelling deeper into the Supply Chain Pillar, which has seen substantial conclusion; the third partis the concluding section for assessing the future evolution of the IPEF.
As of now, the IPEF can best be characterised as a fluid arrangement that is still evolving. While
the “substantial conclusion” of the Supply Chain Pillar has been announced, the publicly available
statements only summarise its broad elements, and not the draft legal texts. This assessment istherefore a guestimate on what the IPEF is all about.

The IPEF Way: Its Underlying Principles
The IPEF presents a new US vision for economic agreements, and a significant departure fromtraditional free trade agreements (FTAs). Starting with the basic premise that the Indo-Pacific is vital
to US security and prosperity, the US’ Indo-Pacific Strategy lays down other objectives including afree and open region with connections within and outside of the region, and regional resilience totransnational threats.2
The fact that the IPEF was launched in Japan signifies that, along with the US, Japan too has strong
commitment to ensure its emergence as a framework for regional security and partnership. The
joint US-Japan statement welcoming the launch of the IPEF in May 2022, highlights the “challengesof the 21st century”, including an acknowledgment of the threats to international law arisingfrom Russia’s invasion of Ukraine, reaffirmation of the United Nations (UN) as presenting thefoundation of a “rules-based international order based on shared principles and universal values”,
recognition of the Indo-Pacific as vital to the international economic order, including to respond toa challenging regional security environment, and specific reference to the need to address China’s
actions relating to coercion by “economic and other means”.3
The economic rationale for the IPEF, as exemplified in this statement, lies not only in the sharedeconomic interests of the Indo-Pacific countries (IPCs), but also in the interlinked geopoliticalinterests. In the absence of any draft legal texts, the official statements of the governments of
1

2
3

42

“Substantial Conclusion of Negotiations on Landmark IPEF Supply Chain Agreement”, US Departmentof Commerce, 27 May 2023, https://www.commerce.gov/news/press-releases/2023/05/substantialconclusion-negotiations-landmark-ipef-supply-chain“Indo-Pacific Strategy”, The White House, February 2022, https://www.whitehouse.gov/wp-content/
uploads/2022/02/U.S.-Indo-Pacific-Strategy.pdf“Japan-U.S. Joint Leaders’ Statement: Strengthening the Free and Open International Order”, The WhiteHouse, 23 May 2022, https://www.whitehouse.gov/briefing-room/statements-releases/2022/05/23/
japan-u-s-joint-leaders-statement-strengthening-the-free-and-open-international-order/

IPEF: An Indian Perspective

the IPCs perhaps offer the closest insights into the thinking and expectations from the IPEF.
For instance, in a recent speech, the United States Trade Representative (USTR) Ambassador
Katherine Tai noted that aggressive liberalisation and tariff elimination have seen benefits, buthave also resulted in significant costs and side-effects, particularly in making the world dependent
on China, shipping jobs overseas, decimating manufacturing communities, and making supply
chains dispersed and fragile.4 She also noted that the US’ key theme in its new story on trade is“strengthening our cooperation with like-minded economies to forge a fairer and more sustainable
future for our people”.5
A similar theme from the Indian side was expressed in India’s Minister for External Affairs S.
Jaishankar’s recent interview with The Economist. Noting that the India-US relationship is notjust about the trade and economic dimension, but the overall strategic dimension, he explainedthat the strategic dimension is the “centrepiece” of bilateral ties.6 He stressed on the increasing
significance of India’s emergence as a “political strategic partner” of the US in the Indo-Pacific, inthe context of “a changing world”.7 At the same time, he also emphasised the growing trade andinvestment relationship, and the close interconnectedness between technological security andeconomic security.8
The uniqueness of the IPEF
The IPEF is not an FTA. It stands out from the traditional model of an FTA on two counts: first,
it does not deal with tariff related issues; and second, it is not backed by the relevant authority
under US laws for negotiating FTAs. A recent report by the US Congressional Research Service(CRS) notes that the basis for the IPEF is that it would be an executive agreement drawn pursuant
to US executive authority, for which there is no requirement for implementing legislation under
US laws, particularly since it does not address any tariff related matters.9 Being the first of its kind,
there is scepticism even within the US on the IPEF’s scope and impact. The CRS report notes thedivergence of views and scepticism within the US on the legal basis of the IPEF and issues arisingfrom the lack of congressional debate and discussion on the IPEF.10 At the same time, it notes theview of US officials that the lack of tariff issues does not necessarily dent the IPEF’s ability to secure
market access, given its focus on facilitating trade and market access (for example, addressing
nontariff barriers, digital trade, and small and medium-sized enterprises activities).11
The IPEF cannot be seen in isolation. It is one of the several initiatives by the US to redefine andredraw economic partnership agreements. The US deviation from the traditional FTA model canbe seen in at least three other arrangements: the Americas Partnership for Economic Prosperity

4“Remarks by Ambassador Katherine Tai at American University Washington College of Law”, Office of theUnited States Trade Representative, 5 April 2023, https://ustr.gov/about-us/policy-offices/press-office/speeches-and-remarks/2023/april/remarks-ambassador-katherine-tai-american-university-washingtoncollege-law
5 Ibid.
6 “In conversation with Subrahmanyam Jaishankar | Transcript of the Economist’s interview with
Mr. Jaishankar”, by The Economist, 15 June 2023, https://www.economist.com/asia/2023/06/15/inconversation-with-subrahmanyam-jaishankar
7 Ibid.
8 Ibid.
9 “Indo-Pacific Economic Framework for Prosperity (IPEF)”, US Congressional Research Service, 10 August
2023, https://crsreports.congress.gov/product/pdf/IF/IF12373
10 Ibid.
11 Ibid.

43

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)(APEP) with Barbados, Canada, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador,
Mexico, Panama, Peru, and Uruguay, is premised on a similar series of negotiations aimed at
producing a similar set of commitments as the IPEF;12 the Minerals Security Partnership (MSP) isan initiative to bolster critical mineral supply chains with key partner countries, Australia, Canada,
Finland, France, Germany, Japan, the Republic of Korea, Sweden, the United Kingdom (UK) andthe European Union (EU),13 which India also recently joined,14 and the Trade and Technology
Cooperation (TTC) between the US and the EU aims at fostering cooperation in trans-Atlantic
trade and investment, specifically focused on emerging technologies and infrastructure.15 A recent
assessment notes that the US-EU TTC follows the approach that is very similar to the IPEF, andthe only missing element in the TTC is the IPEF’s fourth Pillar on Fair Economy dealing with anticorruption and taxation aspects.16
In this context, the IPEF can perhaps best be summarised as the US’ exploration of non-traditional
formats of economic partnership agreements, with what seems to be a higher focus on regulatory
harmonisation across a variety of aspects, including labour, environment, supply chains and clean
energy.

India and the IPEF: Challenges and Opportunities
India is an active participant in three of the four Pillars of the IPEF: Pillar II (Supply Chains), Pillar III(Clean Economy) and Pillar IV (Fair Economy). It is an observer in Pillar I on Trade. Recent reports
indicate that the decision of whether or not India would formally join the Trade Pillar continues tobe an open one.17
While there are synergies in the vision of both India and the US with regard to the strategic andeconomic partnership in the Indo-Pacific, it is important to underscore that it is a US-led initiative,
and an attempt by the US to set out a new framework of rules governing economic relationships.
Even prior to the formal launch of the IPEF, detailed stakeholder consultations were initiated by
the International Trade Administration (ITA)18 and the USTR.19 As noted by the US Chamber of

12 “FACT SHEET: President Biden Announces the Americas Partnership for Economic Prosperity”, The WhiteHouse, 8 June 2022, https://www.whitehouse.gov/briefing-room/statements-releases/2022/06/08/factsheet-president-biden-announces-the-americas-partnership-for-economic-prosperity/
13 “Minerals Security Partnership”, US Department of State, 14 June 2022, https://www.state.gov/mineralssecurity-partnership/
14 “Joint Statement from the United States and India”, The White House, 22 June 2023, https://www.
whitehouse.gov/briefing-room/statements-releases/2023/06/22/joint-statement-from-the-unitedstates-and-india/
15 “U.S.-EU Trade and Technology Council (TTC)”, US Department of State, https://www.state.gov/u-s-eutrade-and-technology-council-ttc/
16 Clete Willems and Niels Graham, “TTC, IPEF and the Road to an Indo-Pacific Trade Deal”, Atlantic Council,2022,
https://www.atlanticcouncil.org/wp-content/uploads/2022/09/TTC_IPEF_and_the_Road_to_an_
Indo-Pacific_Trade_Deal___-.pdf
17 Sidhartha, “Govt. weighs options on trade under Indo-Pacific framework”, Times of India, 3 May 2023,
https://timesofindia.indiatimes.com/business/india-business/govt-weighs-options-on-trade-under-indopacific-framework/articleshow/99946268.cms?from=mdr
18 “Notice for Comments on Indo-Pacific Economic Framework”, US International Trade Administration, 11
March 2022, (ITA-2022-0001-0001), https://www.regulations.gov/document/ITA-2022-0001-0001
19 “Fair and Resilient Trade Pillar for the Indo-Pacific Economic Framework”, USTR, 10 March 2022, (USTR
2022-0002), https://www.regulations.gov/document/USTR-2022-0002-0001/comment

44

IPEF: An Indian Perspective

Commerce, the private sector and other stakeholders are the Administration’s eyes and ears on
the ground in the Indo-Pacific when it comes to commercial and economic issues.20
The IPEF, in the Indian discourse, has so far been dominated by statements and updates from thegovernment. While Indian business chambers like the Confederation of Indian Industry (CII) andthe Federation of Indian Chamber of Commerce and Industry (FICCI) have welcomed recent FTAs
entered into by India,21 there has been no specific assessment of what the IPEF would translate
into. There appears to be an underlying assumption that commitments based on strategic interests
as determined by the Indian government would naturally benefit the realisation of economic
objectives for the private sector as well.
While voices from the Indian industry have been muted, voices of caution against India’s engagementin the IPEF have also been expressed particularly from civil society organisations (CSOs). In acommunication to the government, farmers groups and other CSOs have reportedly raised
concerns with regards the lack of adequate scrutiny of the IPEF and the need for parliamentary
scrutiny with respect to the IPEF’s implications for “India’s economic and development policy
space”.22 It also notes that the IPEF’s wide-ranging Pillars are arguably more ‘intrusive’ than FTAs,
and that even though the IPEF may not deal with market access, its emphasis on regulations andstandards, would indirectly lead to market access.23
Notwithstanding the scepticism, the government-to-government level of engagement between
the US and India, which had been gradually deepening through the US-India Comprehensive
Global and Strategic Partnership, is perhaps the strongest it has ever been. This has significant
implications for India’s engagement in the IPEF. During the 21-24 June 2023 visit by the Indian
Prime Minister to the US, the joint statement of Prime Minister Narendra Modi and President
Joe Biden touched upon a range of issues including defence, technology, clean energy transition,
deepening strategic convergence through a rules based international order, deeper trade andinvestment partnership, and significantly, India’s entry into the exclusive MSP initiated by the US.24
The statement also emphasised the IPEF as central to the interests of both countries.25 On the
trade side, both countries concluded mutually agreed solutions of six outstanding World Trade
Organization (WTO) disputes.26
As noted above, as of now, India is not a part of the IPEF’s Trade Pillar. A year ago, when India had
opted out of the IPEF’s Trade Pillar, India’s Minister for Commerce and Industry Piyush Goyal had
indicated that the reasons holding India back were the expectations of commitments under the

20 “Indo-Pacific Economic Framework: Business Recommendations”, US Chamber of Commerce, 25
February 2022, https://www.uschamber.com/international/indo-pacific-economic-framework-businessrecommendations
21 “Negotiating deeper free trade agreements”, Financial Express, 16 May 2023, https://www.financialexpress.
com/opinion/negotiating-deeper-free-trade-agreements/3088923/
22 “Farmers outfit, civil society caution government against joining IPEF trade pillar”, The Economic Times,
26 May 2023, https://economictimes.indiatimes.com/news/economy/policy/farmers-outfit-civil-societycaution-government-against-joining-ipef-trade-pillar/articleshow/100536225.cms?from=mdr
23 Ibid.
24 op. cit.
25 Ibid.
26 “India-US WTO disputes trade-off”, Ministry of Commerce and Industry, Government of India, https://commerce.gov.in/press-releases/india-us-wto-disputes-trade-off/

45

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Trade Pillar on “environment, labour, digital trade and public procurement”.27 In this context, it isimportant to underscore that labour-related issues are imbued in each of the IPEF Pillars, and not
limited to the Trade Pillar. The Ministerial Statements in May 2022 in each of the Pillars emphasise“promoting labo[u]r rights based on the ILO [International Labour Organization] Declaration on
Fundamental Principles and Rights and Work”, among other worker-related aspects.28
It is also worth noting here that India is already negotiating FTAs with the UK and the EU which are
likely to have chapters on labour, environment, gender and Micro, Small and Medium Enterprises(MSMEs). Indian business chambers like the CII and FICCI have not resisted the intertwining of
non-trade issues such as these in FTAs. However, they have highlighted the need for building
adequate safeguards while agreeing to any new commitments.29
It is in this context that it would be interesting to examine the publicly available information on the
IPEF’s Supply Chain Pillar.
The Supply Chain Pillar: Mapping what we know
While the text of the substantially concluded IPEF Supply Chain Agreement is not available in the
public domain, press releases from the US and the Indian governments provide a glimpse of its
scope and coverage. The agreement is expected to present a unique bottom-up approach witheach country engaging with businesses and utilising technical assistance and capacity building toincrease investment in critical sectors, key goods, physical and digital infrastructure, transportation
and workforce projects.30
The Government of India’s press release on this subject lists a positive and forward-looking visionof the agreement, including that it would lead to the potential shift of production centres in key
goods/critical sectors to India, thereby bolstering domestic manufacturing capabilities and givinga boost to Aatmanirbhar Bharat (self-reliant India). It is also expected to benefit from Production

27 “Indo-Pacific Economic Framework (IPEF) for Prosperity ministerial meet was inclusive and fruitful:
Shri Piyush Goyal”, Ministry of Commerce and Industry, India, 10 September 2022, https://pib.gov.in/PressReleasePage.aspx?PRID=1858243
28 The four Ministerial Statements are as follows:“Ministerial Statement for Pillar I of the Indo-Pacific Economic Framework for Prosperity, Pillar I- Trade”,
22 May 2022, https://ustr.gov/sites/default/files/2022-09/IPEF%20Pillar%201%20Ministerial%20Text%20(Trade%20Pillar)_FOR%20PUBLIC%20RELEASE%20(1).pdf; “Ministerial Statement for Pillar II of the IndoPacific Economic Framework for Prosperity, Pillar II- Supply Chains”, 22 May 2022, https://www.commerce.
gov/sites/default/files/2022-09/Pillar-II-Ministerial-Statement.pdf; “Ministerial Statement for Pillar III of
the Indo-Pacific Economic Framework for Prosperity, Pillar IIII- Clean Economy”, 22 May 2022, https://www.commerce.gov/sites/default/files/2022-09/Pillar-III-Ministerial-Statement.pdf; and “Ministerial
Statement for Pillar IV of the Indo-Pacific Economic Framework for Prosperity, Pillar IV- Fair Economy”, 22
May 2022, https://www.commerce.gov/sites/default/files/2022-09/Pillar-IV-Ministerial-Statement.pdf
29 op. cit.
30 “Press Statement on the Substantial Conclusion of IPEF Supply Chain Agreement Negotiations”, Ministryof Foreign Affairs of Japan, 27 May 2023, https://www.mofa.go.jp/files/100510680.pdf;“PRESS STATEMENT FOR THE INDO-PACIFIC ECONOMIC FRAMEWORK’S CLEAN ECONOMY PILLAR, FAIRECONOMY PILLAR, AND ON THE SUBSTANTIAL CONCLUSION OF IPEF SUPPLY CHAIN AGREEMENTNEGOTIATIONS”, Press Information Bureau, Government of India, 27 May 2023, https://static.pib.gov.in/
WriteReadData/specificdocs/documents/2023/may/doc2023528205801.pdf

46

IPEF: An Indian Perspective

Linked Incentive (PLI) schemes.31 The press release also highlights the potential of the IPEF toensure India’s deeper integration into Global Supply and Value chains, and thereby mitigate risksof economic disruptions and enhance India’s exports within a seamless regional trade ecosystem.32
Additionally, it also highlights the possibility of joint Research and Development (R&D) andworkforce development.33
Actualisation of this wish-list will be clear only from the IPEF legal texts which, as of now, are notavailable.
The publicly available press statement only dwells on the institutional framework under the Supply
Chain Pillar, comprising the following three IPEF Supply Chain bodies:34
1. IPEF Supply Chain Council, which is tasked with the development of sector-specific actionplans designed to build resilience in critical sectors, including through private sector reportingof supply chain vulnerabilities;
2. IPEF Supply Chain Crisis Response Network that will facilitate early response mechanisms to
any supply chain threats, including by establishing emergency communications channels, andfacilitating information sharing and collaboration, especially in times of crisis; and3. IPEF Labor Rights Advisory Board consisting of government, worker, and employer
representatives, as well as a subcommittee composed of government representatives, tosupport the IPEF partners’ promotion of labo[u]r rights in their supply chains, promotion ofsustainable trade and investment, and facilitation of opportunities for investment in businesses
that respect labo[u]r rights.
From a brief review of available information, implementation challenges for India arise in at least
two specific contexts.
First, the basis for the Supply Chain agreement is that each IPC member will identify critical sectors
and key goods (such as raw materials, or other inputs relevant for those sectors). It is perhaps thenlogical to anticipate obligations on those IPC members supplying key goods for critical sectors ofanother IPC member, to not impose trade restrictions such as export restraints. Recent reports
indicate that the Government of India has sought the industry’s views on the US’ proposal foradvance notices on tariff changes and possible curtailment of export restrictions under the Supply
Chain Pillar.35 These requests need to be considered with caution, keeping in view the policy space
available under the multilateral rules of the WTO to impose export restrictions or prohibitions, as
legitimate tools to prevent critical shortages of foodstuffs or other products essential for a country.
Another development is the US’ ambitious plan of up to US$369 billion in subsidies under its
recently enacted Inflation Reduction Act (IRA), to support electric vehicles, key minerals, clean
energy and power generation facilities production, with incentives based on production and

31 “Negotiations for the Supply Chains (Pillar-II) Agreement substantially concluded during 2nd IPEF
Ministerial Meeting”, Press Information Bureau, Government of India, 1 June 2023, https://pib.gov.in/PressReleasePage.aspx?PRID=1929184
32 Ibid.
33 Ibid.
34 op. cit.
35 op. cit.

47

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

sales in the US or North America.36 The IRA skews the conditions of competition in favour of the
US industries. Certain preferential treatment is, however, allowed for US’ FTA partners. During
the recent dialogue between Modi and Biden, India has sought to be recognised as a “Trade
Agreements Act-designated country” by the US,37 which could potentially entitle it to specificbenefits under US law. However, this is unlikely without an underlying trade agreement with theUS, and a consequent change in US law to implement this, an aspect which, as explained above,
the US plans to avoid in its IPEF engagement.
The second issue is about the IPEF’s focus on labour rights. India is a member of the ILO and has
ratified more of its core labour conventions than the US itself.38 The Constitution of India also
guarantees several protections including against forced labour and child labour. However, India
has so far not agreed to conditions relating to labour as part of trade or economic partnershipagreements, the concern being that labour standards in trade agreements could manifest as
protectionist measures in the guise of humanitarian concerns.
An underlying issue is that labour as a factor of production, leads to comparative advantages. In
fact, at the behest of India and several other developing economies, a WTO Ministerial Declaration
at the Singapore Ministerial held in 1996 had emphasised that labour standards should not be
used for protectionist purposes, and that the comparative advantage of countries, particularly
low-wage developing countries must in no way be put into question.39 Recent US FTAs, which haveexalted the need for labour-centric approaches, are a response to core labour concerns within theUS, the rationale being that if a trade deal cannot result in more prosperity of the workforce, it isa futile agreement. To achieve this, however, the US appears to be considering upending the very
notion of comparative advantage. A stark example of this is the US-Mexico-Canada Agreement’s(USMCA) labour value content criteria which require vehicle producers seeking USMCA preferential
treatment to certify that a certain percentage of the imported automobile’s content (by value)
is sourced from manufacturing facilities in the USMCA parties that pay workers at least US$16
per hour.40 While there is nothing in the IPEF negotiating agenda texts to suggest that a similar
approach may evolve in any of the IPEF outcome texts, nevertheless, it is an aspect to remain
cognisant about, given the centrality of labour across each of the IPEF Pillars.
The IPEF Labor Rights Advisory Board under the Supply Chain Pillar is likely to translate into close
scrutiny over domestic regulatory practices, not only by the governments of the IPCs, but by theprivate sector entities of the IPCs. The advisory board itself will be tripartite with members fromthe government, industry and workers. Thereafter, a second-tier sub-committee of government
36 The Inflation Reduction Act (IRA) of 2022 is a legislation slated to bolster American energy security andaddress the climate crisis. It contains a new corporate minimum tax, multiple green energy credits andenhanced enforcement resources. Therefore, it is expected to reduce energy costs for businesses andhouseholds and generate manufacturing jobs for Americans. See “Inflation Reduction Act of 2022”, Public
Law 117-169, 16 August 2022, https://www.congress.gov/117/plaws/publ169/PLAW-117publ169.pdf
37 op. cit.
38 The Core/Fundamental ILO Conventions ratified: India - 6/10 (C029, C100, C105, C111, C138 and C182)
and the US - 2/10 (C105 and C182). See “Ratifications for India”, International Labour Organization,
https://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:11200:0::NO::p11200_country_id:102691;“Ratifications for United States of America”, International Labour Organization, https://www.ilo.org/dyn/normlex/en/f?p=1000:11200:0::no:11200:p11200_country_id:102871
39 “SINGAPORE WTO MINISTERIAL 1996, WT/MIN(96)/DEC”, World Trade Organization, 18 December 1996,
https://www.wto.org/english/thewto_e/minist_e/min96_e/wtodec_e.htm
40 “USMCA Automotive Sector”, US International Trade Administration, https://www.trade.gov/usmca-autoreport48

IPEF: An Indian Perspective

representatives would oversee its role in assessing businesses that respect labour rights, andincentivise investment into such businesses.
To the extent that the Labour Rights Advisory Board and its sub-committee are deferential to
the government’s assessment as regards the compliance of labour laws, the implementation
challenges would likely be limited to mechanisms for monitoring and communication. However, if
such external scrutiny is with a view of an implementation of labour standards that are higher thanthat provided under domestic laws, there are likely to be several sensitivities on the desirability ofsuch external scrutiny and the determination of what is lawful or not, under Indian law.
The IPEF Pillar on Clean Economy
The IPEF’s Clean Economy Pillar will be one of the most consequential ones for the path to green
development of each of the IPCs, especially the developing country members. It would be logicalto see the natural linkages between the Clean Economy and Supply Chain Pillars, particularly
for India which is seeking access to key goods and technology transfers in critical sectors forenvironmentally sustainable development. It would also be good to see an alignment between
the Clean Economy Pillar with international climate change negotiations, particularly as a means
to further implement obligations relating to emission reduction, and to achieve the same throughfinancial and technical assistance and capacity building initiatives between the IPCs. Low costand long-term carbon finance is part of India’s wish-list for this Pillar.41 The press release of May
2023, which announced “good progress” on Pillar III, also indicated the launch of a green hydrogen
initiative among interested IPCs, which includes India.42
The IPEF Pillar on Fair Economy
The IPEF’s Pillar IV on Fair Economy covers two broad areas: anti-corruption and taxation. But
there is little information on what the “Fair Economy Agreement” would look like. The May 2022
Ministerial Statement launching the IPEF, references two international conventions under thisPillar: the United Nations Convention Against Corruption (UNCAC) that India has ratified; and theOrganisation for Economic Co-operation and Development’s (OECD) Anti-Bribery Convention,
which India is not a party to. India is a member of the Financial Action Task Force (FATF), anintergovernmental standard-setting body, which also evaluates compliance of its signatories.
Since FATF standards are recommendatory in nature, and since India is not a signatory to theOECD convention, it would be important to ensure that obligations under this Pillar are worded ina manner that ensures adequate policy flexibility.
Pillar IV’s taxation component refers to support for the OECD/Group of Twenty (G20) Inclusive
Framework on Base Erosion and Profit Sharing (BEPS) negotiations, which is focused on finding a
global understanding on taxation in a digital economy. The OECD discussions had commenced in2013, but sluggishness in progress, including because of the US’ own lack of engagement, had led
to India and several other countries implementing their own laws for taxing entities engaged indigital services. India’s equalisation levy on digital advertising has been implemented since 2016.

41 “Successful and substantial conclusion of text-based negotiations of IPEF Pillar-II (Supply Chains); good
progress under other Pillars, Shri Piyush Goyal calls for expeditious implementation of action-oriented
elements of the Agreement including mobilizing of investments in IPEF supply chains, Regional Hydrogen
Initiative introduced by some IPEF partners”, Press Information Bureau, Ministry of Commerce and Industry,
Government of India, 28 May 2023, https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1927826
42 Ibid.

49

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

A two per cent equalisation levy on non-resident digital entities engaged in e-commerce supplyof services was introduced in 2020.43 The US initiated “Section 301” proceedings against India,
the EU, the UK, Indonesia, and several other countries, since the impact of this tax was on digital
corporations headquartered in the US. Section 301 of the Trade Act of 1974 grants the USTR the
authority to investigate and take action to enforce US rights under trade agreements and respondto certain foreign trade practices. Such unilateral action, clearly, is against any multilateral rules
and in case of the equalisation levy, impinged directly on the sovereign right to impose appropriate
taxation measures. Nevertheless, the US succeeded in forging an agreement with India which
obligates India to withdraw the two per cent levy in March 2024, subject to conclusion of themultilateral convention at the OECD.44
While negotiations at the OECD are progressing, there is still no sign of the multilateral convention
which was expected to be finalised by mid-2023. The issue has significant implications for law
and policy in India, as it is expected that agreeing to the multilateral convention at the OECD will
require passing of a new law in India, as well as being subject to binding dispute resolution.45
There are concerns that the rules of the agreement will be predominantly dictated by the US, andwill impinge on significant revenue potential for countries like India.46 In view of this uncertainty,
it is unclear whether the IPEF Fair Economy Agreement would simply reference a commitment
to ensure the conclusion of the OECD agreement, or arrive at more concrete obligations. It also
remains to be seen whether India would discontinue its two per cent levy by March 2024, even in
the absence of an OECD conclusion.
It is interesting to note that digital tax is an area where there continues to remain significant
divergences between the EU and the US. It is perhaps for this reason that the US-EU TTC covers
elements of the first three IPEF Pillars but is silent on the issue of digital taxation.

What Next for the IPEF
The US and the EU had a significant role in shaping the rules of the multilateral system, under theUN, the Bretton Woods institutions, the General Agreement on Tariffs and Trade and subsequently,
the WTO. While the emergence of other economic powers, including India, has, to a certain extent
diluted the ability of the US to have a unilateral reign as rule-maker, it is not a significant dent.
The IPEF is a prime example of the US’ attempt at reclaiming the space as a rule-maker throughan intelligent linkage of the economic with the geopolitical strategic interests of countries in the
Indo-Pacific, which constitute 40 per cent of the world economy.
The IPEF, however, is clearly not an exclusive club of best friends. This is evidenced in the US’ multipronged approach to secure its strategic interests with like-minded countries. With the EU, this ismost clearly manifested in the US-EU TTC. As the assessment by the Atlantic Council notes, the43 “Equalisation Levy”, Income Tax Department, https://incometaxindia.gov.in/booklets%20%20pamphlets/
equalization-levy-english.pdf
44 “India and USA agree on a transitional approach on Equalisation Levy 2020 ”, Press Information Bureau,
Ministry of Finance, Government of India, 24 November 2021, https://pib.gov.in/PressReleasePage.
aspx?PRID=1774692#:~:text=India%20and%20United%20States%20have,regarding%20the%20said%20
Equalisation%20Levy
45 Rashmin C. Sanghvi, “India should not adhere to the proposed global rules on digital tax”, The Economic
Times, 26 June 2023, https://economictimes.indiatimes.com/opinion/et-commentary/why-india-shouldnot-adhere-to-the-proposed-global-rules-on-digital-tax/articleshow/101262049.cms
46 Ibid.

50

IPEF: An Indian Perspective

IPEF and the TTC have a “heavy issue overlap”,47 ranging from addressing supply chain disruptions
and enhancing its resilience to coordinating on rules and standards for the digital economy togreen technology development.
India’s role and strategic geopolitical significance has been increasing over the years, in termsof the growing size of its economy, an increasingly attractive investment destination, and as apossible counter to the dependence of other countries on China. India is part of both the IPEF andthe MSP – two new initiatives by the US to redefine multilateral rules. While these are indicative of
India’s growing strategic relevance for the US, the rules of these new frameworks and initiatives
are as yet unclear.
Any international negotiation involves the ceding of sovereign space and agreeing to a common
set of rules. This weighing and balancing however depends on the nitty-gritties of the legal
obligations, and a clear cost-benefit assessment. It is here where the uncertainties of the IPEF
appear daunting. Contrast this with the fact that during the negotiations leading up to the WTO
in 1995, the ‘Dunkel Draft’ was released in 1991.48 This allowed for public scrutiny, debate anddiscussion, and consequent refinements. One would expect that 21st century rules would be subject
to a higher level of transparency and scrutiny. Instead, the IPEF appears to demand implicit trustand faith in the ability of governments to set the rules for the benefit of all. It is this element of theunknown that makes the IPEF somewhat worrisome. This is particularly because of the challenges
it poses for domestic law and policy, and possible changes that would need to be considered, inrespect of each of the IPEF Pillars that are agreed to.
Very little is known as of now regarding the enforcement of the IPEF obligations. Unlike traditional
FTAs that focus on enforcement through binding dispute settlement, the current range ofstatements in the public domain indicate that the IPEF is likely to be focused on cooperation anddialogue, rather than on binding dispute settlement. But as USTR Tai noted, the focus of the IPEF
is on mechanisms for verifying that the rules are being followed and looking beyond traditional
dispute settlement.49 Perhaps this is the role of each of the institutional bodies notified under the
IPEF Supply Chain Pillar, which are likely precursors to similar bodies under the other Pillars. This,
clearly, is not without consequence. The fact that something is a soft obligation does not make itmeaningless. At a minimum, this would entail subjecting domestic law and policy open to external
scrutiny, not only by foreign governments, but by the private sector as well, as is likely to be theconsequence of the IPEF Labor Rights Advisory Board for supply chains.
The underlying philosophy of the IPEF is laudable: enhanced cooperation for collective resilience.
The USTR hailed the IPEF as a new chapter in the story of resilience, “focused on raising the tide
for all our citizens, not only now, but also for future generations”.50 That same principle should
govern India’s engagement as well; the legal texts will have implications for both current and future
generations. Ultimately, any speculation about the IPEF remains woefully incomplete without thebenefit of an assessment of those underlying legal texts.

47 op. cit.
48 The then GATT director-general, Arthur Dunkel, who chaired the Uruguay Round negotiations at officials’
level, tabled the draft “Final Act” in 1991, which became the basis for negotiations.
49 “Indo-Pacific framework will ‘push envelope’ on enforcement: USTR ”, interview by Taisei Hoyama, Nikkei
Asia, 29 May 2022, https://asia.nikkei.com/Editor-s-Picks/Interview/Indo-Pacific-framework-will-pushenvelope-on-enforcement-USTR
50 “Remarks by Ambassador Katherine Tai at the 2023 Indo-Pacific Business Forum”, Office of the UnitedStates Trade Representative, May 2023, https://ustr.gov/node/12515

51

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

About the author
Ms R V ANURADHA is a Partner at Clarus Law Associates, New Delhi and heads her firm’s practicein International Trade and Investment Law and Policy. She also advises on Environmental law andpolicy, including on carbon financing and renewable energy. Ms Anuradha has been recognisedby Chambers and Partners as a leading practitioner in her field. She is a member of the Asia WTO
Research Network, the Society for International Economic Law and the Trade Policy Committee of
the Confederation of Indian Industries (CII).
Ms Anuradha advises companies, industry associations and the Government of India on issues
arising under the World Trade Organization (WTO) Agreements, Free Trade Agreements, andBilateral Investment Protection Agreements, including disputes arising under such agreements.
She also undertakes studies for the Commonwealth Secretariat, the International Trade Centre,
the Centre for WTO Studies and export promotion associations in India.
She also teaches at various training sessions and capacity-building programs on trade law andpolicy, including at the Joint Academy on international trade law and policy conducted by the Centre
for WTO Studies in collaboration with the World Trade Institute, Berne. Additionally, Anuradha is avisiting faculty at the National Law University, New Delhi, National Law School of India University,
Bengaluru and the National Law University, Odisha.

52

Indo-Pacific Economic Framework: Negotiating and Implementation Challenges for the US

Indo-Pacific Economic Framework:
Negotiating and Implementation
Challenges for the US
Stephen OLSONAs the Indo-Pacific Economic Framework (IPEF) negotiations intensify, significant challenges await
the United States (US), both in successfully concluding an agreement that achieves US objectives,
as well as ensuring successful implementation of the agreement once concluded. Complicatednegotiating dynamics will deny the US important leverage that it has used in the past to get
trade agreements over the finish line. Unique institutional features of the agreement call into
question whether some objectives can be achieved and enforced. Divergent domestic interests onsome issues will require US negotiators to walk a tightrope between energetic and diametrically
opposed domestic constituencies. The IPEF is freighted with heavy geopolitical baggage which
could complicate negotiations. The unorthodox use of Executive Orders (EOs) to effectuate theagreement will raise several significant implementation challenges of which the IPEF partners
should take clear note. Ultimately, the most important impact of the IPEF could lie far beyond theIndo-Pacific. The IPEF could be an important bellwether for how US-European Union (EU) traderelations are handled in this post-Free Trade Agreements (FTA), post-World Trade Organization(WTO) world.

53

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

As the Indo-Pacific Economic Framework (IPEF) negotiations intensify, what are the key negotiating
and implementing challenges facing the United States (US)?

Setting the stage: a different US approach to trade
The US approach to the IPEF has to be understood in the context of the broader – and profoundly
different – approach to trade being pursued by the Biden Administration. After four years of theerratic, norm-shattering, and frequently bombastic trade policy of the Trump Administration,
many US trade partners hoped for a return to traditional free trade policies under the Biden
Administration. Although Biden has dropped the over-the-top rhetoric, his administration has
demonstrated no interest in returning to the free trade policies historically pursued by the US.
Quite to the contrary, the Administration has explicitly pursued a US worker-centric trade policy,
Buy-American regulations, and most recently, expansive industrial policies that tilt the playing fieldin favour of US workers and US production.1 Cumulatively, these policies represent a sharp rebukeof anything approaching ‘free trade’. Indeed, the pursuit of traditional free trade agreements(FTAs) has been effectively ruled out by the Biden Administration. It has not even attempted tosecure Congressional approval of the Trade Promotion Authority (TPA) – the mechanism underwhich FTAs are typically negotiated by the executive branch and approved by Congress in the US.
Without the TPA in place, comprehensive FTAs are essentially a non-starter for the US.

Ambassador Tai spells out a new course
The US Trade Representative (USTR) – and lead US negotiator on the Trade Pillar of the IPEF –Katherine Tai has been forceful, articulate and entirely consistent in explicitly spelling out thefundamentally different US approach to trade being pursued by the Biden Administration.
According to Tai:2“It is clear today—even to many who are accustomed to a more traditional approach totrade policy—that we must adapt to the realities of today’s global economy.
The traditional approach to trade … prioriti[s]ed aggressive liberali[s]ation and tariffelimination… produced significant benefits—massive increases in economic activity
and historic reductions in poverty in some regions. But we must also acknowledge
that the focus on maximum efficiency above all else had significant costs and side
effects.

1

2

54“Remarks of Ambassador Katherine Tai Outlining the Biden-Harris Administration’s “Worker-Centered
Trade Policy”, Office of the United States Trade Representative, June 2021, https://ustr.gov/about-us/
policy-offices/press-office/speeches-and-remarks/2021/june/remarks-ambassador-katherine-taioutlining-biden-harris-administrations-worker-centered-trade-policy;“Remarks by Ambassador Katherine Tai at the Roosevelt Institute’s Progressive Industrial Policy
Conference”, Office of the United States Trade Representative, October 2022, https://ustr.gov/aboutus/policy-offices/press-office/speeches-and-remarks/2022/october/remarks-ambassador-katherine-tairoosevelt-institutes-progressive-industrial-policy-conference“Remarks by Ambassador Katherine Tai at American University Washington College of Law”, Office of
the United States Trade Representative, April 2023, https://ustr.gov/about-us/policy-offices/press-office/speeches-and-remarks/2023/april/remarks-ambassador-katherine-tai-american-university-washingtoncollege-law

Indo-Pacific Economic Framework: Negotiating and Implementation Challenges for the US

Prosperity without inclusiveness contributed to rising inequality and wealthconcentration. Trade also played a role in shipping jobs overseas, which decimatedmanufacturing communities. And our supply chains became more dispersed andfragile.
All of this has fuel[l]ed resentment and mistrust in global institutions and theinternational economic system here in the United States and elsewhere.”In Tai’s view, the IPEF is not “just any traditional trade deal—it is our vision for how countries cancollaborate to deliver real opportunities for our people. Trade should work for the common goodand help set responsible standards on labo[u]r, the environment, and other priorities that reflect
American values. It should also promote fair and healthy cooperation that lifts up workers andcommunities, and that is the focus for IPEF.”3
In Tai’s judgment at least, “our IPEF partners are on board to negotiate high-standard rules thatcan spur inclusive economic growth and resilience throughout the region.”4 Presumably, the other13 participants will have something to say about exactly how high those standards will be and theextent to which the agreement should reflect ‘American values’.
In any case, lest anyone was still clinging to the notion that the US would be returning to traditional
free trade policies any time soon, Tai closed a recent speech at American University by saying: “Letus not be content with reruns of old. Let us write a new script”.5 The IPEF is intended to be theopening scene in that new script.

Challenges and impact
Significant challenges await the US, both, in successfully concluding an agreement that achieves the
US’ objectives, as well as ensuring successful implementation of the agreement once concluded:
1. Complicated negotiating dynamics will deny the US important leverage that it has used in thepast to get trade agreements over the finish line.
2. Unique institutional features of the agreement call into question whether some objectives canbe achieved and enforced.
3. Divergent domestic interests on some issues will require US negotiators to walk a tightrope
between energetic and diametrically opposed domestic constituencies. For instance, consumer
groups and big tech companies have different visions for what should be accomplished under
the digital provisions. Progressives and supporters of traditional free trade have different
views on the inclusion of social- and values-laden issues in the IPEF, such as the inclusion ofanti-whaling language that is culturally very sensitive in Japan.6
4. The IPEF is freighted with heavy geopolitical baggage which could complicate negotiations.
5. The unorthodox use of Executive Orders (EOs) to effectuate the agreement will raise several
significant implementation challenges of which the IPEF partners should take clear note.

3
4
5
6

Ibid.
Ibid.
Ibid.
Demetri Sevastopulo and Kana Inagaki, “US-Japan whaling spat threatens Indo-Pacific trade deal”,
Financial Times, 11 August 2023, https://www.ft.com/content/bad6fb05-8836-4f9e-9b71-1a5183be816c

55

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Traditional FTAs are subject to Congressional approval. The Administration has taken the
stance that the IPEF is not a traditional FTA and therefore does not require Congressional
approval. It intends to implement the IPEF through EOs, which only require the President’s
signature.
6. Ultimately, the most important impact of the IPEF could lie far beyond the Indo-Pacific. The
IPEF could be an important bellwether for how US-European Union (EU) trade relations arehandled in this post-FTA, post-World Trade Organization (WTO) world.
Each of these issues deserves a closer look.
Complicated negotiating dynamics7
The modular approach of the IPEF completely upends the most cherished cliché about tradenegotiations: ‘nothing is agreed until everything is agreed.’ Under traditional FTAs, this essentiallymeans that everything is interconnected, and no portion of the agreement is considered to be‘agreed’ until the entire deal – down to the last detail – is done. A standoff in one area can sink thewhole agreement. There can be ‘horse trading’ across chapters (for instance, one party gives up alittle more under the investment chapter in order to secure what it really wants under services).
This forces negotiators to be pragmatic and provides an incentive to work towards agreementswith balanced benefits, or else run the risk of the whole deal unravelling.
The modular IPEF approach removes that dynamic. The IPEF will not be negotiated as a ‘single
undertaking’ as is the case with most traditional FTAs. There will be no connection, for example,
between the package of benefits and concessions negotiated under the Trade Pillar and the benefits
and concessions under the Supply Chain Pillar. In fact, any member can be uncompromising under
one pillar, or indeed walk away from the negotiating table, without jeopardising its seat at thebroader IPEF table or its ability to secure benefits under the other pillars. It remains to be seen
exactly how this will play out, but one plausible scenario is that the inability to exert pressure forhigher standard outcomes across pillars could produce a lowest common denominator agreement.
The extremely tight negotiating timeline unfortunately also increases the probability of a lowambition agreement. It is unofficially understood that the US would like to have the IPEF
substantially, if not entirely, completed by the time it hosts the Asia-Pacific Economic Cooperation(APEC) Leaders’ meeting in San Francisco in November 2023. The limited time available fornegotiations, combined with the complexity of the issues of the diversity of viewpoints among
participants, will make it challenging to achieve deep and significant progress.
The other interesting negotiating dynamic to keep an eye on is that unlike any previous FTA
negotiation, the US will not be offering market access concessions, at least not in the traditional
sense of tariff reductions. Typically, granting access to the largest single consumer market in theworld provides the US with considerable leverage to secure concessions in other areas from its
negotiating partners. In the absence of that critical piece of leverage, how will the US convince
partners to agree to provisions they might find difficult, for instance, in digital trade?

756This section is heavily drawn from Stephen Olson, “Three things to know as IPEF negotiations heat up”,
Hinrich Foundation, 28 March 2023, https://www.hinrichfoundation.com/research/article/ftas/threethings-of-ipef-negotiations-heat-up/

Indo-Pacific Economic Framework: Negotiating and Implementation Challenges for the US

It should be noted however that although market access will not be granted through the traditional
means of tariff reductions, it is entirely possible that other provisions, for instance, regulatory
convergence or supply chain cooperation, could indirectly result in a degree of de facto market
access. If this in fact does materialise, it could prove to be a significant IPEF accomplishment. It
would demonstrate that non-traditional means – that is, measures other than the elimination oftariffs and quantitative restrictions – can be used to achieve market access, perhaps changing theway negotiators think about these issues. This would hold important implications for future trade
agreements both within and beyond the region.
Unique features8
More so than any agreement the US has ever negotiated, the IPEF will require substantial buy-inand cooperation from the private sector, especially under the Supply Chain Pillar. One primary
focus under that pillar will be supply chain mapping, especially in critical products. This would
allow members to be better prepared to cope with – and ideally avoid – future disruptions. To dothis in a comprehensive and granular manner, however, would require private companies to sharea good deal of data and operational information they might not be comfortable divulging.
Also, it is important to note that the overriding objective of the pillar is to create more resilient
supply chains. But governments do not build supply chains. Private companies do – through dozens
of decisions about sourcing, investments, and the location of production facilities. Governments
can prod and encourage, but at the end of the day, the key decisions – on information sharing or
logistics – will rest in the hands of private business executives. No previous trade agreement has
ever been this dependent on the private sector for its success. If businesses are not willing to playball, the achievements of the IPEF could be limited.
Perhaps the most unique feature of the IPEF is the ambiguity over whether there will be a meaningful
enforcement mechanism. Traditional FTAs contain legalistic dispute settlement provisions which
ultimately can result in trade sanctions being applied if a member fails to honour its commitments.
In the absence of meaningful enforcement provisions, there is a risk that whatever is agreed underthe IPEF remains just words on paper that are never fully enforced or implemented. When asked
about enforceability, Commerce Secretary Raimondo recently said: “Is it enforceable? I would say
yes and no. It’s not enforceable insofar as the tariffs don’t come back up if there’s non-compliance,
but it is enforceable because countries that don’t follow the rules or live up to their commitments
don’t see the benefits.”9
Domestic challenges within the US
The IPEF negotiations will intersect an intensifying domestic policy debate in the US over digitalpolicy. It is unclear how the US will resolve divergent domestic interests, let alone reach a consensus
with the IPEF negotiating partners.
Consumer and other civil society groups in the US are taking aim at Big Tech as more is being
learned about the extent to which technology giants like Facebook, Google, and Twitter collect,

8
9

Ibid.
“A Conversation on the Indo-Pacific Economic Framework with Secretary of Commerce Gina
Raimondo”, interview by Dr. Sadek Wahba, Wilson Centre, 25 July 2023, https://www.wilsoncenter.
org/event/conversation-indo-pacific-economic-framework-secretary-commerce-gina-raimondo?utm_
medium=social&utm_source=twitter.com&utm_campaign=wilson

57

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

manipulate, and sell data on their users. Concerns over data privacy are morphing with risingquestions about the power wielded by large technology companies and their potentiallymonopolistic practices. While previously concluded trade agreements like the Comprehensive
and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the United States–Mexico–
Canada Agreement (USMCA) contained digital provisions that largely aligned with the interestsand objectives of Big Tech companies, a rising tide of political and civil groups seem determined toprevent these ‘tech-friendly’ provisions from being included in the IPEF. A consortium of 18 suchgroups wrote to President Biden in March, expressing their concerns on the IPEF negotiations:“It is essential that digital trade rules do not undermine Congress’s ability to protect
online privacy or data security. That is why we urge you not to replicate the Big-Techfavo[u]red terms that were slipped into the U.S.-Mexico-Canada Agreement (USMCA)
and the Trans-Pacific Partnership (TPP) that cede control of our personal data to firms,
including rights to move, process, and store personal data wherever they choose.”10
On the other side of the issue are the tech firms themselves, along with companies whosebusiness plans rely on their platforms. The powerful Coalition of Service Industries, for example,
is pushing for the IPEF to replicate – if not expand upon – the tech-friendly provisions from theprevious agreements.11 They point out that those agreements contain exceptions that would
permit regulatory agencies to review things like source code, and that it is not their intention tolimit Congress’ ability to legislate in this area. That is a particularly important point as Congress
is considering legislation that would impose curbs on Artificial Intelligence (AI) technology, andaddress privacy, content moderation and antitrust enforcement.12 Critics charge that Big Tech is
pushing for commitments in trade deals that would circumscribe Congress’ ability to subsequently
impose curbs. Influential legislators, including Senator Elizabeth Warren, are intently focused on
this issue, and will be holding the USTR’s ‘feet to the fire’ to ensure that this does not happen.
In order to ensure at least a requisite level of domestic US support for the digital provisions of
the IPEF, US negotiators will need to structure nuanced positions that will be acceptable to both
Big Tech and the various interests that would like to reign them in. The IPEF negotiating partners
are unlikely to accept these US proposals at face value and will counter-propose modifications
or alternative provisions. Any digital agreement the US is ultimately able to secure with its IPEF
partners could prove to be far from acceptable to one or more of the strong advocacy interests in
the US that will pore over every small detail in the digital trade section of the agreement.
It remains to be seen if US negotiators will be able to successfully triangulate between the IPEF
partners and their two opposing domestic constituencies. This task will be made more difficult
by the fact that digital issues are increasingly becoming a political ‘hot button’ issue in the US andelections are approaching.

10 “Letter to President Biden: Don’t Replicate Big-Tech-Favored Terms in IPEF!”, Rethink Trade, 10 March
2023, https://rethinktrade.org/wp-content/uploads/2023/03/IPEFdigitalrulesletter.pdf
11 “Big Tech’s Big Con: Rigging Digital Trade Rules to Block Antitrust Regulation”, Office of Senator Elizabeth
Warren, May 2023, https://www.warren.senate.gov/imo/media/doc/USTR%20REPORT.pdf
12 Diane Bartz and David Shepardson, “U.S. Congress to consider two new bills on artificial intelligence”,
Reuters, 10 June 2023, https://www.reuters.com/technology/us-congress-consider-two-new-billsartificial-intelligence-2023-06-08/

58

Indo-Pacific Economic Framework: Negotiating and Implementation Challenges for the US

Impact of geopolitical baggage on negotiations13
From its inception, the IPEF has been freighted with heavy geostrategic baggage. Taiwan was eager
to join the negotiations, but the US judged – correctly, in all probability – that the inclusion of
Taiwan would preclude other members from joining for fear of antagonising China. The US politely
rebuffed Taiwan’s interest and is instead working on a separate deal. For the partner countries
that have joined the US, it is fair to wonder to what extent the IPEF is actually about the IPEF,
and to what extent it is about encouraging a deeper US engagement in the Indo-Pacific. For mostcountries in the region, their best interests are served by balancing the US and China, benefitingfrom economic and strategic ties with both, and avoiding a definitive tilt towards one or the other.
For many in the region, greater US engagement in the region would be a desirable counterweight toChina’s growing assertiveness. While there is undoubtedly interest in the substantive agenda that
the IPEF will tackle, the geopolitical realities are playing a role as well. If a key objective is to simply‘get something done’ with the US to draw it more deeply in the region – even just symbolically –then it is fair to wonder how much appetite there will be for hammering through the tough issues
and pushing the substantive agenda.
Significant implementation challenges for the US
The Biden Administration does not intend, at least as of now, to submit the IPEF for Congressional
approval. The typical route for approval and implementation of traditional FTAs in the US has been
under the TPA. Under the TPA, the administration is obligated to consult closely with Congresson negotiating objectives, engage in detailed and regular consultations with Congress as thenegotiations unfold, and ultimately submit the agreement to Congress for approval. In exchange
for playing a partnership role with the administration during the course of the negotiations,
Congress agrees to take a simple up or down vote on the agreement, without a possibility to offer
amendments. The longstanding belief has been that if the 535 members of the US Congress wereable to amend an FTA, it would quickly unravel. TPA – or Fast Track – as it was previously known– has been traditionally seen as a practical solution which allows the executive branch to leadnegotiations rather than coping with the impossible situation of having 535 different de facto ‘lead’negotiators in Congress.
As part of the Congressional approval process, so-called implementing legislation is also approved.
This provides legal authority to effectuate the commitments contained in the trade agreement. Since
the IPEF will not include typical features of an FTA such as tariff reductions, the Administration has
taken the position that Congressional approval is not needed. Not surprisingly, many in Congress
disagree and have been sharply critical of what they see as usurpation of Congressional authority
under Article 1, Section 8 of the US Constitution which gives Congress authority for regulating“commerce with foreign nations”.14
The disagreement hinges on differing views over whether the IPEF should be considered a fullblown, comprehensive ‘trade agreement’. Traditionally, comprehensive trade agreements haverequired Congressional approval. More limited trade actions have usually been interpreted tofall within the President’s executive authority, in which case the executive branch can largely run

13 op. cit.
14 “Menendez, Colleagues Raise Concerns About Process To Approve And Implement Indo-Pacific Trade
Pact And Other Trade Agreements”, Bob Menendez, 1 December 2022, https://www.menendez.senate.
gov/newsroom/press/menendez-senate-finance-committee-members-raise-concerns-about-processto-approve-and-implement-indo-pacific-trade-pact-and-other-trade-agreements

59

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

the show. If this scenario applies to the IPEF, the administration would implement the agreement
through one or more EOs. These are orders issued by the President directing federal agencies
to take certain actions – but only in areas clearly under the President’s authority. For example, a
US president could not attempt to use an EO to amend the US Constitution because that power
resides with Congress and the states. The President could, however, issue an EO directing theCommerce Department, for example, with instructions on how specifically to administer trade
restrictions on high technology products. Over the course of recent administrations, Presidents
have attempted to push the envelope on what actions they can authorise under EOs. President
Obama in particular was accused of executive overreach on issues ranging from homeland security
to workplace protections.15 Attempting to implement the IPEF through EOs would be a further
broadening of the scope and has already (and will continue to) elicit Congressional pushback.
The question of implementation through an EO versus Congressional approval is not merely anesoteric administrative detail. It holds import implications for the US’ 13 IPEF partners as well as
the ability of the US to actually implement the agreement. Three potential complications should
be well understood.
Executive Orders are easily overturned
The President effectuates an EO through the stroke of a pen, that is, by signing the order. Since nolaws have been passed, the EO can be undone without legislative action. A subsequent President
can rescind any EO signed by a predecessor in the same manner. Given the current political moodin Washington, should President Biden fail to be re-elected, it is entirely possible – if not likely –that his successor will undo the IPEF with a stroke of a pen after assuming office in January 2025,
as Donald Trump did with the TPP on his first full day in office. This is a reflection of both the highly
partisan nature of the US political system as well as ambivalence about the IPEF itself. Supportersof free trade feel that it does not go far enough; opponents of free trade feel it goes too far.
The IPEF partners should be aware that the durability of the IPEF could rest to a large degree on
President Biden successfully gaining re-election.
Executive Orders can create legal ambiguities
With the scope of EOs being expanded, a complex legal question has arisen without any clear
resolution. If the President issues an EO which requires a federal agency to contradict a law duly
passed by Congress, which takes precedent? If the EO takes precedent, then the US President
essentially has power to unilaterally override US law. If the EO does not take precedent, then theability of the US to fulfil the commitments contained in the IPEF might be impaired in any place
where it differs from existing US law. The IPEF partners will have to carefully monitor and weighthe extent to which the US will actually be able to live up to its obligations under the IPEF.
Use of Executive Orders could lead to a stand-off
Congress and the Biden Administration have been talking past each other on the question ofCongressional approval. In hearing after hearing, members of Congress have routinely repeatedtheir strongly held belief that the agreement will require a vote. Trade officials, principally the
USTR Tai, have avoided answering the question with respectful niceties but offer absolutely no
indication that they would consider going the Congressional route.

15 Erin Hawley, “Obama’s curtain call: A look back on a legacy of executive overreach”, The Hill, 24 December
2016,
https://thehill.com/blogs/pundits-blog/the-administration/311608-obamas-curtain-call-a-lookback-on-a-legacy-of/60Indo-Pacific Economic Framework: Negotiating and Implementation Challenges for the US

There would be significant complications even if the Biden Administration was to switch gears andseek Congressional approval. The mechanism for Congressional approval – TPA – has expired andan extension would need to be passed by Congress. This would be far from pro forma, as negotiating
objectives and timelines would need to be agreed between the legislative and executive branches.
The process can become contentious or at the very least, time-consuming. It is unlikely that it
could be completed fast enough to be relevant for the IPEF – even if the Biden Administration was
inclined to move in that direction.
For now, Congress and the White House remain at loggerheads on the question of legislative
approval. It remains to be seen how Congress would react – and what means of disruption theymight employ – if their entreaties are ignored. The fact that elections are drawing close only
heightens the stakes and the political appeal of drawing contrasts – and sometimes picking
fights – with political opponents. In the worst case, the IPEF could spark a mini-brawl between theexecutive and legislative branches. The US’ IPEF negotiating partners need to be acutely aware of
how this issue plays out in the US for an additional reason. If legislative approval is ultimately notsought, it could signal that the US does not intend to make any changes under the IPEF that would
require changes to US law. It is unclear how this would sit with the IPEF partners, especially thosethat might be called on to make substantial changes to their legal or regulatory regime in order tomeet IPEF commitments.

IPEF outcomes could shape US engagement with the EU
One interested outside observer to the IPEF negotiations will be the EU. The outcomes – both interms of substance and format – could provide a useful point of reference for how the US and theEU will manage similar issues themselves.
Despite the apparent overwhelming logic, the US and the EU have never been able to conclude
an FTA. The most recent attempt, the Trans-Atlantic Trade and Investment Partnership (TTIP) was
foundered during the Obama Administration, and no serious efforts to revive the initiative have been
undertaken since. At least for the foreseeable future, prospects for a comprehensive, traditional
FTA between the US and the EU appear close to zero. Recognising, however, the imperative for thetwo trans-Atlantic partners to work together on trade and related issues, they have settled on analternative format: a looser framework known at the US-EU Trade and Technology Council (TTC)– a concept which bears at least some similarity to the approach of the IPEF. The US-EU TTC wasestablished in June 2021 to coordinate approaches to key global trade, economic and technology
issues, and to deepen transatlantic trade and economic relations.
Depending on what precisely is accomplished in the IPEF, a couple of different scenarios mightpresent themselves. If the IPEF produces a maximalist outcome – significant and meaningfulprogress on issues of shared interest – there is nothing to prevent the parties from considering EU
admission to the IPEF. The rationale would be to avoid ‘reinventing the wheel’ and simply utilise
the proven framework at hand. The United Kingdom’s (UK) admission to the CPTPP has alreadydemonstrated that geographic indicators applied to trade deals do not preclude prospective
members from outside the region from successfully seeking membership. Undoubtedly, neither
the agendas nor the respective interests are identical across the IPEF and the TTC. The TTC could
perhaps hope for greater progress in some areas and less in others. A more likely outcome thanEU membership might be that US and EU officials pick and choose what might be relevant fromthe IPEF and apply and incorporate them into their workstream in the TTC.

61

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

In the worst-case scenario, if the IPEF comes up short on concrete deliverables or falters
altogether, it could be viewed as a cautionary tale for US-EU efforts in the TTC. Both, the IPEF and
the TTC represent ambitious new attempts to address pressing trade and economic integration
challenges in a far more amorphous, less-structured and less legalistic framework than have beenpreviously undertaken. It is entirely unclear how successful this looser approach will be. In either
event, however, EU interlocutors should closely follow the progress (or lack thereof) of the IPEF
negotiations.
Supply Chain Pillar “substantially concluded”16
Meeting on the fringes of an APEC Ministerial in Detroit in May, the IPEF negotiators announced
that they had “substantially concluded” the Supply Chain Pillar.17 Although complete details are
not yet available, the successful conclusion of the Supply Chain Pillar is good news and reflects
a Herculean effort on the part of undoubtedly exhausted negotiators. It would, however, bepremature to celebrate an IPEF victory. Based on what we know so far, there are reasons for both
optimism and pessimism.
Reasons for optimism18
The agreement ostensibly accomplishes several useful things, including the establishment of
measures intended to limit supply chain disruptions in the event of future pandemics or otherdisasters. A Crisis Response Network will be established to send up an early warning signal as
potential supply chain disruptions are forming on the horizon and facilitate collective responses
to shortages of critical materials.
According to a US Commerce Department press release, the agreement “would establish an
emergency communications channel for the IPEF partners to seek support during a supply chain
disruption and to facilitate information sharing and collaboration among the IPEF partners during
a crisis, enabling a faster and more effective response that minimi[s]es negative effects on theireconomies”.19
IPEF members will also share information during non-crisis periods to increase procurement
among members and provide assistance when shortages do arise.
IPEF members will cooperate on technical assistance and capacity building to strengthen regional
supply chains. The parties intend to mobili[s]e investments and promote regulatory transparency
in order to help prevent significant future supply chain and economic disruptions.
The parties will cooperate on the promotion of high labo[u]r standards, upskilling workers, andmaking customs procedures more compatible. Members will engage with business to manage andideally avoid supply chain bottlenecks.

16 This section is heavily drawn from Stephen Olson, “IPEF seals supply chain deal. Don’t pop the champagneyet.”, Hinrich Foundation, 30 May 2023, https://www.hinrichfoundation.com/research/article/ftas/ipefseals-supply-chain-deal
17 “Press Statement on the Substantial Conclusion of IPEF Supply Chain Agreement Negotiations”, US
Department of Commerce, 27 May 2023, https://www.commerce.gov/news/press-releases/2023/05/
press-statement-substantial-conclusion-ipef-supply-chain-agreement
18 op. cit.
19 op. cit.

62

Indo-Pacific Economic Framework: Negotiating and Implementation Challenges for the US

The supply chain pillar generates positive momentum for the other three pillars and ensures thatthe new, innovative IPEF approach will produce at least one concrete outcome.
Although it is a fairly limited agreement, this is the first substantial agreement the US has reachedin the region since the Trump Administration’s decision to pull the US out of the Trans-PacificPartnership (TPP)20. It could therefore be interpreted as a signal that the US is committed toworking with partners in the region. Proponents of a more robust US engagement in the IndoPacific will point to this – correctly or incorrectly – as evidence that the US is “back”.
Reasons for pessimism21
It appears the agreement will contain a good deal of aspirational language (“IPEF partners willseek to…”) rather than concrete, enforceable commitments. Will such provisions actually be
implemented?
It is as yet unclear as to whether the councils or advisory boards established by the agreement
will be sufficiently empowered to actually accomplish anything meaningful, or if they will simply
become bureaucratic talk shops.
The agreement may or may not be a done deal. The US Commerce Department press releaseannounced only the “substantial conclusion” of the agreement.22 Parties will now engage indomestic consultations and legal review in order to prepare a final text for signature. Modifications
are possible, perhaps likely.

Where are things headed?
One should exercise extreme caution in attempting to draw too many conclusions about ultimate
outcomes when trade negotiations are still ongoing. Yet, while considerable twists and turns willundoubtedly play out as the IPEF negotiations gather steam, several initial propositions can be
cautiously articulated.
The IPEF is an important test case. If the IPEF succeeds, it will provide a template for how future
trade agreements – certainly any involving the US – are negotiated and structured. As the USTR Tai
has made abundantly clear, the US is out of the business of pursuing traditional FTAs at least for
the foreseeable future. Yet, the desire to form blocs and to fragment along geopolitical dividing
lines is unfortunately intensifying. Framework agreements modelled after the IPEF could become
the preferred means for attempting to accomplish that goal. On a more micro-level, the IPEF has
the opportunity to play a path-finding role on trade issues where comprehensive multilateral rules
are lacking. Irrespective of its breadth or depth on other issues, if useful progress is made on – forinstance – digital trade, expect other initiatives, both regional and global, to borrow liberally fromwhat has been accomplished in the IPEF.
Should, however, the IPEF either fail to be concluded or fail to achieve meaningful results, the US’economic and strategic interests in the Indo-Pacific will be set back dramatically for years if not
decades to come. An IPEF misfire would appear to validate the point of view that suggests that the
US is a waning power in the Indo-Pacific, while China is ascendant. Having started this journey, theUS will need to do everything in its power to bring it to a successful conclusion.

20 op. cit.
21 op. cit.
22 op. cit.

63

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

About the author
Mr Stephen OLSON is Senior Research Fellow at the Hinrich Foundation. His areas of expertiseare in sustainable trade, the World Trade Organization, trade negotiations, free trade agreements,
and tariffs and non-tariff barriers.
Mr Olson began his career in Washington DC as an international trade negotiator and served on
the United States negotiating team for the North American Free Trade Agreement negotiations.
He subsequently became president of the Hong Kong-based Pacific Basin Economic Council, andvice-chairman of Cairo-based ARTOC Group for investment and development. He is also a visiting
scholar at the Hong Kong University of Science and Technology. He has a master’s degree inInternational relations from the Johns Hopkins School of Advanced International Studies and a BA
from the State University of New York.

64

The Republic of Korea and the IPEF

The Republic of Korea and the IPEF
Tony MICHELL

The Indo-Pacific Economic Framework (IPEF) was announced as newly elected President Yoon
began a tilt towards the United States (US), endorsing it as a chance to write rules and not takethem. Extensive consultations between business and ministries ensured that each Pillar was
examined, but showed little evidence of rule writing until May 2023. The Korean Ministry of Tradeand Industry was also protesting the impact of the Inflation Reduction Act (IRA) and the Creating
helpful incentives to produce semiconductors (CHIPS) Act with the same US negotiators as for the
IPEF. Minister Ahn of the Ministry of Trade, Industry and Energy (MOTIE) sees opportunities todraw the US closer to the international position especially by creating a carbon trading zone in the
Clean Economy Pillar, and played a role in the Supply Chain committee creation. Korea covered thesame issues with the Chinese on a bilateral basis ensuring that Korea was not drawn fully into any
decoupling strategy. Discussion in Korea in June showed MOTIE optimistic, but business doubtful
about the efficacy of the IPEF which could be challenged in Congress with Executive Orders which
could be abandoned by the next US President.

65

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Introduction
Before May 2023, the existing text for the four Pillars at the IPEF was so bland that it is hard toquarrel with the words, although India saw problems and will not sign the Trade chapter. The
Indo-Pacific Economic Framework for Prosperity (IPEF) is undermined by the lack of benefit orcompensation for members in terms of the two major United States (US) trade policy measuresthat appeared after the IPEF was announced – the Inflation Reduction Act (IRA) or the Creating
helpful incentives to produce semiconductors (CHIPS) Act. Despite the constant reference to theWorld Trade Organization (WTO) in the text, the US is a notable violator of WTO global rules.1
At the outset of the negotiations, Deputy Prime Minister Choo Kyung-ho assured Korean legislatorsthat Seoul would defend its national interests while maintaining strong relations with all parties
during any IPEF discussions. He said that while it is important to join the group to strengthen
supply networks, Korea should “at the same time input our position from the start in forming
regulations.”2

Korea’s unique trajectory from 1945 to 2023
Given South Korea’s position as a trading nation – the sixth largest exporter in 2022 – its uniquetrajectory tends to be overlooked. Korea was a colony of Japan from 1910 to 1945, divided into
South and North by occupying forces. The Korean War became a proxy hot-cold war, and ended
in the longest armed armistice in history. US domination in Korea forced a market opening to
US companies in 1985, and in 1991, a détente was forged with China and Russia in expectationof progress between North and South Korea.3 China became Korea’s largest market by 2000.
Hence, the thesis that Korea is a prisoner of geography faded. First pronounced by Tim Marshall,as the global economy appears to be refreezing into an incipient Cold War mode the iron bars ofgeography seem to be descending again.4 As late as in April 2022, the outgoing Korean President
fretted over the remaining Cold War structures between the North and the South, calling fora Peace Treaty. However, by May 2023, some were accusing the new President as being at theforefront of creating a new Cold War.5

1

2

3
4

5

66

“A WTO Member cannot waive unilaterally its own WTO obligations whenever it considers that anotherMember is acting “unfairly” and that the WTO Agreement does not provide adequate remedies. Suchunilateral responses to perceived unfair acts of another Member are themselves both unfair and illicit
under the WTO Agreement.” See “ United States — Tariff Measures On Certain Goods from China (WT/DS543/R/Add.1)”, World Trade Organization, 15 September 2020, https://www.wto.org/english/tratop_e/
dispu_e/543r_a_e.pdf;
Failing to appoint judges to the panels paralysing the WTO’s dispute resolution process. See “The World
Trade Organization: The Appellate Body Crisis”, Center for Strategic & International Studies, https://www.
csis.org/programs/scholl-chair-international-business/world-trade-organization-appellate-body-crisis
Lee Ho-jeong, “Korea will join IPEF on its own terms: Finance Minister Choo”, Korea JoongAng Daily,
21 August, 2022, https://koreajoongangdaily.joins.com/2022/08/21/business/economy/IPEF-KoreaUSChina-tensions/20220821170204012.html
Progress with the North after the US signing of the Geneva Agreed Framework was thwarted by the US
1994 midterms and then dogged by the North’s resumption of nuclear investigations later in the 1990s.
Tim Marshall, Prisoners of Geography: Ten Maps That Tell You Everything You Need To Know About Global
Politics (New York: Scribner, an imprint of Simon & Schuster, Inc., 2015), 208-229. “how do you solve a
problem like Korea? You don’t, you just manage it…”
Keeho Yang, “Rethinking South Korea-Japan Relations”, EAF Policy Debates – East Asia Foundation,
29 June 2023, https://www.keaf.org/en/book/EAF_Policy_Debates/Rethinking_South_Korea_Japan_
Relations?ckattempt=1

The Republic of Korea and the IPEF

Three decades of relations with China, Korea’s largest trading partner, was celebrated in 2022. The
US is the second largest partner, followed by the European Union (EU) and Vietnam. Trade with
China is conducted under a bilateral Free Trade Agreement (FTA) with ongoing active negotiations
to include services. When exports via Hong Kong are added, which mainly go into Southern China,
China takes almost 30 per cent of Korea’s trade.6 Figure 1 shows the degree of trade connectivity
with China, the EU and then the members of IPEF.
Figure 1: South Korea’s foreign trade connectivity with China, the EU and IPEF members

Source: Korea International Trade Agency7

President Yoon’s tilt towards the US
Usually, Korea has had a progressive President whenever there is a Republican President of the
US and vice versa. Geopolitics and ‘America First’ have upset this rule. The abrupt change in both
domestic and international policy, however, did not make it appear out of sync when the opposite
happened: conservative President Yoon Suk-yeol taking office in May 2022, with the US having
Democrat Joe Biden as its President. The alliance has spilled over into a tripartite agreement
between the US, Japan and Korea enshrined in the August 2023 Camp David Agreement whichgoes beyond geopolitics and calls for closer technological cooperation with 20 different initiatives.8678“Global trade statistics service K-stat”, K-Stat, https://stat.kita.net/
Ibid.
The language of the later paragraphs of this agreement implies that Japan, Korea and US will go beyond
the IPEF in coordination. See “The Spirit of Camp David: Joint Statement of Japan, the Republic of Korea,
and the United States”, The White House, 18 August 2023, https://www.whitehouse.gov/briefing-room/
statements-releases/2023/08/18/the-spirit-of-camp-david-joint-statement-of-japan-the-republic-ofkorea-and-the-united-states/

67

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

The earlier Moon Jae-in’s administration had been strongly in favour of trade agreements andoversaw the renegotiation of the US-Korea (KORUS) FTA at the insistence of Donald Trump. This
period also witnessed the signing of a number of FTAs plus the larger Regional Comprehensive
Economic Partnership (RCEP), application for membership of the Digital Economy Partnership
Agreement (DEPA), completion of a digital trade agreement with Singapore, a digital policy
agreement with the EU and a last-minute bid for the Comprehensive and Progressive Agreement
for Trans-Pacific Partnership (CPTPP), which is now stalled over agricultural issues.9 Korea,
through strong social control and distancing which avoided actual lockdowns during the COVID-19
pandemic, experienced the smallest drop in the Gross Domestic Product (GDP) amongst major
Organisation for Economic Co-operation and Development (OECD) members. In 2023 Korea isexperiencing low growth due to contraction of trade, and a sluggish domestic economy.
The election of Yoon Suk-yeol who ran partly on an ‘anything but Moon’ programme, aimed to
repair relations with the US and create a smaller government. However, it was not clear what
relations with the US had been damaged by Korean action during Moon’s administration as
opposed to damage to the relationship by Trump who put sanctions on Korean washing machines,
and steel and aluminium, and also threatened to withdraw troops. The Koreans had agreed toswap a higher tariff for a quota arrangement, but when Biden became President and super tariffs
elsewhere were dropped, the US refused to amend the quota agreement on Korean steel.10
Announced by Biden in May 2022, the same month that Yoon took office, the IPEF seemed to be
the perfect instrument for the new administration to endorse. Yoon saw the IPEF as ‘all about rules’and stated that it was necessary to join the IPEF since Korea aims to be a rule-maker rather than arule-taker.11 This fitted in nicely with his advisors’ concept of an active global Korea led by National
Security Advisor Kim Sung-hwan, who was one of the architects of the concept and especially of
the tilt to the US.12 Kim Tae-hyo, Deputy head of the National Security Office, commented, “Inplaying a leading role, Korea will propose new standards of creation, invite other countries andreali[s]e its national interests within [the] IPEF.”13

The IPEF talks begin
During the formative months of the Administration, there was a debate as to whether the Trade
Bureau of the Ministry of Trade, Industry and Energy (MOTIE) should have moved back to the
Ministry of Foreign Affairs (MOFA), an experiment conducted during 2009-2014 under President
Lee Myung-bak.14 MOTIE retained the department, which is led by an official with the western titleof a ‘Minister’ while using a Korean title subordinate to the ‘Vice Minister’. The new Minster of Trade,
9

10

11
12
13
14

68

The current administration has a minority in the National Assembly with a high proportion of rural seats.
See Oh Seok-min, “S. Korea’s accession to CPTPP likely to boost real GDP, damage agricultural sector”,
Yonhap News Agency, 25 March 2022, https://en.yna.co.kr/view/AEN20220325005100320
Andrea Shalal, “U.S. not looking to renegotiate Trump-era steel quotas with S.Korea, says Raimondo”,
Reuters, 24 March 2022, https://www.reuters.com/business/us-not-looking-renegotiate-trump-era-steelquotas-with-skorea-says-raimondo-2022-03-23/
Lee Haye-ah, “Yoon says S. Korea’s participation in IPEF is only natural”, Yonhap News Agency, 23 May
2022, https://en.yna.co.kr/view/AEN20220523004200315
Kim Sung-han was replaced suddenly in March 2023 for unclear reasons but possibly for opposing Kim
Tae-hyo more pro Japanese and US views.
Kim Eun-young and Yoon Hee Young, “Tech cooperation with US to boost comprehensive strategic
alliance”, Korea.net, 19 May 2022, https://www.korea.net/NewsFocus/policies/view?articleId=214970
Many of the Ministers and Vice Ministers appointed had last served in government in his administrationin 2013.

The Republic of Korea and the IPEF

Ahn Duk-geun, had been a professor at Seoul National University (SNU) until nominated on May
9 2022.15 It is obvious from his past academic and official work, and his enthusiastic endorsementof the IPEF that Minister Ahn felt he could shape this opportunity to meet the needs of the twentyfirst century in an empirical way that could suit Korea.
After the launch of the IPEF, on the occasion of the 23 May 2022 Korea-US summit meeting, thegovernment claimed it had been actively engaging in the member states’ preliminary negotiations
process, proceeding with what must have been a very cursory economic feasibility evaluation(May-June 2022), and thereafter, held a public hearing (8 July 2022).16 Public hearings are held
almost secretly at very short notice in Korea to avoid the embarrassment of the opposition, so
only major bodies are notified. A ‘hearing is part of a process of collecting ideas on the matter andnot an occasion for the government to offer a final resolution.’17 Ministers of the countries invited
to be members of the IPEF held an informal virtual meeting on 26-27 July 2022, and the plan tonegotiate the IPEF was passed at a Korean Ministerial Meeting on international economic affairs
on 19 August 2022.18
The MOTIE made a report to the National Assembly on 18 August 2022 that “once IPEF negotiations
officially commence, the Ministry will strive in full measure to maximi[s]e national interest throughsufficient communication with interested parties and experts.”19 The basic documents for the Four
Pillars were described by MOTIE as the outcome of intensive negotiations that have taken placesince the launch of the Framework in May. MOTIE spoke of the Pillars as outlining the cooperation
mechanisms of a new economy for tackling digital and supply chain issues, and climate change.20
The Korean audience was not given any indication of changes that went into the initial US drafts
before the innocuous Pillar documents were published in September last year.
Recognising that the negotiating rounds starting in December 2022 would be crucial, MOTIE
announced that “all relevant ministries (MOTIE, the Ministry of Economy and Finance (MOEF),
Ministry of Foreign Affairs (MOFA), Ministry of Agriculture, Food and Rural Affairs (MAFRA), Ministryof Oceans and Fisheries (MOF), Ministry of Science and ICT (MSIT), Ministry of Justice (MOJ), Ministryof Government Legislation (MOLEG) and the Anti-Corruption and Civil Rights Commission (ACRC),
et cetera.) and industry experts will be working in tandem as One Team.”21

15 Oh Seok-min, “(profile) Professor with expertise in int’l trade tapped as new trade minister”, Yonhap News
Agency, 9 May 2022, https://en.yna.co.kr/view/AEN20220509010000320
16 “MOTIE submits IPEF plan to National Assembly”, Ministry of Trade, Industry and Energy, 31 August 2022,
https://english.motie.go.kr/en/pc/pressreleases/bbs/bbsView.do?bbs_cd_n=2&bbs_seq_n=1054
17 “IPEF public hearing”, Yonhap News Agency, 8 July 2022, https://en.yna.co.kr/view/PYH20220708141700325.
The press photo shows a larger audience.

18
19
20

21

“Administrative Procedures Act”, Korea Legislation Research Institute, 31 December 1996, https://elaw.
klri.re.kr/eng_service/lawView.do?hseq=335&lang=ENG. The term “public hearing” means the procedureby the administrative agencies of extensively collecting the opinions of parties, persons with expert
knowledge and experience, and the general public regarding any administrative functions through open
discussions” Administrative Procedures Act Article 2.
op. cit.
Ibid.
“IPEF ministerial statement outlines four pillars for economic cooperation”, Ministry of Trade, Industry
and Energy, 13 September 2022, https://english.motie.go.kr/en/pc/pressreleases/bbs/bbsView.do?bbs_
cd_n=2&bbs_seq_n=1064
Ibid.

69

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

After attending the IPEF meeting on 22 September 2022, Ahn asked a former colleague Prof. Lee
Si-wook at the KDI School to undertake a series of discussions with academics, businessmen andgovernment agencies. The results of the meeting, focused on the political-economic view of the
IPEF, were discussed at a domestic symposium on 6 October 2022, “Supply Chain Realignment Era,
the Meaning of Indo-Pacific Economic Framework for Prosperity (IPEF) and Role of Korea.”22 One
can assume that businesses welcomed the idea in principle but were wary of an agreement withno clear benefits to the parties joining in terms of trade. Equally, they were concerned about boththe exclusion of China, and China’s possible reaction. Businesses questioned the effectivenessof a fiat as opposed to a free-market Supply Chain Pillar and whether the proposals for anticorruption were necessary in view of the OECD Bribery Convention.23 Other academics queried
how a worthwhile agreement could be passed by the US Presidential Decree and not by the US
Congress, and how a group of countries which were a mix of OECD and non-OECD countries would
work.24 Would the agreement cut across or support the WTO rules, given the record of the US in
not supporting the WTO, and actively blocking the appointment of judges?
The second, third and fourth Pillars’ special negotiation round was an intersessional round in
Delhi preceding the official second round of the IPEF negotiations centred around three of the four
IPEF areas, namely Supply Chain, Clean Economy and Fair Economy. The MOTIE aimed to actively
engage in the negotiations to incorporate into the agreement the rules that will help expand
domestic companies’ Indo-Pacific exports and market presence. Ahn did not go to the Delhi roundin February due to being embroiled in the IRA negotiations with the US to save the Korean Electric
Vehicle (EV) industry.25 Instead, MOTIE’s Deputy Minister for FTA Negotiations Roh Keon-ki led thedelegation aiming to “make efforts to advance the negotiations in a way that the IPEF can playa central role in resolving pressing challenges facing the Indo-Pacific region through a balanced
approach based on rules and cooperation, while also securing Korea’s core interests.”26
When Minister Ahn attended the fourth public-private joint strategic meeting of the IPEF on June 72023 at the Korea Chamber of Commerce and Industry (KCCI) after the Detroit Round on 31 May
2023, his opening message was that “through the IPEF Supply Chain Agreement, the basics forjoint response has been established among IPEF member states” and added that “more efforts will
be made to see further outcomes in other areas like improving trade rules, raising transparency inanti-corruption and taxation, and clean energy transition, to provide a stable business environment
for firms.”27

22 “Trade Minister attends IPEF Strategy Symposium”, Ministry of Trade, Industry and Energy, https://
english.motie.go.kr/en/tp/tradeinvestrment/bbs/bbsView.do?bbs_seq_n=1090&bbs_cd_n=2&view_type_v=TOPIC&&currentPage=1&search_key_n=&search_val_v=&cate_n=
23 “Convention on Combating Bribery of Foreign Public Officials in International Business Transactions”,
Organisation for Economic Co-operation and Development,
https://www.oecd.org/corruption/
oecdantibriberyconvention.htm#
24 This issue remains a theme of Korean conversation despite the fact that 11 of the countries are membersof the CPTPP, see discussion on the Busan round below.
25 At this moment the USTR announced that Korean EVs currently made in the US would not get the IRA
subsidy and neither would Korean imports. See Yoon Young-sil, “Hyundai, Kia Scrambling as They Get
Excluded from US Subsidies”, Business Korea, 19 April 2023, https://www.businesskorea.co.kr/news/
articleView.html?idxno=113135#
26 “MOTIE attends IPEF Pillars 2-4 special negotiation round”, Ministry of Trade, Industry and Energy, 9
February 2023, https://english.motie.go.kr/en/pc/pressreleases/bbs/bbsView.do?bbs_cd_n=2&bbs_seq_n=119727 “Trade Minister attends 4th public-private joint strategic meeting for IPEF”, Ministry of Trade, Industry
and Energy, 7 June 2023, https://english.motie.go.kr/en/pc/photonews/bbs/bbsList.do?bbs_cd_n=1&bbs_
seq_n=1626

70

The Republic of Korea and the IPEF

The meeting was attended by representatives of relevant organisations, including the Korea
International Trade Association (KITA) and Korea Institute for Industrial Economics and Trade(KIET).28 After the session, the progressive The Hankyoreh (a Korean newspaper) ran an article
titled, Can the IPEF deliver the US dream of an Asian economy without China? The authors noted “It[the Supply Chain Agreement] is the first between the countries participating in the IPEF, which
was launched in May 2022, and the first international agreement regarding supply chains,” butquestioned whether China could really be excluded by such an agreement.29

IPEF issues in Korea before the Busan round
Before the Busan round started on July 9 2023, Minister Ahn said that he expected agreements
to be made comparable to those in the Detroit session. In fact, the Busan round was inconclusiveand did not discuss these issues. According to observers, it was mainly concerned with differences
between the CPTPP text preferred by the seven countries and the proposed US text.30 Thereremain two main issues which had circulated in Korea since the early days of the IPEF. These are:where does Korea’s China relationship stand as the IPEF takes shape; and what is the practical useof the IPEF and how does it serve the Korean national interest?
One: Where does Korea’s China relationship stand as the IPEF takes shape?
As of 2021, the trade volume between Korea and the remaining 13 IPEF member nations hadcome to US$498.4 billion, accounting for 39.6 per cent of Seoul’s total trade that year.31 Trade with
China including Hong Kong came to about 30 per cent. From day one, voices throughout Korea
had questioned how being part of the IPEF – seen as reshaping the Indo-Pacific to exclude China– was going to affect China trade relations. Already in May 2022, the government was ‘bracing fora possible backlash from China, which claims that the initiative is aimed at countering Beijing by
excluding the country from global supply chains and rearranging them.’32“I think that China is unhappy about the IPEF,” Park Jin, Minister of Foreign Affairs said during ameeting of the Assembly’s Foreign Affairs and Unification Committee, having just completed avideo call with Chinese Foreign Minister Wang Yi. According to Chinese reports, Wang told Park
that the two sides must oppose moves to decouple economically and ensure that the world’s
supply chains remain stable and smooth.33 The Korea Times (a Korean newspaper) wrote, “Although
the Yoon administration stresses that South Korea’s participation in the IPEF is a decision basedon national interests and is not intended to contain China, the opposition party is expressing
concerns about possible diplomatic and economic retaliation.”34
28 “Trade Minister attends 4th public-private joint strategic meeting for IPEF”, Ministry of Trade, Industry
and Energy, 7 June 2023, https://english.motie.go.kr/en/pc/photonews/bbs/bbsList.do?bbs_cd_n=1&bbs_
seq_n=1626
29 Kim Hoe-seung and Kim So-youn, “Can the IPEF deliver the US dream of an Asian economy without
China?”, Hankyoreh, 30 May 2023, https://english.hani.co.kr/arti/english_edition/e_business/1093886.
html
30 Interviews with observers from foreign embassies in Korea involved in the Busan round. Korea not beinga member of CPTPP to date was left on the sidelines of this issue.
31 “Korea holds public-private meeting on IPEF developments, future strategies”, The Korea Times, 31 May
2023, https://www.koreatimes.co.kr/www/nation/2023/06/113_352040.html
32 “South Korea to join US-led Indo-Pacific economic initiative”, The Korea Times, 18 May 2022,
https://www.koreatimes.co.kr/www/nation/2023/06/113_329387.html
33 Ibid.
34 Ibid.

71

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Korean trade suffered in 2018 over the Terminal High Altitude Area Defense (THAAD) missile
location in Korea in Chinese retaliation which stopped tours to Korea, and forced the Lotte Groupto give up its multibillion dollar business in China.35 Kim Tae-hyo, as seen by some as a hardest proUS voice proclaimed “The IPEF is not aimed at forcing countries to decouple from China.”36 A day
later, Kim Tae-hyo said that “Seoul and Beijing are discussing follow up agreements to their bilateralfree trade agreement pertaining to supply networks, investments, and the service sector.”37 He
also added that they were in discussions with China to update the FTA in preparation to smoothly
open up not only the service sector but other markets as well. When asked to elaborate, an official
in the Presidential Office told The Hankyoreh, “We’ve instructed the trade officials at the Ministryof Trade, Industry and Energy who are negotiating the Korea-China FTA to set up a cooperative
mechanism to stabili[s]e our supply chains with China.”38
As for China possibly pursuing economic retaliation against South Korea for its IPEF membership,
as it had following the US’ deployment of its THAAD anti-missile system in South Korea, Kim said
circumstances surrounding the two cases are very different. The presidential aide added that the
government will proactively communicate with both the US and China to avert backlash from
Beijing.”39 MOTIE had earlier funded a Peterson Institute for International Economics (PIIE) study
by Mary E. Lovely and Abigail Dahlman on the impact of the US decoupling from China and its
impact on Korea’s trade. The study was given an IPEF twist when it was published in July 2022.
Lovely and Dahman had used the Trade in Value Added (TiVA) database of the OECD for theirstatistical analysis.40 “The Policy Brief therefore focuses on the entanglement of Chinese andKorean supply chains for unsanctioned goods and assesses how the US demands to “build China
out” could affect Korean manufacturers. It highlights Korean engagement in China-linked supply
chains for computer, electronic, and optical equipment, a sector in which technology tensions
between the [US] and China are growing.” The conclusions of this study are complex but indicatethat Korea’s supply chain in some of its most dynamic Information Technology (IT) products
could be seriously affected in case of the supply chain being diverted from its present course by
US policy, especially damaging to Korean investment in China with consequent cost penalties.
However, these diversions are likely to come from other aspects of the US policy rather than the

35 “South Korea’s Lotte seeks to exit China after investing $9.6 billion, as Thaad fallout ensues”, The Straits
Times, 13 March 2019, https://www.straitstimes.com/asia/east-asia/south-koreas-lotte-seeks-to-exitchina-after-investing-96-billion
36 Kim Mi-na, “National security advisor’s ouster could afford hard-liner Kim Tae-hyo stronger influence”,
Hankyoreh, 31 March 2021, https://english.hani.co.kr/arti/english_edition/e_national/1086055.html;
op. cit.
37 “Top Office Dismisses Claims IPEF Membership Jeopardizes China Ties”, KBS World, 19 May 2022, http://
world.kbs.co.kr/service/news_view.htm?lang=e&Seq_Code=169765
38 Ibid.
39 Jung In-hwan, Seo Young-ji and Lee Bon-young, “S. Korea confirms intent to join IPEF, prompting fears
of backlash from China”, Hankyoreh, 19 May 2022, https://english.hani.co.kr/arti/english_edition/e_international/1043541.html
40 The latest TiVA indicators were generated using the 2021 release of the OECD Inter-Country Input-Output(ICIO) tables, which extend to 2018 relationships in place before the COVID-19 pandemic. Althoughsomewhat dated, they reflect the most recently available information.

72

The Republic of Korea and the IPEF

IPEF Supply Chain chapter agreement.41 Nevertheless, the Korean opposition may blame the IPEF
for the end result, quoting Lovely and Dahlman’s ascription of these impacts to the IPEF.42
Korea and China have continued to talk about extending their FTA in services and Ahn confirmedthat a Supply Chain Agreement was being negotiated with China to maintain stability of trade.
Korea signed a Memorandum of Understanding (MOU) with China on 27 August 2022 on supply
chain relations and appointed a new high-level body. The MOU calls for the establishment of the
new director-level group on supply chains to discuss related issues ‘in time’ when any supply
disruptions take place and to enhance policy consultations, according to the Ministry, along withjoint proposals to open the services sector. This was signed at the 17th Korea-China Meeting on
Economic Cooperation by Deputy Prime Minister (DPM) Mr Choo and Foreign Minister Park Jin
who led the negotiations with China. It appears, in outline, to be similar to what the Committee
agreed in Detroit for the IPEF.
During the first half of 2023, Korea and China have continued discussions on matters such as
chip supplies and other investments. China’s commerce minister said after meeting with South
Korean Trade Minister Ahn Duk-geun on the sidelines of the Asia-Pacific Economic Cooperation(APEC) conference in Detroit in May 2023, that they have agreed to strengthen dialogue andcooperation on semiconductor industry supply chains amid broader global concerns over chip
supplies, sanctions and national security. They exchanged views on maintaining the stability of theindustrial supply chain and strengthening cooperation in bilateral, regional and multilateral fields,
according to a statement from the Chinese Ministry of Commerce.43
World media and President Yoon tend to trumpet every move by the US, and about the US andKorea, while agreements between China and Korea tend to be under-reported under Korea’s
attempt to maintain a balance by the Foreign Minister and Deputy Prime Minster/Finance
Minister.44 Whether this will be enough depends partly on their skill and partly on the answer tothe second question.
Two: What use is the IPEF anyway?
This serious conversation raised the issue of whether Korea could truly be a rule-maker rather
than a rule-taker. With the IRA and the CHIPS Act, and the realisation that Biden and Trump are
cut from a similar protectionist mould from a Korean perspective, resulted in real popular anger

41 Mary E. Lovely and Abigail Dahlman, “22-8 South Korea Should Prepare for Its Exposure to US-China
Technology Tensions [Policy Brief]”, Peterson Institute for International Economics, July 2022, https://www.
piie.com/sites/default/files/documents/pb22-8.pdf. About 60% of Korea’s semiconductor exports go
to China of which about half are processed in China and then exported by Korean local affiliates andChinese companies.
42 Ibid. Throughout the paper as published, Lovely and Dahlman write as though the IPEF rather than other
US policy such as IRA, CHIPS Act or USTR directives will result in these changes which does not seem tobe the case with the current agreement.
43 “China, South Korea agree to strengthen talks on chip industry, Chinese commerce ministry says”,
Reuters, 27 May 2023, https://www.reuters.com/technology/china-south-korea-agree-strengthen-talkschip-industry-chinese-commerce-ministry-2023-05-27/
44 Choi Hyun-june and Kim Hoe-seung, “Chip powerhouse S. Korea struggles to strike balance between
China’s demands, US pressure”, Hankyoreh, 1 June 2023, https://english.hani.co.kr/arti/english_edition/e_international/1094267.html

73

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

on the Korean side.45 The IRA and the CHIPS Act directly challenged Korea’s core interests. This was
not part of the IPEF or any known formal discussions during the IPEF though the subject must havesurfaced during discussions. Minister Ahn was now thrown into the position of being aggressive
towards the Office of the United States Trade Representative (USTR), while the same organisation
was promoting the IPEF.
Reporters at the 28 May 2023 session with Minister Ahn came away asking what use the IPEF
was when it was all agreed. Ahn had been enthusiastic about one of the three committees set up
under the Supply Chain Pillar, which would create a framework for discussion about supply chain
disruption. “The deal on supply chains lays the foundation for joint responses to any global supply
chain disruptions among the member nations. The government will strive for making tangible
results in the other sectors so as to provide our companies with stable business circumstances,”
Ahn said. 46
He said he hoped that the Busan round in July would create further useful outcomes. As noted
above, the Busan round achieved almost no concrete results and therefore, all these issues wereleft to the Bangkok round. As noted, a dispute arose over the wording of chapters deviating fromthe CPTPP agreement despite the fact that each chapter’s document is bland and says most of
the right things. Possibly through inputs by the 13 non-US members including frequent insertionof references to the WTO (despite the US’ obstructionism in not appointing judges bringing tradedisputes to a halt) and the widespread US outcry at the WTO’s condemnation of the US’ use oftariffs to block trade.47
Ahn also briefed the participants on ongoing negotiations on the three remaining fields of Trade,
Clean Economy and Fair Economy, and exchanged opinions about Korea’s stance on the future
path “and policy measures to maximi[s]e benefits for domestic companies.”48 This latter comment
implies that Korea might change its internal policies to make any IPEF measures more attractive to
Korea’s interests although exactly what form these changes might take are unclear.
Some were excited about the prospective digital agreement while for others, Ahn’s proposal
for an IPEF carbon trading market49 based on the Paris Agreement was more unique. It seems
that Ahn’s thinking was now about driving agreements which would pull the IPEF closer to theglobal vision rather than making rules that worked against them.50 On the digital agreement, KITA
published its Analysis and Implications of Digital Trade Norms of Indo-Pacific Economic Framework(IPEF) Participating Countries on 16 June 2023. It outlines the importance of extending digital rules
to developing countries, but also stresses on the upcoming battle over international or localised
data.51 The CPTPP already has a good digital chapter and if the seven IPEF members who are also
CPTPP members (Korea is currently only an applicant for membership) are consistent, they appear

45 Jaemin Lee, “How a Biden Legislative Achievement Jeopardized Relations With South Korea”, The Diplomat,
6 January 2023, https://thediplomat.com/2023/01/how-a-biden-legislative-achievement-jeopardizedrelations-with-south-korea/
46 op. cit.
47 Paul Krugman, “Why America Is Getting Tough on Trade”, The New York Times, 12 December 2022, https://www.nytimes.com/2022/12/12/opinion/america-trade-biden.html
48 op. cit.
49 As indicated in press reports on the Minister’s briefing meeting with Korean industry.
50 Jeong Seok-joon, “[Exclusive] Government starts designing IPEF carbon market... take the initiative”, The
Digital Times, 13 June 2023, http://www.dt.co.kr/contents.html?article_no=2023061302109958063004
51 Ryu Eun-joo, “Conclusion of IPEF Digital Trade Negotiation, Creation of Business Opportunities for One
Company”, ZDNET Korea, 14 June 2023, https://zdnet.co.kr/view/?no=20230614100620

74

The Republic of Korea and the IPEF

to being insist on compatibility. One could read the USTR comment on the Bangkok round in thislight. Building on the discussions that took place during the fourth negotiating round in Busan,
South Korea, in July 2023, the IPEF partners continued to make progress on negotiations towards
high-standard outcomes.52 The Korean comment was that the “fifth round will focus on narrowing
down the issues of Pillar 1 (trade), Pillar 3 (clean economy) and Pillar 4 (fair economy), as well as
the participating countries’ differences of opinion over core issues.”53
Fundamentally, the issue that underlay Koreans’ minds as the Korean National Assembly was
briefed on each stage is that on the US’ side, the IPEF rests on Executive Action and the US
Congress is not involved. No US law would be changed. On the Korean side, changes in the law totake account of the IPEF if any Acts required modification would need approval by the National
Assembly which at least until May 2024 is with the opposition.
One issue that Koreans have either hardly noted or hardly commented on is the labour standards
which underlies part of the US initiative. President Yoon is currently at war with Korea’s labour
unions and with parts of the workforce itself and he is unlikely to favour conditions for morelabour inspections from the US.54

Korea, the EU and the IPEF
Together, China and the EU make up about 45 per cent of Korea’s export trade, outweighing the
IPEF countries. The EU as a rule giver may see several challenges in the IPEF. On 22 May 2023, at asummit in Seoul, President Yoon and Ursula von der Leyen (President of the European Commission)and Charles Michel (President of the European Council) signed or confirmed a landmark set ofagreements.55 Further, as stated in Korea’s own Indo-Pacific Strategy, cooperation with the EU
plays a vital part in establishing a rules-based international order.56
The recent legislative activities by the US, such as the IRA, the Science Act, and sanctions on exports
to China are in line with the ‘America First’ policy but burden its allies and partners. While Korea
is participating in the establishment of trade rules in newly emerging areas through the IPEF, thefuture trajectory of the IPEF remains uncertain. Dr Jaewoo Choo of the Institute of Foreign Affairs
and National Security (IFANS) in an Institut français des relations internationales (IFRI) paper states

52 “Joint USTR and U.S. Department of Commerce Readout of Fifth Indo-Pacific Economic Framework
Negotiating Round in Thailand”, Office of the United States Trade Representative, 18 September 2023,
https://ustr.gov/about-us/policy-offices/press-office/press-releases/2023/september/joint-ustr-and-usdepartment-commerce-readout-fifth-indo-pacific-economic-framework-negotiating
53 “Korea participates in the 5th round of IPEF negotiations”, Ministry of Trade, Industry and Energy, 12
September 2023, https://english.motie.go.kr/en/tp/ftaeconomiccooperration/bbs/bbsView.do?bbs_seq_n=1422&bbs_cd_n=2&view_type_v=TOPIC&&currentPage=1&search_key_n=&search_val_v=&cate_n=454 Shin Ji-hye, “Yoon wages war against labor unions, once the force behind Korea’s democratization”, The
Korea Herald, 14 March 2023, https://www.koreaherald.com/view.php?ud=20230314000517;
No Kyung-min, “[News Focus] What’s really driving Yoon’s war on unions?”, The Korea Herald, 12 June
2023, https://www.koreaherald.com/view.php?ud=20230612000643
55 “EU-Republic of Korea summit, 22 May 2023”, Council of the European Union, 22 May 2023, https://www.
consilium.europa.eu/en/meetings/international-summit/2023/05/22/;“Factsheet: EU-Republic of Korea”, European Union External Action, 22 May 2023, https://www.eeas.
europa.eu/eeas/factsheet-eu-republic-korea_en
56 “Strategy for a Free, Peaceful, and Prosperous Indo-Pacific Region”, Ministry of Foreign Affairs, 28
December 2022, https://www.mofa.go.kr/eng/brd/m_5676/view.do?seq=322133. Original drafts hadconcentrated on the US, and later drafts added China, SE Asia and EU.

75

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

that “a different discussion on the trade environments needs to happen that distances itself fromthe future protectionist approach taken by the US. In this context, a partnership between the
EU and the [Republic of Korea (ROK)] is called for more than ever.”57 In addition to the ROK-EU
FTA platform, the EU may consider including the ROK as the third partner of the EU’s Trade andTechnology Council (TTC) negotiation, currently conducted with the US and discussed with India.58

Conclusion
Ahn Duk-geun appears to be beginning the formulation of a new dynamic for the IPEF, with anattempt to inject a Korean perspective into the negotiations. Korea is statistically going to bea victim of any decoupling between China and the US; he may help to mollify this. But muchdepends on other ongoing negotiations between Korea and China and between Korea and the EU.
Certainly, the real future of the IPEF also hangs on the May 2024 Korean elections for Seoul, andthe November 2024 elections in the US, for all the IPEF members.

57 Jaewoo Choo, ‘South Korea and IPEF: Rationale, Objectives and the Implications for Partners andNeighbors’, Center for Asian Studies, Institut français des relations internationales (IFRI), Asie.Visions, No.
133 (February 2023). https://www.ifri.org/en/publications/notes-de-lifri/asie-visions/south-korea-andipef-rationale-objectives-and-implications. This article suggests, first, that South Korea and France mustfind ways to cooperate to “manage” the United States. Second, it argues that South Korea should take thelead in building a collective mechanism to manage and control the US, which must be made more awareof the external effects of its legislation. Third, it suggests that South Korea and France share information
with respect to developments around shaping the IPEF in the United States.
58 Ibid. This was a proposal made by the previous administration before Minister Yeo was replaced by
Minister Ahn. See János Allenbach-Ammann, “South Korean trade minister calls for closer ties with theEU”, Euractiv, 13 October 2021, https://www.euractiv.com/section/economy-jobs/news/south-koreantrade-minister-calls-for-closer-ties-with-the-eu/

76

The Republic of Korea and the IPEF

About the author
Dr Tony MICHELL is Project Coordinator of the Policy Dialogue Support Facility (PDSF) between
the EU and ROK, and Visiting Professor at the KDI School of Public Policy and Management. He
received his PhD in Economic History from the University of Cambridge and his areas of interests
are economic development and FDI, change management and DPRK engagement policy.
He has managed consulting companies in Korea, China and the DPRK. He is co-chair of PY
Perspectives, a discussion group of diplomats accredited to PY and NGOs. He curates a monthly
briefing session in Seoul for businesses and diplomats Korea Business Forum. He was a research
assistant to the Director of Economic Planning at EPB, ROK (1978-1980) and consultant to theWorld Bank, UNDP and ILO (1980-1986).
Dr Michell’s major publications include a chapter in the Cambridge Economic History of Europe(1968), Employment and Industrialization in South Korea (1989), and Samsung Electronics
and the Leadership of the Electronics Industry (2010). He has taught at the Universities ofCambridge, University of Hull, University of Washington, Seattle, HUFS, Ewha and EAP (Paris).
He has also held research fellowships at Cambridge University, Universiteit te Leuven,
Erasmus University Rotterdam, and The European University Institute, Firenze.

77Perspectives on IPEF from Aotearoa New Zealand

Perspectives on IPEF
from Aotearoa New Zealand
Mia MIKIC

This paper articulates the rationale behind New Zealand’s decision to join the Indo-Pacific
Economic Framework for Prosperity (IPEF) based on a study of official documents, publicly
available submissions and other printed materials, as well as conversations with a number ofexperts. It discusses the challenges that might be faced in the negotiation process and later in theimplementation of the negotiated agreements. The paper argues that the rationale is not to befound in the conventional market opportunity (or trade creation) arguments. Instead, it is linked
to opportunities to pursue non-trade and non-economic objectives incorporated in the strategies
put in place by New Zealand in recent years. These include, inter alia, the Industry Transformation
Plans, Trade for All, and Trade Recovery Strategy 2.0. The fact that the IPEF was introduced as
an unconventional trade agreement while still incorporating trade-related instruments has
opened an avenue for New Zealand to find support in international agreements for its packageof developmental objectives. Among several negotiation and implementation issues, the paper
examines the obligations to Māori under Te Tirity o Waitangi/Treaty of Waitangi on the negotiationside, and the potential difficulty to bring it into implementation due to its ‘non-trade agreement’status.

79

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Introduction
For the last four decades, Aotearoa1 New Zealand has been a poster child for an open and fairplaying economy in the world.2 One of the fastest trade policy reformers in the late 1980s, thecountry became a zealous pursuer of bilateral and plurilateral trade agreements in the period of‘the golden weather for New Zealand trade’.3 With the trade skies turning grey even before the
COVID-19 pandemic, New Zealand, cognisant of the critical importance of trade for long-term
prosperity, intensified its engagements with various economies around the region and the world
to ease its navigation through an increasingly uncertain global trade and investment environment.
While a staunch advocate of the multilateral approach to trade governance, New Zealand embraced
the so-called ‘concerted open plurilateralism’.4 This approach enabled New Zealand to seek andleverage market opportunities through bilateral and plurilateral trade agreements. It also allowed
for promoting the multilateral system by building the World Trade Organization (WTO) rules into
these trade agreements as well as working with partners on modernisation of some outdated rules
and building forward-looking rules. Trade has been helpful as an engine of growth, and economic
and social scarring from the COVID-19 pandemic certainly requires trade to heal and move on. For
New Zealand, this means engaging in trade that is based on principles of inclusivity, including theinterests of women and Māori, and the principles of sustainability. New Zealand utilised its hostingrole of the Asia Pacific Economic Cooperation (APEC) in 2021 to, whenever possible, insert theseprinciples into the region’s initiatives and escalate them to the global level.5
In the context of deepening policy uncertainty and worsening of global geoeconomic tensions,the proposal for the Indo-Pacific Economic Framework for Prosperity (IPEF) initiated by the UnitedStates (US) in October 2021 was welcomed by New Zealand and others interested in safeguarding
economic relations with the US and with each other, for the purpose of boosting the postCOVID-19 recovery. Most of these economies were also not averse to placing resilience, inclusivity
and sustainability squarely onto the trade agenda of the region. Moreover, the IPEF proposal wasinterpreted as a chance for the US’ pivot to Asia for the second time, after several years of the‘region’s neglect’.6
1

2

3

4
5
6

80

Aotearoa is one of the names that the indigenous Māori use to refer to New Zealand. See “Trade Policy
Review – Report by Country New Zealand,” WT/TPR/G/426, World Trade Organization, 6 April 2022,
https://www.wto.org/english/tratop_e/tpr_e/g426_e.pdf“Trade Policy Review Report by the Secretariat - New Zealand,” WT/TPR/S/426, World Trade Organization,
6 April 2022, https://www.wto.org/english/tratop_e/dispu_e/find_dispu_cases_e.htm. This document
refers to New Zealand as “one of the most open economies in the world” (p.11). As of 1 June 2023, there
is no record of New Zealand being an object of a complaint in the WTO Dispute Settlement process.
This period refers to 1994-2018. See “A key-note address at the opening of the seventh session of theCommittee on Trade and Investment United Nations ESCAP” speech by Vangelis Vitalis, Deputy Secretary,
Trade and Economic Group, Ministry of Foreign Affairs and Trade, New Zealand, 27 January 2021, https://www.unescap.org/sites/default/d8files/event-documents/V%20Vitalis%20opening%20transcript_clean.
pdf
Jonathan de Leyser, “The case for Concerted Open Plurilateralism“, Institute for Free Trade, https://ifreetrade.org/article/the_case_for_concerted_open_plurilateralism1
See more details on these initiatives (sections 3, 5 and 7) in the “Trade Policy Review – Report by Country
New Zealand,” WT/TPR/G/426, World Trade Organization, 6 April 2022, (op. cit).
The US’ economic relations with the Asia-Pacific was heavily interrupted by its withdrawal from theTrans-Pacific Partnership (TPP) agreement in January 2017. Some commentators suggest the US failed
to counterbalance China’s increasing presence in the region from much earlier. See Mohammadbagher
Forough, “America’s Pivot to Asia 2.0: The Indo-Pacific Economic Framework,” The Diplomat, 26 May 2022,
https://thediplomat.com/2022/05/americas-pivot-to-asia-2-0-the-indo-pacific-economic-framework/

Perspectives on IPEF from Aotearoa New Zealand

New Zealand’s trade patterns and the use of trade instruments relevant to the
IPEF
As a small economy, New Zealand is expected to be dependent on global trade. However, itsdistance to markets and the small size of its manufacturing sector have prevented it from growing
into a key actor in regional and Global Value Chains (GVC). Nevertheless, prior to the COVID-19
pandemic, in 2019, the share of external trade in its Gross Domestic Product (GDP) was 55 percent. By 2021, this fell to 44.5 per cent, with four-fifths of it contributed by merchandise trade,signalling a much slower recovery of commercial services trade after the COVID-19 pandemic.7
In 2021, almost 60 per cent of the merchandise exports went to four destinations: China (31.7 percent), Australia (12.4 per cent), the US (10.6 per cent), and the European Union (EU) (5.1 per cent).
This reflects a continued geographical concentration of the country’s exports as, in 2015, thesefour markets absorbed only 53 per cent of exports. From 2015 - 21, China’s share increased by 14
percentage points at the cost of a reduced share of all other traditional export markets of New
Zealand.8 It is important to note that this growing reliance on China happened while the country’s
total exports expanded by US$10 billion. At present, China is New Zealand’s largest trading partner
on both the export and import side.9
Services trade has still not recovered after the serious contraction caused by disruptions during the
COVID-19 pandemic, especially in international travel and education sectors. The figures for 2020
show somewhat smaller geographical concentration, with 50 per cent of exports of commercial
services destined to Australia, the US, United Kingdom (UK), India and Singapore. The largest
trading partner in services trade is Australia, followed by the US.10
Despite strongly supporting the multilateral trade governance under the WTO, New Zealand has
used bilateral and plurilateral trade negotiations for enlarging market access opportunities for its
exports. Out of its 15 signed or enforced trade agreements,11 only the agreement with Australia
predates the establishment of the WTO. Nine agreements are bilateral (all but the one with the UK
are with Asian economies) and six are plurilateral (including the one with the EU).
Figure 1 shows that about 72 per cent of total merchandise exports goes to economies with whomthere are major bilateral and plurilateral trade agreements in force or signed. Signing bilateral
trade agreements with the US and India would increase that coverage by about 12 percentage

7

8
9“Trade Profiles 2022”, World Trade Organization, 2022, 262-263, https://www.wto.org/english/res_e/statis_e/daily_update_e/trade_profiles/NZ_e.pdf;“Asia-Pacific trade and investment trends brief 2022/2023 : New Zealand”, 9 January 2023, United Nations
Economic and Social Commission for Asia and the Pacific (UNESCAP), https://www.unescap.org/kp/2023/
asia-pacific-trade-and-investment-trends-brief-20222023-new-zealand
op. cit.
China is the largest goods trading partner of most IPEF members (excluding Brunei Darussalam, Fiji, India
and the US). See Han-Koo Yeo and Wendy Cutler, “Strengthening Regional Supply Chain Resiliency

Through the Indo-Pacific Economic Framework (IPEF)”, Asia Society Policy Institute, Issue Paper, May2023.
10 Ibid.
11 As of June 2023, 13 out of these 15 agreements have been notified to the WTO. Agreements with the EU
and UK are yet to be ratified.

81

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

points.12 India and the US are members of the IPEF and if the IPEF were a conventional trade
agreement, negotiating trade under it would have allowed access to both markets. However, theIPEF is conceptualised as a non-traditional agreement which does not seek to create market accessthrough tariff reductions among members. From the beginning, this feature of the IPEF did not sit
well with most of its developing country members.13 Increasingly – and most likely as the response
to not only the Asian developing country members, but also some of the US’ businesses – it has
been pointed out that market access could (and should) be leveraged through instruments otherthan tariff concessions.14
Figure 1: Contribution of Regional Trade Agreements (RTAs) to total exports (% averages for
2019-2021, merchandise exports)15

Source: Calculated by author using UNCOMTRADE data downloaded from World Integrated Trade Solution,
June 2023

12 As observed with the expansion of trade with China after the signing of the China-New Zealand Free Trade
Agreement (FTA) in 2008 (upgraded in 2022), the share of bilateral trade with China in New Zealand’s
total trade has doubled since 2015. While it is highly unlikely that bilateral trade with India and the US
would follow the same trajectory, they can rise faster with, than without, agreement-based preferences.
13 Gary Clyde Hufbauer and Megan Hogan, “Security not economics is likely to drive US trade engagementin Asia,” East Asia Forum, 9 Jan 2022, https://www.eastasiaforum.org/2022/01/09/security-not-economicsis-likely-to-drive-us-trade-engagement-in-asia/
14 In the press conference announcing the completion of the IPEF Supply Chains Agreement, US Commerce
Secretary Gina Raimondo and the USTR Katherine Tai argued that the absence of focus on tariffelimination is not a weakness of the IPEF. Instead, the USTR argued that “from the very beginning, [theIPEF] is not a traditional trade deal. We’re not just trying to maximi[s]e efficiencies and liberali[s]ation.
We’re trying to promote sustainability, resilience and inclusiveness.” See “Indo-Pacific nations vow to
fortify supply chains for critical items”, The Japan Times, 28 May 2023,
https://www.japantimes.co.jp/news/2023/05/28/business/us-indo-pacific-deal/
15 To prevent double-counting, the RCEP excludes Australia and the CPTPP excludes Australia, Brunei
Darussalam, Japan, Malaysia, Singapore, and Vietnam. Rest of the World (ROW) includes some economies
with whom New Zealand has trade agreements (for example, Hong Kong, China, Chinese Taipei, andmembers of the Pacific Agreement on Closer Economic Relations [PACER plus])82

Perspectives on IPEF from Aotearoa New ZealandAn evidence-based view on the value of a trade deal can be obtained from the openness of one’s
own and potential partners’ markets. Traditionally, tariffs were the main trade policy instrument.
At present, various forms of non-tariff measures (NTMs) claim attention of both trade negotiatorsand businesses.16
Table 1 shows that New Zealand’s Most Favoured Nation (MFN) applied tariff rate averages 1.9
per cent across all tariff lines. The country does not impose any tariffs on about 66 per cent of
its tariff lines, leaving less than 35 per cent of tariff lines as the potential object of negotiations
for tariff elimination or reduction.17 These lines contain commercial value for trading partners tonegotiate with New Zealand. The average applied rate for these tariff lines is 5.7 per cent (2021)
with relatively small number of domestic peaks (5.6 per cent) and no international peaks. This
does not give much negotiating power to the New Zealand trade negotiators as, in addition to thesmall domestic market, entry barriers in the form of tariffs are not high enough for partners tooffer much reciprocating access. Understandably, in the agreements already negotiated, almost
all these tariff lines were made duty-free.18
The structure of tariff protection in other IPEF members varies (see Table 1). Simple average applied
MFN ranges from 0 for Singapore to 18.3 per cent for India; the share of zero duties in all tariff lines
ranges from 100 per cent for Singapore to 1.9 per cent for India; the share of tariff rates higher
than 15 per cent ranges from 0 (Australia, Brunei, New Zealand and Singapore) to 37.7 per cent for
India, and the maximum rates go from 45 per cent in New Zealand to over 1000 per cent in Fiji and
Malaysia. This shows that despite relatively low applied tariffs, there is scope for commercial gains
from negotiations on tariff reductions among countries that do not have free trade agreementswith each other (mostly with respect to Fiji and the US). For example, New Zealand does not havea Regional Trade Agreement (RTA) with either India or the US; the Association of Southeast Asian
Nations (ASEAN) members of the IPEF (except Singapore) and Korea do not have an RTA/FTA withFiji and the US. Therefore, the benefits to be harvested from the elimination of tariffs, while notnegligible, would vary among the IPEF members. Nonetheless, tariff elimination is not only aboutmarket access; it contributes to improving predictability and stability of the business environment,
especially for GVC-linked producers operating with thin profit margins.

16 This does not mean that tariffs are unimportant. Low level of bindings, tariff peaks, as well as nuisancetariffs and uncontrolled unilateral increase of tariffs can significantly increase trade costs and consumers’
prices, as seen with the US tariffs under President Trump. See Inu Manak, et. al., “The Cost of Trump’s
Trade War with China Is Still Adding Up”, Council on Foreign Relations, 18 April 2023, https://www.cfr.org/
blog/cost-trumps-trade-war-china-still-adding
17 New Zealand’s most protected industries are footwear, textiles, and textiles articles, with the highest
simple average applied MFN rate for clothing at 9.6%. According to the WTO, New Zealand’s tariffs show
positive escalation, suggesting more processed goods enjoy higher protection than raw materials or
semi processed goods. See “Trade Policy Review Report by the Secretariat - New Zealand”, WT/TPR/S/426,
World Trade Organization, 6 April 2022, https://www.wto.org/english/tratop_e/tpr_e/s426_e.pdf
18 Ibid. (See Table 3.5 Summary analysis of New Zealand’s preferential tariffs, 2021).

83

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Table 1: Tariff structure of New Zealand and other IPEF members
Simple average Duty free (shares)
MFN applied (%) MFN applied* (%)

Tariff rateapplied >15$(%)

Max. duty
MFN applied(%)

Australia

2.4

52.0

0.0

22

Brunei Darussalam

0.3

95.8

0.0

135

Fiji

7.9

26.1

5.3

> 1000

India

18.3

1.9

37.7

328

Indonesia

8.1

13.1

9.8

150

Japan

4.2

53.1

3.6

628

Korea, Rep.

13.6

17.1

10.7

887

Malaysia

5.6

66.5

13.1

> 1000

New Zealand

1.9

66.1

0.0

45

Philippines

6.1

12.8

3.3

65

Singapore

0.0

100.0

0.0

91

Thailand

11.5

37.0

26.7

226

United States

3.4

47.3

2.7

350

Vietnam

9.6

35.3

24.4

135

Country

Source: Prepared by author from data in WTO, World Tariff Profiles, Summary tariff tables, 2022
Notes:* Share of HS 6-digit subheadings in per cent$ Share of HS 6-digit subheadings in per centWhile tariffs still matter, NTMs matter much more. Often seen as being distortionary, they areassociated with adverse impacts on trade costs/efficiency as well as transparency. However, they
are also credited with achieving non-economic objectives that are part of public policies.19
NTMs encompass a range of different border and behind-the-border instruments. Ad-valorem
tariff equivalents (AVE) are used for assessing the impact of NTMs on trade costs and various
prevalence indicators to gauge potential distortionary impacts. According to data from the United
Nations Conference on Trade and Development (UNCTAD) Trade Analysis and Information System(TRAINS) database, 95 per cent of New Zealand’s exports to the US, and 82.6 per cent of its exports
to Australia, faced at least one NTM. For all other trade partners, the average coverage ratio
was around 78 per cent. Exports to the US and Australia faced 4.8 and 4.1 NTMs on average,
respectively. The prevalence score for all other trade partners was 2.7 NTMs on average (Figure 2).

19 “Navigating non-tariff Measures towards Sustainable Development”, United Nations, Asia-Pacific Tradeand Investment Report 2019, 2019, https://www.unescap.org/publications/APTIR2019;“Non-tariff measures - Impacts, trends and effects on exports from New Zealand”, Sense Partners,
January 2022, https://www.mfat.govt.nz/assets/Trade-General/Trade-stats-and-economic-research/
Non-tariff-measures-Impacts-trends-and-effects-on-exports-from-New-Zealand-January-2022.pdf

84Perspectives on IPEF from Aotearoa New Zealand

The cost impact of NTMs on exporters are only indicative20 since compliance costs of NTMs vary
widely between sectors and countries, and even between firms within countries. Nonetheless,higher NTM AVEs have the same impact as high tariffs in terms of conferring a competitive
advantage on some exporters. Indeed, it is useful to note in the context of the IPEF: “Establishedtraders from countries that have strong commercial, social and cultural connections (that is,
better networks) may well be less affected by NTMs than those in less well-connected countries.”21
For New Zealand, exports with highest costs from NTMs are beverages, wool, and other animal
products.
Figure 2: NTMs faced by New Zealand’s exports to trade partners (Coverage ratio in % andprevalence scores)

Source: UN ESCAP, “New Zealand Trade Brief,” Asia-Pacific Trade and Investment Trends 2022/202322

Subsidies, as NTMs, have caused deep concerns given the significant rise in their number, as
they are often distortionary, trade-restrictive and difficult to be dialled down.23 There is growing
reliance on the use of distortive subsidies by some IPEF members (for example, the US) as a chosen
instrument of new industrial policy for promoting strategic sectors in pursuit of greater resiliency.
As argued elsewhere, this can bring into play even more subsidies if the IPEF members choose
a competitive subsidisation path, and it is not clear how the IPEF would be able to deal with thispotential problem.24

Ibid.
Ibid., p. 21.
op. cit.
“Subsidies, Trade and International Cooperation”, IMF, OECD, World Bank and WTO, 2022, https://www.
wto.org/english/news_e/news22_e/igo_22apr22_e.pdf
24 More subsidies put smaller and financially weaker developing countries at a disadvantage, as they cannot
afford to compete against industrialised countries with more resources.
20
21
22
23

85

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

How does the IPEF fit into New Zealand’s ‘Trade for All’ agenda?
When Minister Damien O’Connor announced the launch of IPEF negotiations on 10 September
2022, he emphasised “a strong overlap between the underlying objectives of IPEF and New
Zealand’s Trade for All Agenda as well as our Trade Recovery Strategy 2.0.”25 Earlier in May 2022,
the then Prime Minister Jacinda Ardern had pointed to the importance of New Zealand contributing
to the making of future rules for digital trade. She said that digitalisation offers opportunities foraddressing challenges that New Zealand still has due to its distance from the major markets.26
Indeed, the four pillars of the IPEF – Trade, Supply Chains, Clean Economy and Fair Economy(Figure 3) – present a cooperative forum with a potential of rulemaking and norm-setting in
the future-shaping areas of digital trade, carbon pricing and border adjustment measures, andcritical minerals governance. Furthermore, it can provide a new impetus for addressing old issues
related to NTMs, including subsidies, and better link advances in trade facilitation to supply chain
resilience. All these are significant for the three instruments of new approach to New Zealand’s
trade policy.
Trade for All Agenda
The Trade for All Agenda was launched in March 2018 in response to public concerns regarding
the country’s participation in trade agreements and ensuring that trade policy delivers for all
New Zealanders. The initiative benefited from broad public consultations over several months in
2018, providing feedback from stakeholders on how to approach all phases of trade policy, fromdesign to monitoring and evaluation to ensure fairer impacts. A Trade for All Advisory Board wasestablished, which produced an independent report with recommendations to the government.
The findings and recommendations of the report and the core principles approved by the Cabinet
are the foundation of the Agenda, which, along with other policies, aims to support sustainable
and inclusive economic development.
The core principles are:
1. Open conversation with the public and key stakeholders around the future direction of New
Zealand’s trade policy, including consultation with the Māori, consistent with their role as aTreaty partner
2. Creating new and more sustainable economic opportunities for New Zealanders of all incomes
and backgrounds
3. Supporting the international rules-based system and New Zealand’s contribution to its
modernisation
4. Supporting multilateral negotiations as a first-best option for New Zealand, followed by open
plurilateral negotiations
5. Enhancing New Zealand’s economic integration with the Asia-Pacific region, and economic
connections to other regions, including through RTAs and FTAs

25 “IPEF Negotiations Launched”, Speech by Damien O’Connor, Minister for Trade and Export Growth of
New Zealand, 10 September 2022, https://www.beehive.govt.nz/release/ipef-negotiations-launched
26 Sam Sachdeva, “NZ eyes on US-led trade initiative as ministers meet”, newsroom, 9 September 2022,
https://www.newsroom.co.nz/nz-eyes-on-us-led-trade-initiative-as-ministers-meet

86Perspectives on IPEF from Aotearoa New Zealand

6. Supporting trade policy for maximising the opportunities and minimising risks associated with
global issues27
7. Preserving the right of governments to regulate in the public interest, including for national
land markets, taxation of multinational businesses and public services
8. Developing specific directives for future trade policies and negotiations to operationalise
Trade for All.
Trade Recovery Strategy 2.0
The Trade Recovery Strategy was launched in response to the COVID-19 pandemic in 2020. It
was enhanced into the Trade Recovery Strategy 2.0 in 2022. The Strategy encompasses four work
areas under the organising framework STAR:28
1. Sustainable and inclusive trade aligned with the Trade for All agenda
2. Trade and export lift focused on assisting New Zealand exporters to compete in international
markets by utilising economic diplomacy and trade mission
3. Architecture comprising all three levels of governance of trade (bilateral, plurilateral andmultilateral) requiring continued and enhanced efforts in modernising the chapters on
Economic and Technical Cooperation contained in trade agreements for use by New Zealandin working with others for promoting new priorities and principles29
4. Resilience addressing vulnerabilities exposed or exacerbated by the COVID-19 pandemic andstrengthening New Zealand’s trade against future shocks by promoting diversification of
trade, mitigating supply chain pressures, and working with other cross-government economic
strategies, particularly for emissions reduction.
Industry Transformation Plans 8
The Government introduced the Industry Transformation Plans (ITPs) in 2019 to support its
economic goal of building a productive, sustainable and inclusive economy.30 The ITPs aim totransform key industries through partnerships between government, industry (businesses andworkers) and the Māori. Eight ITPs are in progress: agri-tech, advanced manufacturing, construction,
digital technologies, fisheries, food and beverage, forestry and wood processing, and tourism. ITPs

27 Global issues include: Environmental issues such as climate change, Protecting New Zealanders’ healthand wellbeing, Labour rights, Gender equity, The rights of indigenous peoples, SME participation ininternational markets, Inclusive regional economic growth, poverty reduction and sustainable job
creation, Protecting traditional knowledge.
28 “Trade Recovery Strategy 2.0”, Ministry for Foreign Affairs and Trade, 2022, https://www.mfat.govt.nz/en/
trade/trade-recovery-strategy/trade-recovery-strategy-2-0/
29 See for example an updated version of AANZFTA or the new agreements with the United Kingdom andthe European Union.
30 According to the Ministry of Business, Innovation and Employment, the ITPs are a key mechanism for
implementing the Government’s industry policy adopted in 2019. They involve partnership of multistakeholders (business, workers, Māori, and Government). They are focused on long-term transformationand target industries with significant potential to contribute to high productivity, high wage, andlower emissions economy. See “Industry Transformation Plans”, Ministry of Business, Innovation and
Employment, 2022, https://www.mbie.govt.nz/business-and-employment/economic-development/
industry-policy/industry-transformation-plans/

87

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

have 20-30-year visions for lifting productivity by scaling up highly productive and internationallycompetitive clusters in areas where New Zealand has a comparative advantage, and to transform
environmental and labour market outcomes.
By joining the IPEF, New Zealand is seeking opportunities and mechanisms for addressing
several critical issues facing Indo-Pacific economies, including itself. While tariff cuts are not on
the agenda, New Zealand anticipates meaningful commercial gains that could be obtained fromaddressing other obstacles and barriers to trade and cooperation. Most importantly, there is an
overlap between the IPEF and New Zealand’s objectives of expanding inclusive and sustainable
trade, harnessing the benefits of the digital economy, strengthening resilience of regional supply
chains, and boosting collective climate action.
Figure 3: Synergies between New Zealand’s trade objectives and IPEF

Source: Compiled by author

New Zealand stakeholders are aware of possible adverse spillovers from the IPEF. This includes thepossibility of the IPEF being an instrument of friend-shoring. The underlying motivation for the IPEF
(or at least some of the pillars) can be seen as ‘to collaborate to reduce dependencies on unreliable
sources of strategic supply, promote reliable sources in our supply chain cooperation, and engage
with trusted partners’.31 If this is accompanied by putting in place IPEF-wide instruments for
restricting trade with these ‘unreliable’ sources, then the IPEF could be perceived as adding to thefragmentation of the world economy and weakening, rather than strengthening regional stability.
This would also adversely impact the health of the multilateral trading system and the WTO.
Another possible cost of the IPEF could be weakening of the APEC process. Given the diversity ofmembers in their development and the associated negotiating ambition and capacity, it is unlikelythat the agreed text under any of the four pillars of the IPEF contain binding language. If that isso, then the impact of the IPEF for New Zealand and other APEC members of the IPEF will be moresimilar to what was experienced from the membership in the APEC. New Zealand both benefited
from the APEC process, and used its standing of an open and fair-playing economy to influence the

31 Halit Harput, “The hidden costs of friend-shoring”, Hinrich Foundation, 15 Nov 2022, https://www.
hinrichfoundation.com/research/article/trade-and-geopolitics/the-hidden-costs-of-friend-shoring/88Perspectives on IPEF from Aotearoa New Zealandevolution of the APEC. Given that after the Russian invasion of Ukraine the APEC could not operatesmoothly due to difficulties in achieving consensus-based decisions, the IPEF members, which
are also APEC members (except Fiji and India), could see this weakening of the APEC as additional
motivation for speeding the work to fill in the space.

Potential negotiation and implementation issues
Based on the discussion above, several negotiation and implementation challenges could
be identified for New Zealand. On negotiations, possible issues could be both procedural andsubstantive. With respect to procedural issues, the concerns might be raised about meeting someof the principles of the Trade for All agenda, such as:a) Ensuring that consultation with stakeholders and the Māori meet the standards laid out by theTrade for All agenda32b) Notwithstanding negotiating constraints, releasing draft negotiation texts and keeping the
public engaged throughout the processc)

Allocating sufficient resources in the responsible government departments for supporting
frequent and intensive negotiations

The Ministry of Foreign Affairs and Trade (MFAT) that negotiates trade agreements called upon
New Zealand stakeholders, including businesses, the public, and civil society, to comment on New
Zealand’s membership and the upcoming negotiations guided by the following questions:
1. What issues would you want to see prioritised in negotiations on the scope of IPEF?
2. Are there specific issues you would want to see addressed through New Zealand’s participation
in IPEF?
3. Are there any areas where New Zealand and IPEF members could cooperate more closely toenhance regional economic integration and / or climate action?
4. As a New Zealander, what outcomes would you like to see for New Zealand businesses, or forthe general population, through the IPEF?
The call was open from 3 to 20 June 2022 and 13 submissions were received. Further opinions canbe placed through the MFAT’s Have Your Say website.33
Lack of adequate transparency is always an issue in negotiating trade agreements. While thenegotiation process (driven still by mostly mercantilist interests) must allow for some of thecontent to be withheld from the public eye, New Zealand has committed, through a new approach
32 “Report of the Trade for All Advisory Board”, Trade for All Advisory Board, November 2019, 62-72, https://www.mfat.govt.nz/assets/Trade-General/Trade-policy/Trade-for-All-report.pdf
Recommendation 19 states: “Because New Zealand has a population that is increasingly diverse,
culturally and linguistically, MFAT needs to develop and apply a superdiversity lens to all consultation andengagement processes. Engagement on trade must be consistent with guidance from the International
Association for Public Participation (IAP2) and in line with the New Zealand Open Government Partnershipcommitments. This needs to be done with genuine openness to the diversity of ideas about trade policy
and its implementation.”
33 “Indo-Pacific Economic Framework for Prosperity”, Ministry of Foreign Affairs and Trade, https://www.
haveyoursay.mfat.govt.nz/

89

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

to trade, to more transparency, especially to the Māori. In the communication between the US
and New Zealand on the treatment of documents related to negotiations, New Zealand indicatedits intention of sharing its own information related to negotiation prior to the expiry of the nondisclosure five-year period (with the condition of not revealing any information about the positionsof other participants or the agreed text); and also indicated that negotiating participants will beable to “develop their positions and communicate internally with each other, and engage with
their public, and in New Zealand’s case, with Māori, as they consider appropriate in developing
and communicating their own positions”.34
The issue of allocation of appropriate resources has been discussed in the Parliament.35 The MFAT
has appointed a dedicated Senior Official/Chief negotiator and 3.0 full-time equivalent (FTE) ofstaff resource. It is also relying on expertise of other staff from within and outside the Ministry.
More resources might be needed depending on the complexity of negotiations as they evolve.
Given that the texts under negotiations (included the closed text on Pillar 2) are not publicly
available, it is difficult to comment on possible content-related negotiation issues. Review of thesubmissions received by the Government in June 2022 reflects that stakeholders share concerns
about the absence of market access negotiation with the US. This is regarded as a lost opportunity
not so much for the domestic exporters but for the US to unambiguously show its economic
commitment to Asia and the Pacific. At the same time, the IPEF provides the opportunity to steer
negotiation towards binding rules on at least some of the NTMs.36
Digital economy is part of the Trade pillar. This is the only pillar where negotiations are led by
the Office of the United States Trade Representative (USTR) (as opposed to the Department ofCommerce for the other three pillars). The Singapore Round of negotiations held in May 2023
was reportedly expected to discuss the text on the digital economy. However, there was noagreement among the countries on how to proceed after the developing countries refused toendorse the proposed text for further negotiations.37 From the point of view of one stakeholder
in New Zealand, if the proposed text would follow the CPTPP chapter on e-commerce, then it
might be a potential problem for New Zealand as it would constitute a breach of state obligations
to Te Tiriti o Waitangi / Treaty of Waitangi.38 The impacts that are deduced on the CPTPP text,
other US agreements39 and further consultations would be in a form of a closure of policy spaceand options, implicit preference to big-tech companies, perpetuation of profiling and the biases
through allowing secrecy of codes, and transparency rules that empower big tech and the lobbies,
preventing change in laws.40

90

34 “IPEF Treatment of Documents Related to Negotiations”, United States Trade Representative, 13 April 2022,
https://ustr.gov/sites/default/files/foia/US-New%20Zealand%20Signed%20IPEF%20Confidentiality%20
Arrangement_04132022.pdf
35 MFAT, Estimates 2022-23, Post-Hearing Questions (209-217), Vote Foreign Affairs
36 “IPEF Public Submissions Summary - June 2022”, Ministry of Foreign Affairs and Trade, June 2022,
https://www.mfat.govt.nz/assets/Trade-agreements/IPEF/IPEF-Summary-of-Written-Public-SubmissionsJune-2022.pdf
37 Su-Lin Tan, “Disagreements between US, Asian nations complicate IPEF negotiations”, South China Morning
Post, 23 May 2023, https://www.scmp.com/week-asia/economics/article/3221547/disagreementsbetween-us-asian-nations-complicate-ipef-negotiations
38 “The Treaty in brief”, New Zealand History – Ministry for Culture and Heritage, https://nzhistory.
govt.nz/politics/treaty/the-treaty-in-brief; Ngā Toki Whakarururanga, “Briefing Paper on Digital
Sovereignty and Governance,” IPEF – Singapore Round, May 2023, https://static1.squarespace.
com/static/62d0af606076367ebf83b878/t/6455ef867c527350f5c68e4e/1683353482072/
NTW+IPEF+Digital+paper+3+May+2023.pdf
39 Ibid.
40 Ibid.

Perspectives on IPEF from Aotearoa New Zealand

Among the implementation issues, most arise due to uncertain political circumstances in the US.
However, even if the CPTPP history repeats itself and the US withdraws from the IPEF process
after 2024, there are advantages to engaging in this process, including providing smaller countries
with additional confidence for pushing their trade agenda forward. There also might be somelack of clarity on the ratification process of the completed agreements; at present, only Pillar 2on the Supply Chains falls into this category. There is a set process in New Zealand before thetrade agreement, after signing, is ratified and put into force (Figure 4). Concerns arise because
this process is designed for trade agreements (“multilateral or major bilateral treaty of particularsignificance”41). However, since the IPEF is not being treated as a trade agreement, it is unclear
if this process would apply. The Minister of Foreign Affairs has the discretion to decide which
agreements need to go through this scrutiny.
Figure 4: Scrutiny process before trade agreements is enforced

Source: MFAT, Trade Engagement
Notes:
NIA – National Interest Analysis
FADTC – Foreign Affairs Defence and Trade Committee

Concluding caveats
With the adoption of a new approach to trade based on Trade for All, Trade Recovery 2.0 and
ITP8, New Zealand has begun transforming its economy from volume-based to value-based,that is, by creating more productive companies with higher value jobs and higher incomes,
based on sustainability principles that can result in a better quality of life for New Zealanders.42
Trade remains vital in this process as one in four New Zealanders’ jobs (and one in three Māoris’)depend on exports and trade is considered the critical enabler of post-COVID-19 recovery anddecarbonisation.
Obstacles facing New Zealand exporters in the global market are more from NTMs than tariffs.
These are being faced increasingly in the form of subsidies and export restrictions, labour andenvironmental regulations and other behind-the-border destination country regulations. It is justa matter of time before new instruments for addressing climate change, digital economy and41 “International Treaty Making”, ISBN: 978-0-477-10258-2, Ministry of Foreign Affairs and Trade, September
2021,
p.5,
https://www.mfat.govt.nz/assets/About-us-Corporate/Treaties-Model-instruments/
International-Treaty-Making-Guide-2021.pdf
42 Tim Green, “Moving from volume to value: how do we make it happen”, New Zealand Trade and Enterprise,
16 August 2021, https://www.nzte.govt.nz/blog/moving-from-volume-to-value-how-do-we-make-ithappen

91

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

labour markets come up. It is troubling to visualise that these instruments might be motivatedmore by a somewhat fuzzy concept of national security rather than economic factors.
As a small and trade-reliant economy, New Zealand rightly understands the importance of having aseat at the table where these new rules will be created. It remains a strong supporter of multilateral
trading rules and contributes proactively to their modernisation. It also uses the architectures of
its bilateral and plurilateral trade agreements and the new arrangements and initiatives (in areasof gender equality, fossil fuel subsidies, environmental services, and digital economy, to namesome) for shared and sustainable prosperity.
The IPEF has the opportunity of working with a subset of WTO members, most of whom areinterested in finding solutions to new problems in the post-COVID-19 world. As experienced in
the APEC process, new policy options and rules take time to finetune and are thus adopted bycountries on a voluntary basis, almost as a learning-by-doing. The IPEF has the potential to serve
as a laboratory for yet untested approaches for building resilience while promoting diversification,
inclusivity and sustainable growth. The key to its success will be in its willingness to allow positive
spillover effects from its new regulatory solutions to reach the developing and developed countries
outside the Framework. If successful in this, it just might be a new dynamo both regionally andglobally.

92Perspectives on IPEF from Aotearoa New Zealand

About the author
Dr Mia MIKIC is a Research Fellow at Waikato University, New Zealand, and Advisor at Large,at the Asia-Pacific Research and Training Network on Trade (ARTNeT). She is a trade economist
with a keen interest in sustainable development and has a proven track record and experience inacademia and international civil service. She coordinated the ARTNeT from 2009 to 2021. She also
served as a Director of Trade, Investment and Innovation Division at the UNESCAP.
Prior to her United Nations tenure, Dr Mikic was the Head of the Department of Economic Theory,
Professor of International Economics and Director of Economic and Business International
Program at the University of Zagreb, and Senior Lecturer at the University of Auckland. She is
the author of a number of reports and papers and has edited or co-edited several volumes oninternational economics, regional integration and development. She also oversaw the preparationof the Asia-Pacific Trade and Investment Report (APTIR), a flagship publication in the area of tradeand investment.
Dr Mikic’s current research and advisory work focus on the impact of the COVID-19 pandemicon trade and global value chains, frontier technologies and inclusive future of work, advocating
for women as influencers in policymaking, services trade, and promotion of evidence-based
policymaking. She is collaborating with several universities on modernising trade curricula. She
has a Doctorate in Economics from the University of Zagreb.

93

Analysis of the Indo-Pacific Economic Framework for Prosperity for Fiji

Analysis of the Indo-Pacific Economic
Framework for Prosperity for Fiji
Radika KUMAR

This paper discusses the implications of Indo-Pacific Economic Framework for Prosperity (IPEF) forFiji. The members of the IPEF are at different stages of development and thus the welfare gains fromthe framework would vary between countries. Fiji is among the smallest economies in the IPEF andstands to gain market opportunities for trade and investment through integration with Asia andthe United States (US). However, realising these benefits necessitates substantial reforms. The IPEF
offers potential market access, but Fiji’s private sector must comply with regulatory requirements
to trade effectively. Consequently, Fiji needs technical and financial assistance for these reforms. A
key recommendation is for Fiji to strengthen or propose an overarching IPEF development chapter
with specific assistance areas across the Trade, Supply Chains, Clean Economy, and Fair Economy
Pillars. This assistance should supplement existing aid from developed countries. If Fiji volunteers
under all four Pillars, it must request an action plan for assistance provision over time from thedeveloped IPEF members.

95

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Introduction
In May 2022,1 the United States (US) initiated the Indo-Pacific Economic Framework for Prosperity(IPEF) in collaboration with 13 countries – Australia, Brunei Darussalam, Fiji, India, Indonesia,
Japan, the Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, andVietnam. The framework aims to bolster the resilience, sustainability, inclusiveness, economic
growth, fairness, and competitiveness of the economies.
The primary objective of the IPEF is to foster cooperation, stability, prosperity, development, andpeace within the region. It is noteworthy that the 14 IPEF partners collectively account for 40 per
cent of global Gross Domestic Product (GDP) and 28 per cent of the global goods and services
trade.
The members of the IPEF are at different stages of development and as a result the benefits
accrued from the partnership would vary among countries. This paper therefore provides ananalysis of the implication of the IPEF on developing countries with a focus on Fiji. The rest of
the paper is as follows: Section I of the paper provides an overview of the Fijian economy andinternational trade, Section II of the paper provides an assessment of Fiji’s integration with IPEF
members using UN Comtrade and the United Nations Economic and Social Commission for Asiaand the Pacific (ESCAP) Regional Integration Value Chain Analysis (RIVA) database. Section III of
the paper discusses the implications of the different pillars of the IPEF on Fiji and the final section
concludes the paper with recommendations.

The Fijian Economy and International Trade
Fiji is a small island state located in the Pacific region. It has a limited export base and is highly
dependent on imports, including fuel. The island’s distance from major markets also raises thecost of doing business and access to markets. Additionally, it has a limited commodity and services
base. The major exports of Fiji include agriculture products, fisheries, and travel and tourism.
According to the Fijian Trade Policy,2 with a population of 884,8873 Fiji is classified as a middleincome country and operates as an open economy. The country’s real gross domestic product(RGDP) per capita is FJ$6,246.22 (US$2864.88).
After gaining independence in 1970, Fiji implemented several new economic policies. Initially,
during 1970-late 1980s, economic policies focused on import-substitution, self-sufficiency, andincluded significant government involvement in the business sector. The period witnessed robust
growth followed by a prolonged phase of low average growth. From late 1980s, Fiji transitioned
to a more market-oriented approach, emphasising trade liberalisation, deregulation, investment
promotion, and an increased role for the private sector. To continue fostering an efficient andoutward-looking economy, it is crucial to reduce or eliminate well-established interventions suchas tariffs, tax and customs exemptions, and incentives. Given this, the ongoing commitment tothese reforms is essential for Fiji’s economic development. In this vein, participating in the IPEF

1

2
3

96

“Indo-Pacific Economic Framework for Prosperity (IPEF)”, Office of the United States Trade Representative,
https://ustr.gov/trade-agreements/agreements-under-negotiation/indo-pacific-economic-frameworkprosperity-ipef“Fijian Trade Policy Framework (2015-2025)”, Ministry of Industry, Trade and Tourism – Republic of Fiji,
July 2015, https://www.mitt.gov.fj/wp-content/uploads/2018/10/Fijian-Trade-Policy-Framework-min.pdf“Census of Population and Housing”, Fiji Bureau of Statistics, 2017, https://www.statsfiji.gov.fj/
statistics/207-census-of-population-and-housing.html

Analysis of the Indo-Pacific Economic Framework for Prosperity for Fijiand expanding its market potential will contribute to the ongoing reform agenda for Fiji. Fiji has
been a member of the World Trade Organization (WTO) since 1996. It is part of a major groupingof the small vulnerable economies and the African, Caribbean Group, which share similar tradeand economic challenges.
Fiji is part of regional and sub-regional trade agreements, including the Pacific Agreement on
Closer Economic Relations (PACER Plus)4 with Australia, New Zealand and the Pacific. The PACER
Plus comprises trade in goods, services, investment, sanitary and phytosanitary (SPS) measures,
technical barriers to trade (TBT), labour mobility, and economic and development chapters.
Furthermore, among the small states of the Pacific, Fiji is also a member of the Pacific Island
Countries Trade Agreement (PICTA)5 Trade in Goods agreement, which aims to provide duty-freeand quota-free market access to goods traded among the 12 small states of the Pacific region,
excluding Australia and New Zealand. Apart from these, Fiji has signed and ratified the Economic
Partnership Agreement (EPA) with the European Union (EU) which aims to ensure duty-free andquota-free access to goods into the EU market.6
At the sub-regional level, Fiji is a signatory to the Melanesian Spearhead Group Trade Agreement(MSGTA) among the four members of the Melanesia group, comprising Papua New Guinea,
Vanuatu and Solomon Islands.7 Fiji is also a beneficiary of the South Pacific Regional Trade andEconomic Co-operation Agreement (SPARTECA) with Australia and the US’ Generalized System ofPreferences (GSP) scheme.8 Radika Kumar
Based on the IMF’s Direction of Trade Statistics database,9 Fiji typically exports nearly US$1 billion
annually, with the US purchasing around 20 – 25 per cent of the total exports. The primary export
from Fiji to the US is drinking water, commonly sold under the brand ‘Fiji Water’. Australia and New
Zealand also form a significant market for Fijian goods, along with other Pacific islands. Fiji’s major
exports to New Zealand include textile clothing, taro, pharmaceutical products and kava while its
exports to Australia include clothing and textiles, gold, and agricultural produce.10

4“Pacific Agreement on Closer Economic Relations Plus”, Australian Government – Department of Foreign
Affairs and Trade, https://www.dfat.gov.au/trade/agreements/in-force/pacer/pacific-agreement-oncloser-economic-relations-plus
5 “Regional Trade Development and Integration”, Pacific Islands Forum, https://www.forumsec.org/
regional-trade-agreements/
6 Ibid.
7 “Excelling together towards a progressive and prosperous Melanesia”, Melanesian Spearhead Group,https://msgsec.info/about-msg/
8 The GSP scheme includes 13 Pacific countries accounting for over 10 per cent of all 119 current GSP
beneficiary countries; the GSP imports from the group is low comprising of US$10 million to US$20
million over the last decade. Also see “SPARTECA (South Pacific Regional Trade and Economic Cooperation
Agreement)”, Investment Policy Hub – United Nations Conference on Trade and Development (UNCTAD),
https://investmentpolicy.unctad.org/international-investment-agreements/groupings/1/sparteca-southpacific-regional-trade-and-economic-cooperation-agreement9 Ed Gresser, “Pacific Islands Trade: Options for U.S. Policy”, The Progressive Policy Institute, 14February 2023, https://www.progressivepolicy.org/publication/pacific-islands-trade-options-for-u-spolicy/#:~:text=Thirteen%20of%20these%20are%20GSP,Vanuatu%2C%20and%20Wallis%20and%20
Futuna.
10 “Exporting to New Zealand”, Fiji Consulate General & Trade Commission – Australia & New Zealand,
https://www.investinfiji.today/exporting-to-new-zealand/;“Exporting to Australia”, Fiji Consulate General & Trade Commission – Australia & New Zealand, https://www.investinfiji.today/exporting-to-australia/

97

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Fiji has achieved success as a beneficiary of the GSP in exporting processed foods and certain
agricultural products.11
Fiji’s fisheries industry is also substantial, including fish processing plants. Fijian officials haveexpressed interest in making canned tuna eligible for GSP benefits, as it currently faces high US
Most Favoured Nation (MFN) tariffs, reaching up to 35 per cent. While canned tuna already qualifies
for the GSP program for least-developed countries, expanding its eligibility to all beneficiary
countries has been politically sensitive due to the significance of tuna cannery employment in
American Samoa. Additionally, including canned tuna in the GSP without ensuring preferential
benefits for Pacific Island countries might yield limited results, as larger producers like Thailand
and the Philippines would also qualify and may be preferred sources due to lower costs.
In 2022, Fiji exported US$815.34 million to the world with top destinations being the US (20.51
per cent), Australia (16.51 per cent) and New Zealand (8.23 per cent). With respect to imports,
Fiji imported US$2.12 billion from the world with top sources being Singapore (17.07 per cent),
Australia (16.09 per cent) and China (15.04 per cent).12
The IPEF is a unique partnership deal for Fiji as it comprises its major export and import destination
markets along with new and emerging markets such as India, Indonesia and other Asian countries,
providing Fiji with opportunities for greater market access.

Section II: Analysis of Fiji’s Integration with IPEF Members
This section analyses Fiji’s integration with the IPEF members using data from the UN Comtrade
database and the ESCAP RIVA database.13 The analysis focuses on Fiji’s integration levels in tradeand investment, value chain, infrastructure and connectivity.
Major Export and Import Destinations of Fiji
The US, Australia and New Zealand constitute more than 40 per cent of Fiji’s exports (Figure 1). In
2021, Fiji’s exports to the US stood at 20.5 per cent, Australia 16.5 per cent and New Zealand at 5.7
per cent. Other markets for Fiji included Asia (Japan and China) and the Pacific Island countries. It
is interesting that Fiji’s exports to China14 were around 5.7 per cent, despite China having a major
geopolitical presence in the region. China has heavily supported infrastructure development inFiji and other countries in the Pacific. In the context of the IPEF, however, while China is not amajor exporter in goods, it may still have an influence in services and other related trade aspects.
Within the IPEF membership, three of the IPEF members are major export destinations for Fiji,
the agreement may yield further benefits for the country, depending on the final deal of theagreement.
Fiji also has the potential to deepen its trade integration with its major exporting partners. Despite

11 Notably, these include above-quota cane sugar (1.46 cents/kg), fresh and chilled taro (2.3 per cent Most
Favoured Nation [MFN] tariff), candied and sushi-quality ginger (2.4 per cent MFN tariff), bakery products(4.5 per cent MFN tariff), and canned fish product (6.0 per cent). GSP imports from Fiji to the US typicallyrange between US$10 million and US$20 million per year, accounting for approximately 5 – 10 per centof Fiji’s total exports to the US.
12 Note: Data is from UN World Trade but analysed in Trade Intelligence Negotiations Adviser (TINA) portal.
13 “Regional Integration and Value Chain Analyzer (RIVA)”, UN Economic and Social Commission for Asia andthe Pacific (UNESCAP), https://riva.negotiatetrade.org/#/
14 Ibid.

98Analysis of the Indo-Pacific Economic Framework for Prosperity for Fiji

Fiji negotiating the PACER Plus with Australia and New Zealand, it has only been signed and notbeen ratified so far. As such, through the IPEF, Fiji may have the potential to access the Australianand New Zealand markets without the PACER Plus. Furthermore, securing a bilateral Free Trade
Agreement (FTA) with the US may be an arduous and prolonged process. The USA GSP scheme
has stringent rules for Fiji to export, so despite the agreement in place it is not that effective. The
requirements for GSP plus is burdensome to have market access. Fiji is a small country and does
not have the capacity like Asia does to compete in US GSP. So the IPEF gives a level of comfort inmarket access if negotiated well.
Figure 2 analyses Fiji’s major import destination for 2021. Singapore, Australia, China, New Zealandand the US are major importing countries constituting more than 70 per cent of imports. Singapore,
Australia and China are the top three importing countries. Other countries include Thailand, India,
Malaysia, the EU and Japan. With China being one of the major importing destinations for Fiji, theIPEF may create a shift in Fiji’s import markets. Depending on the negotiations, other countries
in Asia, including India, may be able to substitute some of the imports from China. The IPEF may
create import diversification opportunities for Fiji.
Figure 1: Major Export Destinations of Fiji

Source: UN Comtrade

Figure 2: Major Import Sources of Fiji

Source: UN Comtrade99

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Trade and Investment Integration for Fiji
The data from the ESCAP RIVA database15 assesses the current level of trade and investment
integration of Fiji with IPEF members (refer to Figure 3). In comparison to 2010, Fiji’s integration
with the IPEF members has increased by 18 per cent. However, the depth of integration varies
across the different indicators. The current levels of Fiji’s integration are highest in connectivity
and the financial sector, followed by digital economy, trade and regulatory cooperation (Figure3). While there has been an improvement in integration across different variables, there areopportunities for deeper integration.
Figure 3: Trade and Investment Integration for Fiji with IPEF Members Excluding the US

Source: RIVA database

Performance of IPEF Members on Trade and Investment
Figure 4 shows the economic performance in relation to trade and investment for IPEF member
countries. In comparison to the period of 2010 - 15 and that of 2016 - 21, Australia, Japan, Singapore,
the US, Malaysia and Indonesia have expanded integration, while Vietnam and Thailand havecontracted trade and investment integration. The IPEF may provide an option for Fiji to expand its
integration level with IPEF members.

15 Ibid.

100Analysis of the Indo-Pacific Economic Framework for Prosperity for Fiji

Figure 4: IPEF Members’ Performance in Trade and Investment

Source: RIVA database

Figure 5: Fiji’s Trade and Investment Integration

Source: RIVA database

101

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Performance of IPEF Members on Value Chain Integration
Figure 6 depicts the value chain integration levels between 2010 - 15 and 2016 - 21. At the aggregate
level, the value chain integration index for all the IPEF members has improved between the periods.
Singapore and the US are leading in the value chain integration, with the US demonstrating themost substantial improvement. The rest of the IPEF members have different levels of value chain
integration developments. The IPEF may benefit countries to integrate further. However, thiswould depend on the provisions of the supply chain agreements.
Figure 6: Value Chain Integration of IPEF Members

Source: RIVA database

Figure 7 provides some evidence of Fiji’s sustainable value chain participation index with IPEF
members. Over the same period, Fiji’s participation has improved from 0.26 - 0.32, an increase of
0.06. As such, the IPEF may provide further potential for Fiji to enhance its value chain integrationcompetitiveness and diversification.

102

Analysis of the Indo-Pacific Economic Framework for Prosperity for Fiji

Figure 7: Fiji’s Value Chain Integration with IPEF Members

Source: RIVA database

Performance of IPEF Members on Infrastructure and Connectivity Integration
Figure 8 depicts the infrastructure and connectivity integration for IPEF members between the
period 2010 - 15 and 2016 - 21. Between the two periods, the IPEF members have improved theirinfrastructure and connectivity integration with South Korea, Singapore, Japan, the US, Australia,
New Zealand, Vietnam, and Thailand with index score of 0.8 and above between 2016 - 21. Other
economies like India and Indonesia have also made substantial progress with scores of 0.71 and
0.75 respectively.

103

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Figure 8: Infrastructure and Connectivity Integration

Source: RIVA database

Figure 9 shows Fiji’s integration on infrastructure and connectivity over the same period as well.
In terms of average rural access to electricity and internet Fiji has also improved in the areas. It istherefore indicative that for IPEF integration, Fiji has the potential to integrate with the rest of themembers and benefit from market access and supply chain integration. This, however, would becontingent upon the scope and depth of the finalised text.

104Analysis of the Indo-Pacific Economic Framework for Prosperity for Fiji

Figure 9: Fiji’s Infrastructure and Connectivity Integration

Source: RIVA database

Performance of IPEF Members on Regulatory Connectivity16
Figure 10 depicts the regulatory connectivity among the IPEF members. Within the IPEF members,
this index has been the lowest in comparison with the other areas. Regulatory reforms usuallyrequire political and legal will to be implemented. During the periods 2010 - 15 and 2016 - 21,
Australia, South Korea, New Zealand, Singapore and the US have been leading. Figure 11 shows
Fiji’s Regulatory Connectivity Integration. In comparison to other IPEF members, Fiji’s performanceon regulatory connectivity is better, with an index score of 0.57 during the time period 2016 21. Overall, the IPEF may provide additional opportunities for further regulatory coherence andreforms for the countries.

16 Regulatory connectivity is one of the seven indicators of regional integration dimensions from the RIVA
database. It comprises of sustainable FTA scores, average rule of law index, SDG trade and regulatory
distance from partners and average IIA score.
See “Regional Integration Analyzer”, UN Economic and Social Commission for Asia and the Pacific, https://riva.negotiatetrade.org/#/rioverview

105

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Figure 10: Regulatory Connectivity Integration

Source: RIVA database

Figure 11: Fiji’s Regulatory Connectivity Integration

Source: RIVA database106Analysis of the Indo-Pacific Economic Framework for Prosperity for Fiji

Digital Economy Integration
Figure 12 depicts the digital economy integration of the IPEF members. Within the periods 2010 15 and 2016 - 21, Singapore and the US are the most integrated in the digital economy with index
scores of 0.71 and 0.64 respectively. The rest of the IPEF members have on average integrated at a
slower pace in the digital economy than the rest, with mean scores at 0.4 during 2016 - 21.
Figure 12: IPEF Members Digital Economy Integration

Source: RIVA database

Figure 13 provides the specific situation for Fiji on digital economy integration. Fiji’s integration
into the digital economy is low, based on access to secure internet and average access to internet
per household with scores of 0.17 and 0.54 respectively. The IPEF may provide opportunities
for further integration. However, it will depend on the trajectory of discussions over the coming
months on this subject.

107

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Figure 13: Fiji’s Digital Economy Integration

Source: RIVA database

Section III: Implications of the IPEF for Fiji
The Supply Chain Agreement
The Supply Chain Agreement of the IPEF is considered to be the world’s first multilateral supply
chain agreement.17 It aims to develop resilient and competitive supply chains and establish
a framework for lasting cooperation on issues including workforce development, supply chain
monitoring and investment promotion.
Along with the Supply Chain Agreement, the members have committed to several initiatives
including digital shipping pilot projects, including one with the Port of Singapore;18 expansionof the US Customs Trade Partnership Against Terrorism (CTPAT) program in the Indo-Pacific,19
an IPEF Science, Technology, Engineering, and Mathematics (STEM) Exchange Program, andadditional trainings, symposiums, and two-way trade missions with IPEF partners. Beyond
these specific measures, the US also hopes to grow public and private sector engagement andinvestment in the region. In return, the US hopes that the IPEF Supply Chain Agreement will better
position IPEF partners to reshape their supply chains to meet US interests, including resilience andcompetitiveness, in line with the broader US ‘friend-shoring’ agenda that incentivises supply chain
reshuffling to countries that do not pose a national security threat.

17 Aidan Arasasingham, Emily Benson, Matthew P. Goodman and William Alan Reinsch, “Assessing IPEF’s
New Supply Chains Agreement”, Center for Strategic & International Studies, 31 May 2023, https://www.
csis.org/analysis/assessing-ipefs-new-supply-chains-agreement
18 Ibid.
19 The digital shipping pilot project links to trade facilitation and digital trade in IPEF. The US Customs Trade
Partnership is a way to shift the power dynamics back to USA and to an extent what IPEF aims to achieve
too.

108

Analysis of the Indo-Pacific Economic Framework for Prosperity for Fiji

Implications of the Supply Chain Agreement for Fiji
In relation to value chain integration, the IPEF members are at different stages of development
and integration. Fiji also has the potential to integrate with the members of the IPEF throughthis agreement. However, the degree of trade creation and trade diversion would depend on thelevel of trade between Fiji and the rest of the IPEF members. Fiji’s major trading partners include
Australia, New Zealand, the US and China. Though the former three economies are members of
the IPEF, China is not a member.
The IPEF also has stringent structures in place to ensure the integration of members into the
supply chain. Fiji, being a small economy with limited resources and capacity, may need to be
cautious about the implementation of the agreement. For example, information in relation to theaction plan for the Supply Chain Council is not yet clear. The action plan implementation would
have a burden on the private sector if resources were not sufficiently allocated. The Supply Chain
Response Network has merits given the COVID-19 pandemic during which Fiji as well as the restof the world encountered major disruptions in supply chains, especially for essential goods. While
the response mechanism laid down by the IPEF aims to address such disruptions, the coordination
mechanism needs to be clearly outlined for ease of implementation.
At the regional level, Fiji has negotiated the PACER Plus with Australia and New Zealand. However,it has not ratified the agreement to date. The PACER Plus agreement does not have a strong
linkage on trade and labour issues within the Agreement, whereas the IPEF has. As such, thecost and benefit for Fiji in relation to the compliance on labour laws within the supply chain will
determine the level of success under the IPEF with its trading partners. Given that China is notpart of the IPEF, Fiji may need to carefully consider the ways in which its exports from value added
products would be integrated into the IPEF supply chain and whether it would meet the rules oforigin requirements. Fiji imports raw materials from the rest of the world to process and export
final goods to Australia and New Zealand and the rest of the world, particularly for textile andclothing. If the supply chain requirements become stringent and constrains Fiji from importing
raw materials from China, then it will affect the local cost of production, as importing from China
is cheaper.
At the multilateral level, Fiji is a member of the WTO since 1996. At the 1st WTO Ministerial
Conference in Singapore in December 1996, in relation to issues surrounding labour rights within
supply chains of partner countries, ministers renewed the commitment to observe internationallyrecognised core labour standards.20 Labour rights issues are critical for any country and must be
upheld. The IPEF members, including Fiji, recognise this, which is a positive step towards fair andequitable trade. However, in tandem, it should also ensure that these are not deemed as disguised
restrictions on trade. For Fiji, in finalising the agreement on supply chains, it must request for astrong mechanism for capacity building and technical assistance in order to ensure that its private
sector is in a position to comply with the required labour standards. Such reforms may take time.
However, if they are progressively achieved, it could provide Fiji with the competitive advantage in
relation to fair and sustainable trade. As such technical assistance and capacity building must bepart of the text with a clearly stated work programme for implementation.

20 “Singapore Ministerial Declaration”, World Trade Organization, 13 December 1996, https://www.wto.org/
english/thewto_e/minist_e/min96_e/wtodec_e.htm

109

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Implications of the Trade Pillar for Fiji
The Trade Pillar of the IPEF intends to negotiate provisions addressing labour, environment,competition policy, agriculture, transparency, digital economy and emerging technology, tradefacilitation, good regulatory practices, gender, indigenous populations, and development andeconomic cooperation. The Trade Pillar will be one of the most comprehensive frameworks should
members decide to have an outcome on all these areas. But integrating these issue into a trade
agreement framework may have its own implications; it would depend on the scope and depth of
the agreement.
As it stands, it is deemed that the IPEF negotiators have high ambition in these areas. The
framework reflects the consolidation of new and existing issues at the WTO with varying interests
among developed and developing countries. For example, on trade and labour, members in the
IPEF aim to achieve high-standard commitments that benefit workers, including those related to
implementing and enforcing internationally recognised labour rights, corporate accountability
in cases of labour law violations, public engagement and cooperative mechanisms on emerging
labour issues, including with respect to workers in the digital economy. At the WTO, for example,
in the fisheries subsidy agreement, the US had a previous proposal on forced labour.21 However,certain members were of the view, that though the labour issues are critical to address, thesemust be done so in the relevant forum of the International Labour Organization (ILO).
In relation to environmental issues within the Trade Pillar, the aim is to achieve trade-related
commitments that meaningfully contribute to environmental protection and effective responses
to common sustainability challenges, including those that are climate-related. The issues include
obligations on trade and environment, enhanced environmental cooperation, protection of themarine environment, conservation of wild fauna and flora, climate change and renewable energy,
circular economy, promotion of ‘green’ data centres and data transmission, voluntary market
mechanisms for promoting sustainability of information and communications technologies,
promotion of lower carbon sourcing in supply chains, corporate accountability and responsible
business conduct, and implementation of obligations under multilateral environmental
agreements.
Several issues being discussed in the Trade Pillar are being deliberated in the Committee on
Trade and Environment in the WTO. The scope of environment-related issues are new under the
WTO. Despite the importance of addressing environmental issues, members need to also weighthe cost of implementation for developing countries. Furthermore, the scope further focuses on
digital infrastructure greening and data transmission, which require further reflection, and anassessment of the capacity of members. The developed economies of the IPEF have the required
infrastructure to undertake reforms, however, the costs would be high. A way would perhaps befor transitionally-phased implementation with technical and financial assistance as conditions for
implementation.
The aim is also to promote equitable growth of the digital economy in a manner that supports
labour and environment objectives, sharing best practices on regulatory approaches and policy
issues, and promoting responsible use of emerging technologies. For Fiji, in order to develop thedigital economy, the development of digital infrastructure ecosystem is important.

21 “United States Urges WTO Members to Address Forced Labor on Fishing Vessels in Ongoing Fisheries
Subsidies Negotiations”, Office of the United States Trade Representative, 26 May 2021, https://ustr.
gov/about-us/policy-offices/press-office/press-releases/2021/may/united-states-urges-wto-membersaddress-forced-labor-fishing-vessels-ongoing-fisheries-subsidies

110Analysis of the Indo-Pacific Economic Framework for Prosperity for Fiji

The issues on trade and an agreement on digital trade covers a plethora of issues which are traderelated and beyond the scope of the traditional trade agreements. There is an ongoing discourseon this at the multilateral level and in particular, under the plurilateral on the Joint Statement
Initiative.22 Despite the importance of the digital economy and digital trade agreement, developing
countries in the IPEF including Fiji must exercise caution with respect to the commitments they
undertake without adequate regulatory and infrastructure reforms in place. Figures 10 and
11 show the digital economy integration levels among the IPEF and also for Fiji, revealing that
there is scope for IPEF members to integrate in this area. In this regard, a step wise approachof prioritisation may be better than a full-fledged agreement. Developing countries could also
demand technical and financial assistance to develop their digital infrastructure environment firstand foremost, and then move progressively in other areas.
For developing countries, including Fiji, agriculture is a vital sector for economic development.
The issues surrounding non-tariff measures for market access have been a challenge for Fiji. The
discussion of the text focuses on enhanced transparency, regulations, SPS and TBT measures.
Depending on the requirements of countries, the cost of compliance may be high. As such,
agriculture and related infrastructure development assistance is needed to ensure that Fiji is able
to benefit from the market access of the IPEF countries. Fiji must also ensure that the baseline on
discussions in relation to agriculture are aligned with the WTO Agreement on Agriculture.
In relation to transparency and regulatory practices, the text aims to focus on commitments on the
publication of proposed regulations and allowing a meaningful opportunity for public comment byinterested persons, improving public accessibility to information about regulations and regulatory
processes, having processes and mechanisms for internal coordination, and reliance on highquality information, and science and evidence in rulemaking. The members further aim to use thisarrangement as an opportunity to cooperate on the adoption of sound and transparent regulatory
practices, thereby promoting good governance. It further aims to build on the Joint Statement
Initiative on Services Domestic Regulation of the WTO. Despite the fact that good regulatory
practices and coherence would facilitate trade, developing countries, including Fiji, need to ensurethat their right to regulate the domestic sector is not compromised. Furthermore, adhering to theprocess of high quality, scientific and evidence-based rule making would also require resources
and capacity. This will affect the ability of market access for services. The issues surrounding these
are currently under debate at the WTO. Should Fiji consider progressing in this area, it needs to doso progressively, ensuring that the required regulatory and institutional capacities are developed,
and the private sector is also empowered to undertake the required regulatory reforms first andforemost.
On competition policy, the Trade Pillar focuses on members maintaining competition laws to ensure
open, fair and competitive markets, including digital markets and cooperating on competition
enforcement and policy issues. The issue of competition policy is one of the issues from the1996 Singapore Ministerial Conference of the WTO. The issues surrounding anti-competitive
behaviour have elements in the Trade-Related Aspects of Intellectual Property Rights (TRIPS)
and Trade-Related Investment Measures (TRIMs) Agreements. The issue, however, is to ensurethat developing countries including Fiji have the technical and financial capacity to negotiate andimplement these policies in their domestic markets effectively. The discussions would also include
the competition policy of digital markets which is a new area and would first require capacity
building before arriving on any commitments.
22 “Joint Initiative on E-commerce”, World Trade Organization, https://www.wto.org/english/tratop_e/
ecom_e/joint_statement_e.htm

111

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

For developing countries including Fiji, trade facilitation is crucial for overall trade. Fiji has signed
and ratified the WTO Trade Facilitation Agreement and is in the process of implementing its
commitment. The scope of the IPEF trade facilitation agreement, however, is beyond the traditional
trade facilitation commitment, in particular on the digitalisation aspect, which has other related
issues such as data protection and cross-border flow of data. To undertake digital trade facilitation,
further domestic reforms on regulation and infrastructure would be key. For these, Fiji would
require regulation and infrastructure development capacities.
The Trade Pillar has a development and economic cooperation element which focuses on theongoing development and economic cooperation, including the existing bilateral- and regional
trade-related technical assistance and capacity building. The IPEF commitments are robustand beyond the scope of the traditional frameworks or agreements. As such, developing
countries including Fiji have to demand additional technical and financial assistance for the full
implementation of the IPEF.
Implications of the Clean Economy Pillar for Fiji
The US has tabled a proposal which seeks to promote a clean economy, including by accelerating
IPEF partner countries’ clean energy transitions, scaling and reducing the cost of innovativetechnologies and advancing low greenhouse gas emissions in priority sectors. The text also aims
to enhance collaboration with the private sector to take advantage of the market, investment,
industrialisation, and quality job opportunities related to a clean economy transition.
In the case of developing countries including Fiji, whilst the commitment to clean energy transitionis vital to tackle climate change, they have to ensure that the commitments in relation to theregulations and infrastructure requirements do not burden the private sector. Relative to theUS, the private sector in Fiji is mostly composed of small and medium enterprises. Furthermore,investing in clean energy infrastructure will also require enormous capital investment. In the
textual proposal and discussions, Fiji has to consider these aspects and include a development
chapter to cover the specifics of the technical and financial assistance needed for the clean
economy transition. Fiji must undertake a phased approach towards these transitions.
Implications of the Fair Economy Pillar for Fiji
The US has tabled a proposal that seeks to prevent and combat corruption and related financial
crimes, improve tax administration and increase cooperation, information sharing and capacity
building in these areas. The aim of the text is to promote inclusiveness, transparency, the ruleof law and accountability, all of which are essential to levelling the playing field for workers andenterprises in the Indo-Pacific region and ensuring that the benefits of economic growth andinvestment are broadly shared.
For developing countries including Fiji, a fair economy is vital for international trade. The US
proposal, however, covers several areas and also requires compliance with various international
standards. For Fiji, while combating corruption, ensuring transparency, and adhering to labour
rights are at the core of a well-functioning economy, it has to also ensure that sufficient technicaland capacity building assistance are provided for it to undertake the required regulatory andinstitutional reforms. As such, Fiji will need to strengthen or propose a pillar on economic anddevelopment assistance to cover specific areas of assistance for fair economy.

112

Analysis of the Indo-Pacific Economic Framework for Prosperity for Fiji

Conclusion
The IPEF is a new generation agreement which covers new and emerging issues and has
geopolitical and economic agendas intertwined. The members of the IPEF are at different levelsof development, with the US, Australia, New Zealand, Singapore, South Korea, Malaysia and India
being major economies. Fiji is one of the smallest economies among the IPEF members. The
framework does provide an opportunity for Fiji to integrate with Asia and the US and create newmarket opportunities for trade and investment. However, these benefits would only be realised
if Fiji is able to bear the cost of the reforms (which are substantial) to effectively integrate andbenefit from the Supply Chain Agreement, and the available proposals for the Trade, Clean Energy
and Fair Economy Pillars.
For Fiji, the IPEF, on the one hand, has potential for market access, with access to Asia and the US
market, which would not be feasible if Fiji had to negotiate FTAs with each member separately.
However, the requirements for regulatory, infrastructure and institutional reforms of the IPEF may
be burdensome for Fiji and may act as a barrier to fully utilising its potential. The private sector ofFiji will need to comply with the regulatory requirements in order to be able to trade. As such, Fijiwould require technical and financial assistance to undertake the required reforms over time if itaims to benefit from the IPEF.
A key recommendation for Fiji would be to strengthen or propose an overarching pillar as the
IPEF development chapter with specific areas of technical and financial assistance across thevarious pillars of trade, supply chain, clean energy and fair economy. It must also ensure that theassistance is in addition to the existing assistance provided by various developed countries. Given
that the IPEF is proposing new areas of commitments by members which are beyond the scope of
traditional trade agreements including the WTO, Fiji could provide such justification. Furthermore,should Fiji decide to volunteer under all the four pillars, within the development assistance pillar,
it needs to further request developed members to provide an action plan for the provision ofassistance over time. Fiji must also condition its commitment to technical and financial assistanceby developed IPEF members.

Views expressed in the paper are of the author and not of any persons or organisations.

113

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

About the author
Dr Radika KUMAR is an expert in international trade and economics. She specialises in tradenegotiations in particular fisheries subsidies and digital infrastructure policy for the digital economy.
She holds a PhD in Economics from the University of the South Pacific. She served as an Economist
and Special Adviser to the Minister for Foreign Affairs of Fiji in the early years of her career. Dr
Kumar has also been the first adviser for Hub and Spokes to be appointed from the Pacific region
under the EU-Funded Hub and Spokes programme for the Commonwealth Secretariat in 2014.
She served in the Marshall Islands where she assisted the countries in implementing trade policies
and undertaking capacity building trainings.
Dr Kumar has experience in negotiating Trade Agreements including the Pacific Agreement on
Closer Economic Relations, EU-Economic Partnership Agreement, Pacific Island Countries Trade
Agreements, the Micronesian Trade and Economic Committee and US-Compact agreement. She
later served as Deputy Head of Mission in Geneva and worked with various organisations including
UNESCAP, ITC, WTO WIPO and also was instrumental in WTO negotiations including the Fisheries
Subsidies negotiations for members. She coordinated with ACP, SVE, G-90 and LDC group ofcountries.
She is also an academic and was lecturer in Economics at the University of the South Pacific teachinginternational economics. Currently, she holds the position of Adviser, Artificial Intelligence andTransformative Technology at the Commonwealth Secretariat in London. She is also an author
and publisher, and a frontend developer.

114

13
1

Southeast Asia

Malaysia’s Interests in the IPEF: Managing Trade Frictions and Restoring Market Access

Malaysia’s Interests in the IPEF:
Managing Trade Frictions and Restoring
Market Access
Jayant MENON

To re-engage economically with the Indo-Pacific region, United States (US) President Biden
launched the Indo-Pacific Economic Framework for Prosperity (IPEF) in May 2022. For Malaysia,
the IPEF could help restore market access to the US by relaxing Withhold Release Orders (WROs)
that ban exports of companies facing forced labour allegations. Malaysia also expects that theease and frequency with which trade sanctions are applied in the future will be better managed asa result of the IPEF. These potential benefits of the IPEF need to be weighed against a worst casescenario where the creation of the IPEF further fuels US-China tensions. Another problem is that
the IPEF without China is almost economically meaningless to countries with China-centred supply
chains like Malaysia. Worse than that, any potential benefits could be more than offset if it fuels
US-China tensions leading to actions that further disrupt supply chains and trade.

117

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Introduction
In a bid to re-engage economically with the region, United States (US) President Biden launched
the Indo-Pacific Economic Framework for Prosperity (IPEF) in Tokyo on 23 May 2022. Malaysia
joined six other Association of Southeast Asian Nations (ASEAN) members – Brunei Darussalam,Indonesia, the Philippines, Singapore, Thailand and Vietnam – to sign on as participating countries,
together with Australia, Fiji, Japan, India, Republic of Korea, and New Zealand.
The much-awaited return of the US to the region as an economic partner was met with great
expectations, and the standards by which the IPEF was to be judged were set accordingly high,also leaving a lot of room for disappointment, especially in terms of perceived benefits and costs.
Expectations may be unreasonably high because they are probably still based on the view that the
US is the original guarantor of a rules-based trading order, rather than its more recent performancethat has seen it undermine the World Trade Organization’s (WTO’s) Dispute Settlement Mechanismand disregard some of its rulings, among other things.
The Framework comprises four policy pillars: Trade; Supply Chains; Clean Economy (energy,
decarbonisation and infrastructure); and Fair Economy (tax and corruption). Employing a modular
approach, member countries can choose which policy pillar to sign up for but have to abide by
all the commitments within the selected pillar(s). The price for this flexibility is possible ‘cherrypicking’, which has already seen India pull out of the Trade Pillar and could leave difficult reforms
behind.1
The IPEF is not a Free-Trade Agreement (FTA) or a traditional trade agreement. In this respect, thelack of market access provisions through exchange of concessions is greatly lamented and calls
for reconsideration to bring them back onto the negotiating agenda are frequent. The IPEF is verymuch about market access, however, but just not in the way that it is traditionally understood.
While it may not improve market access of the IPEF members to the US, it will certainly affectmarket access of US firms to other members’ markets, because almost every other item on theagenda, from digital trade rules to environmental or labour standards, will affect competitiveness.
In the same vein, Malaysia’s interpretation of market access is also slightly different and the IPEF
could be used to serve its interests in this area.
For Malaysia,2 the IPEF is important in at least two ways, as it relates to the Trade and Supply Chain
Pillars. The first relates to market access. In Malaysia’s case, it is not so much about increasing
market access to the US but about restoring market access where it has been denied and thenpreserving it. That is, reversing the remaining Withhold Release Orders (WROs)3 that currently ban
exports to the US market and ensuring that the ease and frequency with which trade sanctions areapplied in the future is better managed.

1

2

3

118

Jayant Menon, Tham Siew Yean and Maria Monica Widharja, “Biden wants Asia to trade with the US
as an ‘alternative to China’ but details are scant”, Channel News Asia Commentary, 3 June 2022, https://www.channelnewsasia.com/commentary/us-biden-ipef-asean-indopacific-china-trade-economicpartnership-2722771
Malaysia does not have an explicit Indo-Pacific strategy, although the Indo-Pacific is frequently referred
to in various defence and other non-economic policies and strategies. Therefore, apart from participatingin the ASEAN Outlook on the Indo-Pacific, it is the IPEF that will form the basis of any formal economic
engagement with the US and the Indo-Pacific region.
“Withhold Release Orders and Findings List”, US Customs and Border Protection, https://www.cbp.gov/
trade/forced-labor/withhold-release-orders-and-findings

Malaysia’s Interests in the IPEF: Managing Trade Frictions and Restoring Market AccessSecond is balancing key relationships and managing the fallout from the escalating US-China
trade and technology war. With the Regional Comprehensive Economic Partnership (RCEP), theworld’s largest FTA, Malaysia may hope that the IPEF will provide greater balance in managing its
relationship with its two key trade and investment partners, China and the US. Thus, jumping on
the IPEF bandwagon now may be part of its ‘balancing’ strategy as it avoids having to pick sides andtherefore risk being cut off from either the US or China. But will the IPEF’s creation or Malaysia’s
membership of it help with or hinder this balancing act? Only time will tell.
At the very least, the IPEF should not fuel US-China tensions and worsen the fallout on regional
trade and supply chains. At the 2023 Group of Seven (G7) Summit in Tokyo, President Biden tried
to clarify that the US objective was not to decouple (from China), but to de-risk and diversify.4
This statement would have been welcomed by Malaysia and other ASEAN countries whose
manufacturing supply chains are intricately linked to China. The big question, however, is whether
this statement will translate into action, with a stalling of punitive measures initially, followed
quickly by a reduction in them, or whether it will turn out to be a play on words. If it turns out tobe just ratcheting of the rhetoric, as many fear, then the real risk to the ASEAN region will quickly
shift from China to the US.
The paper is divided into five parts. The next section provides context by examining the political
economy of the IPEF and the underlying motivation of the US in proposing it in the way that ithas. This section also provides an overview of Malaysian trade policy, focusing on its FTAs, andtrade governance. Section 3 deals with the two most important pillars for Malaysia, Trade andSupply Chains. The discussion on these two pillars is combined because it does not make sense
to separate the two from an economic point of view for a country like Malaysia, although it mightfrom a national security or geopolitical standpoint, for a country like the US. The pillars on Clean
and Fair Economy are discussed in Section 4. The discussion on these two pillars is combined
because there is little here that is likely to have a material impact on Malaysian policy making. A
final section concludes.

Political Economy of the IPEF and Malaysian Trade Policy
To understand the likely impact of the IPEF on Malaysia and other members, it is important tofirst come to terms with the motivation underlying it. To do this, it is useful to understand theenvironment within which it was created, by reviewing recent changes that have occurred in the
trade policy setting agenda in the US under President Biden.
For decades, US trade policy was run by the US Trade Representative’s (USTR’s) office. The USTR
negotiated all key trade agreements and was strongly pro-trade and liberalisation. Under the Biden
Administration, some argue that the power to set the trade agenda has shifted to the Commerce
Department.5 This shift in power has already had a profound influence on US trade policy. Unlike
the USTR, whose mission is to promote trade and investment through advancing liberalisationand maintaining a rules-based order, the Commerce Department is focused on the defence and45

At the closing press conference of the G7 meetings in Japan on 21 May 2023, President Biden stated that:“We’re not looking to decouple from China. We’re looking to de-risk and diversify our relationship with
China,”. See Trevor Hunnicutt and Jeff Mason, “Biden sees shift in ties with China ‘shortly’”, Reuters, 21
May 2023, https://www.reuters.com/world/biden-sees-shift-relations-with-china-shortly-says-g7-wantsde-risk-not-decouple-2023-05-21/
Edward Alden, “Why the U.S. Trade Office No Longer Runs Trade”, Foreign Policy, 7 March 2023, https://
foreignpolicy.com/2023/03/07/ustr-tai-trade-biden-america-first-china-decoupling/

119

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

promotion of US companies and the protection of US technologies. It has also been overseeing
the rollout of the massive subsidies being offered to re-shore semiconductor manufacturing,
restricting sales of advanced US technologies to various Chinese companies and various otherdistortionary and protectionist policies. In addition to semiconductors, the subsidies being offeredto the production of clean energy and electric vehicles is already affecting competitors not just in
China but also US allies in Europe.6 This had led one commentator to conclude that “the US shift
to a more nationalist trade policy, driven by domestic industrial interests and national security
concerns, will be durable”.7
The stark contrast between the USTR and the Commerce Department is also why the IPEF is a
White House initiative. The USTR and Commerce Department simply could not come to agreement
on how the IPEF should be structured and the White House was forced to take it over.
Malaysia is a small, open economy that has a long history of embracing free and open trade andinvestment policies. In fact, prior to the 1997 - 98 Asian Financial Crisis, Malaysia was often hailed
as a model worthy of emulation by the developing world of how such liberal trade and investment
policies could transform economies and avoid the middle income trap.
Malaysia has pursued liberalisation through its participation in the WTO, unilateral actions and
FTAs. As of June 2023, Malaysia is implementing 18 FTAs (Table 1) and is negotiating five more.8
It has bilateral FTAs with four IPEF member countries – Australia, India, Japan and New Zealand– and is in the process of negotiating with two others – Republic of Korea and the US. Despite
negotiations having commenced in 2006, Malaysia does not look like concluding an FTA with the
US anytime soon. The question that then arises is by what extent the IPEF can effectively substitutethe absence of a bilateral FTA with the US. The short answer appears to be “very little, if at all”.
So far, the US is not providing the same treatment to the IPEF members as it is to countries withwhom it has an FTA. A stark contrast that highlights this discrepancy arises in relation to the Clean
Economy Pillar and ‘green’ investments (see Section 4).

6

7
8

120

Edward Alden, “Biden’s ‘America First’ Policies Threaten Rift with Europe”, Foreign Policy, 5 December 2022,
https://foreignpolicy.com/2022/12/05/biden-ira-chips-act-america-first-europe-eu-cars-ev-economicpolicy/
op. cit.
The five FTAs that Malaysia is negotiating are with the European Union, the Gulf Cooperation Council,
Iran, Republic of Korea and the US.

Malaysia’s Interests in the IPEF: Managing Trade Frictions and Restoring Market Access

Table 1: Malaysia’s trade agreements in effect, June 2023
IPEF
MEMBERS (1)TRADE AGREEMENTENTRY INTO
FORCE

IPEF (7)ASEAN Free Trade Area

1993

IPEF (9)ASEAN-Australia and New Zealand Free Trade Agreement

2010

ASEAN-Hong Kong, China Free Trade Agreement

2019

IPEF (8)ASEAN-India Comprehensive Economic Cooperation
Agreement

2010

IPEF (8)ASEAN-Japan Comprehensive Economic Partnership

2008

ASEAN-People's Republic of China Comprehensive Economic
Cooperation Agreement

2005

IPEF (8)ASEAN-Republic of Korea Comprehensive Economic
Cooperation Agreement

2007

IPEF (2)Australia-Malaysia Free Trade Agreement

2013

IPEF (7)Comprehensive and Progressive Agreement for Trans-PacificPartnership

2018

IPEF (2)

India-Malaysia Comprehensive Economic Cooperation
Agreement

2011

IPEF (2)----Japan-Malaysia Economic Partnership Agreement

2006

--

Malaysia-Chile Free Trade Agreement

2012

--

Malaysia-Pakistan Closer Economic Partnership Agreement

2011

--

Malaysia-Türkiye Free Trade Agreement

2015

IPEF (2)New Zealand-Malaysia Free Trade Agreement

2010

IPEF (2)Preferential Tariff Arrangement-Group of Eight Developing
Countries

2011

IPEF (11)Regional Comprehensive Economic Partnership2022

Trade Preferential System of the Organization of the Islamic
Conference

2022

--

Note: The number in parentheses refers to the number of countries participating in the IPEF.
Source: Asia Regional Integration Center, ADB9

The question of overall value-addition combined with the recent political and policy climate in
Malaysia may also affect its appetite to aggressively pursue a new and challenging agreement likethe IPEF. Since 2020, Malaysia has had four Prime Ministers and three Ministers of the Ministry ofInternational Trade and Industry (MITI). To provide context, it has had the same number of Prime
Ministers and Ministers of MITI in the last three years as it has had in the preceding three decades.
In short, the political and trade policy environment has been in a state of flux over recent years.
This is why Malaysia kept delaying ratification of the Comprehensive and Progressive Agreement
for Trans-Pacific Partnership (CPTPP) until 30 September 2022, making it the ninth (out of 11)
members to do so.
Some stability has returned with the current Anwar Ibrahim Administration, with Tengku Zafrul
Azis, the former Finance Minister, in charge of MITI. The CPTPP came into effect on 29 November
2022, soon after the Anwar Administration took office. The current administration has reiterated

9“Free Trade Agreements”, Asia Regional Integration Center, https://aric.adb.org/fta

121

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

support for the CPTPP, despite some concerns from domestic lobbies. The Minister of MITI saidin January 2023, “There were obviously some issues that were raised by various groups, and wehave addressed that by taking action to mitigate some of the concerns, so we are very muchcommitted to participating in [the CPTPP]”.10 This bodes well for the current administration’s free
trade credentials, and therefore, for the IPEF.
Malaysia is already a beneficiary of the IPEF’s technical assistance and capacity-building activities,
even claiming some responsibility for bringing it onto an agenda that has very few unilateralconcessions. The IPEF Upskilling Initiative aims to provide seven million training opportunities towomen across the region to acquire digital skills that prepare them for high-quality jobs. Malaysia
has also called for the establishment of an IPEF Centre for Excellence to provide training andcapacity building in areas covered by the various pillars such as supply chain resilience, energy
transformation and decarbonisation.11 These types of initiatives may go some way towards
providing more incentives in the form of carrots in an agreement that is heavy on sticks.

Pillars 1 and 2 – Trade and Supply Chains
As noted, Pillars 1 and 2 on Trade and Supply Chains, respectively, are the most important to
Malaysia. In fact, most of Malaysia’s trade involves supply chains and separating the two does
not make much economic sense for it. Nevertheless, the issues in the Trade Pillar are alreadyhaving a significant impact on trade relations with the US, particularly as they relate to labour andenvironmental standards.
Former MITI Minister Azmin Ali has indicated that Malaysia sees the IPEF as providing a platform
to open engagement with the US in seeking a solution to the WROs that have been imposed by
US authorities on Malaysian exports. US authorities currently have six active WROs on Malaysiancompanies, four on rubber gloves and two on palm oil, due to allegations of forced labour. The
WROs prohibit the import of products originating from companies facing forced labour allegations.
Will the IPEF be able to deliver on helping address the WROs or other punitive trade measures?
Two out of the six WROs have been modified in early 2023 and there is another precedent ofsorts that provides room for optimism that the IPEF can help. Just two weeks after the IPEF waslaunched on 23 May 2022, the Biden Administration lifted a transshipment ban that had been
imposed following a complaint by a US-based solar company.12 Malaysia (and Cambodia, Thailand
and Vietnam) were suddenly provided 24-month duty-free access to the US market for theirexports of solar cells and modules.
Therefore, even if the IPEF does not include the exchange of market access concessions in the
traditional sense, it may provide the opportunity to reverse binding restrictions and restore
market access for countries like Malaysia. It may also allow Malaysia an avenue to better manage
similar issues should they arise in the future. The recent relaxation of WROs on two companies
and the removal of the transshipment ban on solar products suggest that this might be possible.

10 Quoted in “Malaysia ‘fully committed’ to CPTPP, says Tengku Zafrul”, Free Malaysia Today, 5 January 2023,
https://www.freemalaysiatoday.com/category/highlight/2023/01/05/malaysia-is-fully-committed-tocptpp-says-tengku-zafrul/
11 “FACT SHEET: IPEF Upskilling Initiative”, US Department of Commerce, https://www.commerce.gov/sites/
default/files/2022-09/IPEF-Upskilling-Fact-Sheet.pdf
12 See Nichola Groom, “US places tariffs on some big solar companies for dodging China duties”, Reuters,
19 August 2023, https://www.reuters.com/sustainability/us-slaps-tariffs-some-big-solar-companiesdodging-china-duties-2023-08-18/

122

Malaysia’s Interests in the IPEF: Managing Trade Frictions and Restoring Market Access

Nevertheless, the increasing influence of the US Department of Commerce in setting the tradeagenda (see Section 2) has increased the weaponisation of trade policy and this needs to be checked
and better managed. Otherwise, its impacts on a growing number of non-trade related areas willcause significant disruption to countries on the receiving end.
Malaysia is keen to grow its digital economy, and the rules relating to it coming from the IPEF may
be significant. If the IPEF negotiations on digital trade and data flows can further the agenda beyond
that of other bilateral (for example, the Framework of Cooperation with Singapore), regional(CPTPP, but also ASEAN, Asia-Pacific Economic Cooperation [APEC], et cetera.), or multilateral(WTO) frameworks, then the impact of the IPEF could be transformative. Details are still sparsebut the potential is certainly there to make the IPEF a significant part of Malaysia’s trade policy. The
negotiations in this area, however, are not without risk. With the European Union and China also
pursuing their own approaches to digital governance, the possibility of a ‘splinternet’ emerging,which fractures the global system, needs to be avoided.
Malaysia will also be impacted by the first tangible results of the year-long negotiations, relating to
supply chain resilience. Following the meeting in Detroit on 27 May 2023, US Commerce Secretary
Gina Raimondo announced “substantial progress” towards an IPEF Supply Chains Agreement,
although the final text is yet to be agreed upon.
Three new structures are being created to operationalise the agreement:
The first is the IPEF Supply Chain Council for better coordination of supply chain activities andbuilding resilience and competitiveness in certain critical sectors. The Council will oversee thedevelopment of ‘action plans’ for these sectors that may help companies identify and address
supply chain vulnerabilities.
The second is an IPEF Supply Chain Response Network for giving early warnings to members on
potential supply disruptions. With a new ‘emergency communications channel’, it is expected that
the IPEF members can streamline communication and coordinate a response when one or more
IPEF parties face a supply chain crisis.
Finally, an IPEF Labo[u]r Rights Advisory Board made up of government, worker, and employee
representatives is being proposed. This Board is to identify areas where certain labour rights
are being violated. Analysing the language in the agreement’s press statement, some expertssuggest the board can recommend action under a new facility-specific mechanism for addressing
allegations of labour rights inconsistencies similar to that in the United States-Mexico-Canada
Agreement’s (USMCA’s) Facility-Specific Rapid-Response Labo[u]r Mechanism.13 An importantdifference with the USMCA’s Rapid-Response mechanism relates to enforcement, however, as the
IPEF mechanism is unlikely to be binding or reciprocal.
Although a tangible outcome such as the IPEF Supply Chain Agreement after just one year should be
welcomed, the operational details, once available, need to be studied before reaching conclusions
on its practical use. The Press Statement on the Substantial Conclusion of the IPEF Supply Chain

13 Aidan Arasasingham, Emily Benson, Matthew P. Goodman, and William Alan Reinsch, “Assessing IPEF’s
New Supply Chains Agreement”, CSIS, Washington, DC., 31 May 2023, https://www.csis.org/analysis/
assessing-ipefs-new-supply-chains-agreement

123

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Agreement Negotiations, posted on the US Department of Commerce official website,14 reveals
very little of substance, unfortunately. Indeed, the announcement, which is all that is available
as of June 2023, has been described as “a mass of abstract verbiage with a tangle of subclauses
festooned with adjectives and adverbs layered two or three deep”.15 It is mostly aspirational andvery thin on practical details, with whatever little details provided being so heavily qualified thatthey can be interpreted to suit a diverse range of interests.16
China’s not being a part of the IPEF and the Supply Chain Agreement is a major concern for
Malaysia and the other ASEAN members involved in regional supply chains. This is because almost
all manufacturing supply chains that involve Malaysia and other ASEAN countries are Chinacentred. It is with this Pillar that the exclusion of China is most significant, and greatly undermines
its value to a country like Malaysia. The high level of interdependence that characterises supply
chains highlight the importance of including all players, especially critical ones like China. The
exclusion of China can undermine the usefulness of this pillar to ASEAN members of the IPEF,
including Malaysia.
More than being of limited use due to the exclusion of China, the Supply Chain Agreement could
actually harm Malaysia and other countries with China-centred supply chains. This is because the
US expects to get the IPEF members to buy into its ‘resilience and competitiveness’ framework andsupport its national security interests by limiting engagement and dependency on China. The US
hopes the agreement will encourage other members to also start reshaping their supply chainsin line with the broader US ‘friend-shoring’ agenda that incentivises supply chain relocation tocountries that do not pose a perceived national security threat.17 In exchange for this, members
are being offered various capacity building and training programmes, and the possibility of greater
Foreign Direct Investment (FDI) flows during an unspecified future. This is not a bargain thatcountries like Malaysia are likely to find beneficial.
When it comes to regional supply chains, an early warning system will be useful only if its predictions
are reliable. This in turn will depend on the willingness of member states to share information
on a timely basis. Although supply chain networks are highly interdependent, countries involved
can sometimes operate more as competitors than collaborators, and may be unwilling to share
information on a timely basis, especially if the information is sensitive or proprietary in nature.
An example of the problem that can arise is illustrated by the ASEAN+3 financial and economic
surveillance process, which is also supposed to provide an early warning system of emerging risks
and vulnerabilities for ensuring pre-emptive actions to avert a contagious financial crisis. The
process has become a beauty contest of sorts, with members tending to highlight strengths rather
than potential vulnerabilities, with the latter seen as failures of economic management. It appears
that members are reluctant to air their dirty laundry in public and would rather prefer either

14 “Press Statement on the Substantial Conclusion of IPEF Supply Chain Agreement Negotiations”, US
Department of Commerce, 27 May 2023, https://www.commerce.gov/news/press-releases/2023/05/
press-statement-substantial-conclusion-ipef-supply-chain-agreement
15 Alan Beattie, “The US trade pledge to the Indo-Pacific is empty”, Financial Times, 8 June 2023, https://www.
ft.com/content/42a87796-8228-445b-8ad5-63a5c35d5144
16 To illustrate the point, consider the following statement, which is representative of many of the pledges
made in the press release: “ensure that workers and the businesses, especially micro-, small-, andmedium-sized enterprises, in the economies of IPEF partners benefit from resilient, robust, and efficient
supply chains by identifying disruptions or potential disruptions and responding promptly, effectively,
and, where possible, collectively.”
17 op. cit. As in 10 earlier.

124

Malaysia’s Interests in the IPEF: Managing Trade Frictions and Restoring Market Accessdisguising or glossing over them, while focusing on the positive aspects, which undermines the
purpose of the surveillance.
Another problem illustrated by the ASEAN+3 process, which could equally apply to the IPEF’s early
warning initiative, is the absence of effective remedial and response measures for addressing risks
emerging from the early warning system. The Multilateralised Chiang Mai Initiative (CMIM), which
is supposed to provide emergency liquidity support in the event of a rapidly evolving crisis, has
never been used because the operational procedures remain unclear and arduous, almost as if
it is designed not to be used.18 Similarly, the global climate crisis was not due to any lack of early
warning, but rather inter-generational choices and trade-offs.
The supply chain initiative should be able to not only identify emerging risks but also to respondto them in an effective and timely manner. The details must be examined before it is hailed asa breakthrough, as the US Commerce Secretary Gina Raimondo already has : “I can tell you I
would have loved to have had that Crisis Response Network during [the COVID-19 pandemic]. It
absolutely would have helped us secure American jobs and keep supply chains moving”.19 How a
Crisis Response Network that excludes a critical player like China might have helped keep supply
chains moving during a global pandemic that shut down economies around the world for months
on end is difficult to comprehend. If anything, the pandemic demonstrated how resilient supply
chains already were, despite the incredible pressures they faced.20 A properly functioning early
warning system may at best help in limiting the fallout from a country- or region-specific shock,given the highly interdependent nature of supply chain networks, but certainly not a global shock.
As noted earlier, embedded within the Supply Chains Agreement is a new labour rights advisoryboard aimed at raising labour standards in supply chains. Labour issues were meant to be partof Pillar 1 on Trade but have found their way into Pillar 2 on Supply Chains and might arise inother pillars as well, further emphasising the so-called ‘worker-centric’ nature of the IPEF. The
extent to which this body will raise standards to protect workers, as opposed to removing thecost competitiveness that developing countries have with labour supply, is yet to be seen. It would
suffice to say that developing countries tend to view the introduction of labour standards into
trade negotiations with a high level of suspicion.

Pillars 3 and 4 – Clean Economy and Fair Economy
For the issues covered in the pillars on Clean and Fair Economy, Malaysia’s main policy response
will be determined by either national actions and priorities, or commitments to existing
international agreements, rather than the IPEF. For Clean Economy, Malaysia has updated its
Nationally Determined Contribution target to reach net-zero greenhouse gas emissions by 2050.

18 Jayant Menon and Hal Hill, “Does East Asia Have a Working Financial Safety Net?”, Asian Economic Journal,
Vol. 28, no. 1, (2014): 1-17, https://researchprofiles.anu.edu.au/en/publications/does-east-asia-have-aworking-financial-safety-net
19 Quoted in David Lawder, “U.S.-led Indo-Pacific talks produce deal on supply chain early warnings”,
Reuters, 28 May 2023, https://www.reuters.com/markets/asia/us-led-indo-pacific-talks-produce-dealsupply-chain-early-warnings-2023-05-27/
20 Jayant Menon, “Supply chains are more resilient than they appear”, East Asia Forum, 3 July 2022, https://www.eastasiaforum.org/2022/07/03/supply-chains-are-more-resilient-than-they-appear/

125

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

This is a major challenge.21 The IPEF can play a complementary role in helping Malaysia meet its
commitments, but not with its current configuration. At the moment, the IPEF will not have muchof an impact, unless it is upgraded to at least the standard applied in US FTAs.
The US has comprehensive FTAs in force with 20 countries, of which four are with IPEF members,
namely Australia, Republic of Korea, Japan and Singapore. Since Malaysia has not concluded an
FTA with the US, it will not receive the same treatment as these four IPEF members, or other nonIPEF countries that have FTAs with the US, and this discrepancy is at its greatest in relation to
the green economy. The Inflation Reduction Act (IRA) grants tax credits to companies if a certain
percentage of the value of critical minerals in electric vehicle batteries, for instance, is extracted
or processed in the US or FTA partner countries.22 This does not automatically extend to the IPEF
members. The fact that the US signed a critical minerals agreement bilaterally with Japan in March2023 that allows Japan to access IRA tax credits erodes the relevance of the IPEF to other members.
It is this type of discrepancy and discrimination that is undermining the value of the IPEF in thisarea in particular, and as a serious attempt to economically re-engage with the region, in general.
With respect to the Fair Economy Pillar, it should be noted that Malaysia is already a signatory to theMultilateral Instrument to Prevent Base Erosion and Profit Shifting (BEPS). There are also various
governance issues relating to corruption and the performance of Government Linked Companies(GLCs) that need to be addressed but this will mainly require national actions.23 Furthermore, with
Malaysia ratifying the CPTPP, there may be little that the IPEF can add to the binding commitments
already made to the reform agenda in this area.
What is missing from the Fair Economy agenda is a mechanism for addressing the unintended
consequences of industrial policy actions of one (or more) member(s) on the other(s). The
question arises as to how a pillar on fair economy can be consistent with uncompensated impacts
on the IPEF members of actions by the US targeting China for non-economic reasons, for instance.
Malaysia and other supply chain partners may suffer the indirect consequences of actions designed
to safeguard perceived threats to US national security, and there is no mechanism in place forredress or compensation. This issue needs attention because the measures being employed may
not be fully covered by global trade rules, as they mostly relate to subsidies and export controls,
not traditional measures such as tariffs or other import restrictions.
Although discriminatory subsidies are forbidden under WTO disciplines, contraventions havebeen widely ignored. Even when an attempt is made to justify such measures on national security
grounds – as permitted under Article XXI of the General Agreement on Tariffs and Trade (GATT) –the legitimacy of the claim is often suspect. If a WTO ruling determines the national security claim
spurious, the US has simply ignored the decision, as it did with the ruling on the Trump-era tariffs onsteel, for instance. Indeed “US decisions as to whether a country, company, product or technology

21 The International Renewable Energy Agency has noted that meeting the target would require adoubling in investments in renewable energy transition to at least US$375 billion in order to expand
renewables capacity, infrastructure and energy efficiency. See Mei Mei Chu, “Malaysia needs to invest$375 bln in renewables to reach 2050 climate goals – report”, Reuters, 9 March 2023, https://www.
reuters.com/business/energy/malaysia-needs-invest-375-bln-renewables-reach-2050-climate-goalsreport-2023-03-09
22 See “Inflation Reduction Act of 2022 (IRA): Provisions Related to Climate Change”, Congressional ResearchService, 3 October 2022, https://crsreports.congress.gov/product/pdf/R/R47262
23 Jayant Menon and Thiam Hee Ng, “Do State-Owned Enterprises Crowd Out Private Investment: Firm
Level Evidence from Malaysia”, Journal of Southeast Asian Economies, Vol. 34, no. 3, (September 2017):
507-522.

126

Malaysia’s Interests in the IPEF: Managing Trade Frictions and Restoring Market Accessthreatens US national security are shielded both from public and judicial scrutiny and deliberately
ignore economic costs”.24 These costs, however, are not confined to the US but are also imposedon the country being targeted as well as its trading and supply chain partners. When the supposed
original guarantor of the rules-based trading order becomes one of its major violators, any new
proposals purporting to promote fair trade or fair economy needs to be carefully scrutinised.

Conclusion
Using trade agreements for pursuing non-economic ends, whether through formal FTAs or
frameworks like the IPEF, is neither new nor unique to the US. In fact, most trade agreements
probably have more to do with international diplomacy and politics than with trade or investment.
The IPEF is not an exception. The outstanding difference with the IPEF, however, is how much it
asks of its members in return for how little it promises to provide – it is almost all stick and no
carrot. This is particularly problematic since there is no mechanism to bind countries to makegood on their commitments. Unless this changes, the policy impact of the IPEF, as opposed to thefanfare that is likely to accompany the conclusion of negotiations, will be vast. The IPEF may happen
but will hardly be noticed in practical terms. There is still time to negotiate a better agreement.
But even if little changes between now and its conclusion, expected at the APEC Summit in San
Francisco in November 2023, the impact of the IPEF will vary by country and sector.
What Malaysia expects to derive from the IPEF may differ from other members. For Malaysia,
participation in the IPEF could serve as insurance against punitive trade policy actions by the
US and could provide the opportunity to resolve existing trade frictions. Therefore, Pillars 1 and
2 on Trade and Supply Chains will be most significant. With the Trade Pillar, it is not so muchabout increasing market access to the US, which the IPEF does not currently provide, but rather
with restoring and preserving market access by reversing the remaining WROs that currently
ban exports to the US market by targeted companies. Malaysia also expects that the ease andfrequency with which trade sanctions are applied in the future will be better managed due to the
IPEF. The recent relaxation of WROs on certain companies and the removal of the transshipment
ban on solar products suggest that this might be possible.
A remaining unknown relates to digital trade. The potential exists for the IPEF to be transformative
for countries like Malaysia if it can deliver in this area in a way that moves the frontier while avoiding
the risk of a ‘splinternet’ emerging. These potential benefits of the IPEF need to be weighed against
a worst case but highly plausible scenario where the creation of the IPEF further fuels US-China
tensions that lead to further retaliatory actions. This is likely if the IPEF is viewed as an attempt by
the US to export its national security agenda to the region. If retaliatory actions further disrupt theoperations of regional supply chains, leading to possible bifurcation, then the cost to Malaysia andother ASEAN countries will be high enough to outweigh any benefits.
The reality, however, is that the IPEF without China is, to a large extent, economically meaningless
to countries like Malaysia, and potentially disruptive and costly. To expect that this might change
in the future would be unrealistic if a key underlying motivation of its main proponent(s) is tocounter the rise of China’s influence in the region.

24 Gary C. Hufbauer, “Washington’s turn to neo-mercantilism”, East Asia Forum, 4 June 2023, https://www.
eastasiaforum.org/2023/06/04/washingtons-turn-to-neo-mercantilism/?utm_medium=email&utm_
campaign=newsletter2023-06-03

127

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

About the author
Dr Jayant MENON is Senior Fellow, Regional Economic Studies, at ISEAS-Yusof Ishak Institute. At
ISEAS, Dr Menon continues his work on trade and investment issues and economic developmentin the Asian region. His current research areas include economic impacts of COVID-19 in Southeast
Asia, COVID-19 and the poor, the United States-China trade war and restructuring of Global Value
Chains in Asia and the evolving regional economic architecture.
His last post was at the Asian Development Bank (ADB) as Lead Economist in the Office of the
Chief Economist. He was also at the ADB Institute in Tokyo from 2005 to 2008. He started work
as an academic in Australia, spending almost a decade at the Centre of Policy Studies at Monash
University at its original campus in Clayton, Melbourne. He has also worked at the University of
Melbourne, Victoria University, and the American University in Washington, DC. He holds adjunctappointments with the Australian National University, University of Nottingham, United Kingdom
and IDEAS, Malaysia.

128Thailand’s Perspectives on the IPEF

Thailand’s Perspectives on the IPEF
Kaewkamol PITAKDUMRONGKITThis chapter investigates Thailand’s perspective on the Indo-Pacific Economic Framework for
Prosperity (IPEF). It introduces different views on the Framework from the Thai government,
businesses, and civil society. The negotiation challenges facing the country and some anticipatedoutcomes of each Pillar are highlighted. Thailand will likely find it difficult to partake in the IPEF
in the areas of digital economy, labour standards, environmental cooperation and anti-bribery
practices. Yet, some difficulties can be ameliorated by the other IPEF members’ capacity building
programmes. The domestic political factors stemming from the General Election (GE) in May 2023
and how they will shape the country’s implementation of the IPEF are also examined. This chapter
ends with the discussion of the prospects of engaging Europe from Thailand’s viewpoint. The
analysis finds that the state prefers to advance its economic ties with Europe via regular Free
Trade Agreements (FTAs) rather than the IPEF.

129

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

This paper investigates Thailand’s perspectives on the Indo-Pacific Economic Framework for
Prosperity (IPEF). It scrutinises how the government, the private sector, civil society and otherstakeholders view the Framework. It also reflects on the key challenges facing Thailand during
the talks and anticipated negotiation outcomes. The recent changes in Thai politics and how they
will affect the implementation of the IPEF are also examined. The paper concludes with viewson Thailand’s IPEF membership in relation with other global actors and the prospects of theframework’s implementation in the next five years.

What the IPEF Means for Thailand
Government Sector
From the government’s viewpoint, Thailand does not see the IPEF as a replacement for Free Trade
Agreements (FTAs). Yet, it can serve as a scheme that can mint out innovative initiatives against
the backdrop of the post-COVID-19 economic recovery and changing geopolitics. The benefits of
the IPEF include generating new trade and investment opportunities for the region and Thailand.1
In other words, the cooperation will improve the business environment, which can attract more
foreign direct investment (FDI) and create new jobs.2 This will in turn enable Thailand to obtain
the objectives outlined in the 13th Nation Economic and Social Development Plan (2023 – 27)
including boosting per capita income, narrowing income inequality, and lessening greenhouse gas
emissions.3
Bangkok also sees its Eastern Economic Corridor (EEC) gaining from the IPEF. EEC is striving totransform the nation’s eastern part into the Indo-Pacific region’s production hub of 12 targetedindustries: Next-Generation Automotive, Intelligent Electronics, Advanced Agriculture andBiotechnology, Food for the Future, High-Value and Medical Tourism, Robotics, Aviation andLogistics, Medical and Comprehensive Healthcare, Biofuel and Biochemical, Digital, National
Defence, and Education and Human Resource Development.4 The IPEF could better the businessenvironment and raise investors’ confidence, allowing the country to attract more investment inthese sectors.
The Thai authorities are aware of the geopolitical underpinnings of this Washington-led initiative.
The IPEF is a product of the intensifying United States (US)-China power contestation. In May 2022,
US Secretary of State Anthony Blinken labelled China as “the most serious long-term challenge tothe international order” and revealed the US’ three-pronged strategy – “invest, align, compete”.5

1
2
3

4

5

130

Author’s conversation with the Thai government officers, 24 February 2023.
“ASEAN Digest”, Bangkok Bank, June 2022, https://www.bangkokbank.com/-/media/files/internationalbanking/aec-connect/asean-digest/2022/asean-digest_-jun2022.pdf
Kavi Chongkittavorn, “Behind the scenes: Thailand’s IPEF talks”, Bangkok Post, 24 May 2022, https://www.
bangkokpost.com/opinion/opinion/2314838/behind-the-scenes-thailands-ipef-talks;“Parliament okays NESDC’s new development plan for Thailand”, The Nation, 30 August 2022, https://www.nationthailand.com/in-focus/national/40019519“Developing EEC to Support MICE Industry and the Investment of 12 Focused Industries”, Thailand
Convention and Exhibition Bureau, 2022, https://www.businesseventsthailand.com/en/support-solution/
success-story/detail/631-developing-eec-to-support-mice-industry-and-the-investment-of-12-focusedindustries“The Administration’s Approach to the People’s Republic of China”, Speech by Anthony Blinken, Secretaryof State at George Washington University, Washington D.C., 26 May 2022, https://www.state.gov/theadministrations-approach-to-the-peoples-republic-of-china/

Thailand’s Perspectives on the IPEF

Under the ‘align’ aspect, the Biden Administration intends to promote an alternative vision of theregional order different from Beijing’s. The IPEF was cited as a mechanism to revitalise the US
rule-making leadership for emerging matters such as “digital economy, supply chains, clean energy,
infrastructure, and corruption”.6 In short, Washington attempts to lean on the IPEF to counterweigh
China in the Indo-Pacific economic governance area.
Due to the US-China rivalry, global supply chain calculations will likely be based more on strategic
than economic factors as exemplified by the concept of friendshoring. Bangkok welcomes this trend
as an opportunity for it to attract more investments as other states reconfigure their production
networks. This would entail windfall gains for Thailand as it will receive more investments in EEC’s
key sectors.
Regarding Pillar 1 (Trade), while the IPEF is not a regular FTA, the country’s view is that it can be
another mechanism that Bangkok can leverage to craft international rules and standards for its
own and regional interests. The state must partake in this Framework especially after it suspended
its plan to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). Due to theanti-CPTPP domestic backlash, Bangkok postponed its formal application to join the pact.7 As aresult, the IPEF is regarded a practical pathway that Thailand can utilise to deepen its economic
engagement with other regional states. As far as the US-Thailand trade relations are concerned,
this initiative has come after the US-Thailand FTA talks stalled.8 Thus, the IPEF can be a forum
for Bangkok to cooperate economically with Washington, voice its concerns with the latter (forexample, US protectionism), and sort out joint solutions.
Thailand’s participation in Pillar 2 (Supply Chains) stems from the latter’s focus on supply chain
resilience, which Bangkok sees as a new area that has not been adequately addressed by otherframeworks.9 Thailand’s comparative advantages in certain sectors can be further exploited if
cooperation on Pillar 2 comes into fruition. Thailand’s exports to and imports from the other IPEF
members in 2018 – 21 accounted for 42.7 per cent and 52 per cent of the country’s total exports
and imports respectively.10 Moreover, the nation’s outward investment to and inward investment
from the other IPEF members in 2018 – 22 amounted to 46.8 per cent and 45.4 per cent of thecountry’s total outward and inward investment respectively.11 The collaboration on Pillar 2 will
permit companies in these industries to expand abroad, raise funds for their future investments,
and deepen their supply chains in the region. Furthermore, Bangkok aims to foster new andIbid.
op. cit.
The US-Thailand FTA talk commenced in October 2003. Six negotiation rounds took place from October2003 to January 2006. In February 2006, the negotiation was suspended after the military putsch ousted
the democratically-elected Thaksin Shinawatra government.
9 Author’s conversation with the Thai government officers, 24 February 2023.
10 “Trade Data”, UN Comtrade Database, https://comtradeplus.un.org/TradeFlow?Frequency=A&Flows=all&CommodityCodes=TOTAL&Partners=764&Reporters=all&period=all&AggregateBy=none&BreakdownMode=plus
6
7
8

The top traded goods during this period were: (1) Machinery, boilers, nuclear reactors and mechanicalappliances; parts thereof (HS Code 84); (2) Electrical machinery and equipment and parts thereof; soundrecorders and reproducers; television image and sound recorders and reproducers, parts and accessories of such articles (HS Code 85); and (3) Vehicles; other than railway or tramway rolling stock, and parts
and accessories thereof (HS Code 87).
11 The most invested sectors were: manufacturing, wholesale and retail trade, repair of motor vehicles andmotorcycles, financial and insurance, accommodation and food services, and real estate. The information
was gathered from the Bank of Thailand database.

131The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

emerging supply chains via the EEC. For instance, electrical vehicles (EVs) are under the EEC’s
Next-Generation Automotive industry, whose growth and expansion the government encourages.
The IPEF will raise investments in EVs, allowing the state to maintain and bolster its position as the‘Detroit of Asia.’
Pillar 3 (Clean Economy) is seen as complementary to Thailand’s pursuit of a bio-circular-green(BCG) economy.12 BCG economy is a new model enabling the state to accomplish inclusive andsustainable growth and development. This approach rides the country’s strengths in biologicaldiversity and cultural richness, and employs technology and innovation to transform Thailand
into a value-based and innovation-driven economy. The model conforms with the United Nations(UN) Sustainable Development Goals (SDGs) and aligns with the Sufficiency Economy Philosophy(SEP), the key principle of Thailand’s social and economic development.13 The country has beenpractising this model domestically and advocating it internationally. For instance, as the host of
the Asia-Pacific Economic Cooperation (APEC) Summit last year, it played a pivotal role in making
the APEC adopt the Bangkok Goals on the BCG Economy at the APEC Economic Leaders’ Meetingin November 2022.14 With its experience and expertise on sustainability, the state intends to makecontributions to the cooperation under this Pillar.
Thailand views Pillar 4 (Fair Economy) as important for upgrading the regional economies’ anticorruption and taxation legislations. Also, successful cooperation in Pillar 4, will enhance bothtransparency and good governance, improving the Indo-Pacific business climate and making theregion a more attractive FDI destination. Another reason undergirding Bangkok’s engagement in
the IPEF pertains to capacity-building. The government believes that the participation will boost
its capabilities to better implement international initiatives such as the Paris Agreement, the UN
Conventions, and the Organisation for Economic Cooperation and Development (OECD)’s twopillar solutions.15
Private Sector
Thailand’s private sector generally welcomes the Framework. The business community feels the
IPEF will lead to some degree of regional standard upgrading. However, it has difficulty conducting
usual cost-benefit analyses because the IPEF is not an FTA. Put differently, this framework’s uniquenature poses challenges to the Thai firms’ abilities to anticipate their potential gains and losses.
These stakeholders are uncertain over whether they will emerge as winners or losers from the
Framework. As a result, they are unable to plan strategies such as lobbying with the government
to refrain from engaging in any arrangements that undercut their interests.16
The private sector is optimistic about the IPEF yielding tangible and beneficial outcomes. The
Upskilling Initiative for Women and Girls launched in September 2022 is a case in point.17 This
programme strives to train 7 million women and girls in the IPEF middle-income and emerging
economies by 2032. Fourteen American tech firms such as Apple, Amazon, Cisco, Dell, IBM, and
12 Author’s conversation with the Thai government officers, 24 February 2023.
13 “Bio-Circular-Green Economic Model (BCG)”, The Royal Thai Embassy, Washington D.C., August 2021,
https://thaiembdc.org/bio-circular-green-bcg/
14 “2022 Leaders’ Declaration”, Asia-Pacific Economic Cooperation (APEC), Bangkok, Thailand, 19 November
2022, https://www.apec.org/meeting-papers/leaders-declarations/2022/2022-leaders-declaration
15 Author’s conversation with the Thai government officers, 24 February 2023.
16 Ibid.
17 “FACT SHEET: IPEF Upskilling Initiative”, US Department of Commerce, https://www.commerce.gov/sites/
default/files/2022-09/IPEF-Upskilling-Fact-Sheet.pdf

132

Thailand’s Perspectives on the IPEF

HP will boost digital skills of at least 500,000 of these individuals during the ten-year period. The
Thai female workforce will receive training from this initiative. From the businesses’ perspective,
this will galvanise their long-term development and competitiveness in the increasingly digitalised
world economy. Consequently, businesses hope for additional concrete public-private partnership(PPP) projects like the Upskilling Initiative to come out of the Framework.18
Civil Society
The Thai civil society actors are either unsure or positive about the impact of the IPEF on theeconomy and society. There is no obvious domestic backlash. The sentiments manifest in the 2023
survey conducted by the Institute of Southeast Asian Studies (ISEAS) - Yusof Ishak Institute which
gathers the opinions of Southeast Asian academic and thinktank scholars, business communities
and civil society actors. This study reveals that 46.5 per cent and 41.7 per cent of the Thai
respondents said they were unsure, and positive, respectively, about the IPEF’s benefits on the
country.19 Among those expressing a positive stance, more than one-third articulated that the IPEF
“will complement existing ASEAN [Association of Southeast Asian Nations] initiatives” and signal
Washington “to be economically engaged in the region.” Among those unsure, the key factors were“[t]here is little information available” and “[i]t depends on what emerges from the negotiations”.20

Negotiation Challenges and Anticipated Outcomes
Pillar 1 (Trade)
This analysis foresees two main challenges facing Thailand under Pillar 1. The first one concerns
the digital economy. While the country’s e-commerce market is the second largest in Southeast
Asia and is projected to reach US$32 billion by 2025,21 the progress of fostering transnational digital
governance architectures via international arrangements is relatively sluggish when compared toother Indo-Pacific states such as Australia and Singapore. While Bangkok is a signatory to the
Regional Comprehensive Economic Partnership (RCEP) that has an e-commerce chapter, it isneither a member of the CPTPP, nor is it pursuing any digital economy agreements. It is also
not participating at the WTO (World Trade Organization) talks on the trade-related aspects of
e-commerce. The gaps in rulemaking would hinder Thailand’s participation under this Pillar.
A possible outcome in digital economy will depend on how the IPEF stakeholders decide to adopt
elements from different existing frameworks such as the United States-Mexico-Canada Agreement(USMCA), the CPTPP and other arrangements. The final outcomes might also reflect some influence
from the Digital Economic Partnership Agreement (DEPA) signed in June 2020 between Chile,
New Zealand, and Singapore. The DEPA has 14 sections and is built on the modular approach.22
Such modality allows states to pick and choose among these modules to construct their own

18 Author’s conversation with the Southeast Asian trade consultant, 24 February 2023.
19 “The State of Southeast Asia: 2023 Survey Report”, Institute of Southeast Asian Studies (ISEAS) - Yusof
Ishak Institute, 9 February 2023, https://www.iseas.edu.sg/wp-content/uploads/2025/07/The-State-ofSEA-2023-Final-Digital-V4-09-Feb-2023.pdf
20 Ibid.
21 “Thailand’s roaring digital economy set to hit THB1.28 trillion this year”, The Nation, 10 November 2022,
https://www.nationthailand.com/business/tech/40021907
22 “Digital Economy Partnership Agreement (DEPA)”, Ministry of Trade and Industry – Singapore, 2020,
https://www.mti.gov.sg/-/media/MTI/Microsites/DEAs/Digital-Economy-Partnership-Agreement/Text-ofthe-DEPA.pdf

133

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

arrangements. This advantage-by-design will facilitate the making of subsequent agreements
including the IPEF.
Thai domestic legislations are more restrictive in terms of cross-border data flows. The Personal
Data Protection Act (PDPA) of 2019, which has been in effect since June 2022, is a case in point.
The Act is largely derived from the EU’s General Data Protection Regulation (GDPR). The GDPR
is in force since May 2018 and is regarded as the world’s toughest data privacy and security
legislation as it offers the most restrictive provisions regarding these matters.23 Illustratively, similar
to the GDPR, the Thai PDPA’s Section 28 puts restrictions on transnational transfers of personal
data. The transmissions are permitted only to the destinations that provide an adequate level ofprotection.24 Such a provision clashes with the CPTPP and the USMCA. The CPTPP’s Article 14.11
mandates all CPTPP parties to “allow the cross-border transfer of information by electronic means,including personal information, when this activity is for the conduct of the business.”25 Likewise,
USMCA’s Article 19.11 posits that “[n]o Party shall prohibit or restrict the cross-border transfer of
information, including personal information, by electronic means if this activity is for the conductof the business.”26 Hence, the discrepancies among the Thai laws, CPTPP and USMCA (coupled witha high likelihood that Washington will ride on the latter’s modality to advance the IPEF talks) may
prevent Bangkok from reaching agreeable details pertaining to cross-border data transmission.
But there is room for collaboration. The Digital Upskilling Initiative is welcomed by Bangkok since
it lags behind its regional peers in the area of digital workforce. Illustratively, according to the 2022
International Institute for Management Development (IMD)’s World Digital Competitiveness Index,
the country ranks 38 among 64 economies, and 10 among 14 Asian economies surveyed.27 Goingforward, Thailand will likely call for additional capacity-training programmes especially thosecatered towards entrepreneurs, which the US and other advanced IPEF nations can offer.
Another negotiation challenge for Thailand in Pillar 1 is labour standards. With the United States
Trade Representative (USTR) leading negotiations in Pillar 1, this issue will be contentious, as
the USTR has a strong pro-labour position. In June 2021, USTR Katherine Tai clarified the Biden
Administration’s worker-centred trade policy.28 She contended that it involves “addressing thedamage that [US] workers and industries have sustained from competing with trading partners
that do not allow workers to exercise their internationally recogni[s]ed labo[u]r rights... We will
be more effective if our trading partners also commit to promoting, protecting, and enforcing

23 “What is GDPR, the EU’s new data protection law?”, The European Union, 2023, https://gdpr.eu/what-isgdpr/
24 Personal Data Protection Act, B.E. 2562 (2019), Section 28, Government of Thailand, 27 May 2019, https://thainetizen.org/wp-content/uploads/2019/11/thailand-personal-data-protection-act-2019-en.pdf
25 “Electronic Commerce”, Article 14.11, Chapter 14 in CPTPP, https://www.mfat.govt.nz/assets/Tradeagreements/TPP/Text-ENGLISH/14.-Electronic-Commerce-Chapter.pdf
26 “Digital Trade”, Article 19.11, Chapter 19 in USMCA, https://ustr.gov/sites/default/files/files/agreements/
FTA/USMCA/Text/19-Digital-Trade.pdf
27 “IMD World Competitiveness Yearbook 2022 – Thailand” International Institute for Management
Development (IMD), 2022, https://wwwcontent.imd.org/globalassets/wcc/docs/wco/pdfs/countrieslanding-page/TH.pdf
28 “Remarks of Ambassador Katherine Tai Outlining the Biden-Harris Administration’s ‘Worker-Centered
Trade Policy’”, Office of the United States Trade Representatives, 10 June 2021, https://ustr.gov/aboutus/policy-offices/press-office/speeches-and-remarks/2021/june/remarks-ambassador-katherine-taioutlining-biden-harris-administrations-worker-centered-trade-policy

134Thailand’s Perspectives on the IPEF

internationally recogni[s]ed workers’ rights as part of their trade policies”.29 On another occasionin June 2021, Tai praised the USMCA as “a better deal for workers and a new model for trade
agreements able to secure a broad base of support”.30 This stance will likely entail that Washington
would press for the USMCA-styled high labour standards at the IPEF talks. This is reflected by thefact that all IPEF Pillars call for the promotion of labour rights under the International Labour
Organization (ILO) Declaration on Fundamental Principles and Rights at Work.
Bangkok can face some challenges stemming from the discrepancies between its degree ofcompliance or conformity, on the one hand; and what is stipulated in the ILO Conventions, andwhat the IPEF and USMCA cover, on the other. The USMCA’s Chapter 23 (Labour) does not require
the adoption of the Convention. Nevertheless, it stresses that ‘[t]he Parties affirm their obligations
as members of the ILO, including those stated in the ILO Declaration on Rights at Work and theILO Declaration on Social Justice for a Fair Globali[s]ation.’ A close look at the ILO Declaration on
Rights at Work31 divulges that the parties are mandated to uphold the labour principles and rights
as outlined in the ILO Conventions. According to the text, ‘all Members, even if they have not
ratified the Conventions in question, have an obligation arising from the very fact of membershipin the Organi[s]ation, to respect, to promote and to reali[s]e, in good faith and in accordance with
the Constitution, the principles concerning the fundamental rights which are the subject of those
Conventions, namely:(a) freedom of association and the effective recognition of the right to collective bargaining;(b) the elimination of all forms of forced or compulsory labour;(c) the effective abolition of child labour;(d) the elimination of discrimination in respect of employment and occupation; and(e) a safe and healthy working environment.’32
Regarding the ILO Conventions, Bangkok ratified several ILO conventions including minimum
age, child labour, and forced labour. The amended Anti-Trafficking Act No 2 of 2015 increases
the penalties for human traffickers. The national labour protection laws cover minimum wages,
maximum working hours, and entitlement to sick and maternity leaves.33
However, Bangkok has not ratified the Freedom of Association and Protection of the Right toOrganise Convention, 1948 (ILO No. 87) and the Right to Organise and Collective Bargaining
Convention, 1949 (ILO No. 98). The government is working to conform with these laws. “[T]heMinistry of Labour is proposing a draft amendment to the Labour Relations Act and the StateEnterprise Labour Relations Act. The draft amendments are being examined by the Office of

29 “Remarks of Ambassador Katherine Tai at the ‘USMCA at One’ Event at the Wilson Center”, Office of theUnited States Trade Representatives, 30 June 2021, https://ustr.gov/about-us/policy-offices/press-office/speeches-and-remarks/2021/june/remarks-ambassador-katherine-tai-usmca-one-event-hosted-wilsoncenter
30 Ibid.
31 The full name is the Declaration on Fundamental Principles and Rights at Work and Follow-up to the
Declaration
32 “ILO Declaration on Fundamental Principles and Rights at Work”, International Labour Organization,
2022, https://www.ilo.org/declaration/lang--en/index.htm
33 “Thailand joins the global movement to combat forced labour”, Press Release, International Labour
Organization,
4
June
2018,
https://www.ilo.org/global/standards/information-resources-andpublications/news/WCMS_631435/lang--en/index.htm

135

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

the Council of State.” 34 At the IPEF talks, if Washington fervently rejects Thailand’s equivalentlegislations or demands the latter to upgrade or adjust its domestic laws to be closer to what the
US aspires, this could lead to clashes during the negotiation. Without market access offer, it will bedifficult for the US to extract buy-ins from Thailand.35
Pillar 2 (Supply Chains)
On 27 May 2023, the members announced the substantial conclusion of negotiation on an IPEF
Supply Chain Agreement which is the first multilateral deal striving to galvanise resilience andconnectivity of supply chains.36 This proposed deal will establish three mechanisms. First, theIPEF Supply Chain Council is a crisis-prevention entity which will devise sector-specific actionplans to bolster the resilience of critical industries and essential goods. The second one is the
IPEF Supply Chain Crisis Response Network – a crisis-management body. It will create emergency
communication channels to help the parties address supply chain disruptions. Finally, the IPEF
Labo[u]r Rights Advisory Board will ensure that supply chain cooperation promotes labour rights.37
At the fourth Negotiation Round in South Korea on 9-15 July 2023, the government “advanced thelegal review of the proposed IPEF Supply Chain Agreement”.38
This outcome is unsurprising because of convergence of interest among the Indo-Pacific nations
including Thailand. Recent global events, especially the intensifying Sino-American rivalry, the
COVID-19 pandemic, and the conflict in Ukraine have taught the regional states the importanceof diversifying supply chains for their economic resilience. The stakeholders believe that the
Framework would set rules and offer a pathway to obtain such resilience. In other words, thismechanism would further augment their ability to weather future market uncertainties andcrises. Another reason stems from the fact that no prior multilateral framework has focusedon transnational supply chain collaboration, such as establishing an early warning system.
This apparatus would enable the participating economies to collectively identify supply chain
bottlenecks and re-configure their production lines to ensure smooth and timely flows of goods.
For Thailand, creating such a system at the regional level is significant, as the current cooperationin this regard is bilateral through the Memorandum of Understandings (MOUs). Because supply
chains are multilateral in nature, multilateral mechanisms should be more effective than bilaterals
for achieving economic diversification and resilience. 39
Although this Agreement is a positive development, negotiation challenges remain. The details
concerning how these entities will operate are subject to further talks which can cause clashes
among the members. For one thing, the IPEF nations may not be able to reach a common ground34 “Country Baseline under the ILO Declaration Annual Review – Thailand – 2021 (Freedom of Associationand the Effective Recognition of the Right to Collective Bargaining)”, International Labour Organization,
2021, https://www.ilo.org/wcmsp5/groups/public/---ed_norm/---normes/documents/genericdocument/
wcms_857831.pdf
35 Author’s conversation with the Thai government officers, 24 February 2023.
36 “Press Statement on the Substantial Conclusion of IPEF Supply Chain Agreement Negotiations”, US
Department of Commerce, 27 May 2023, https://www.commerce.gov/news/press-releases/2023/05/
press-statement-substantial-conclusion-ipef-supply-chain-agreement
37 Ibid.
38 “Joint USTR and U.S. Department of Commerce Readout of Fourth Indo-Pacific Economic Framework
Negotiating Round in South Korea”, The United States Trade Representative, 16 July 2023, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2023/july/joint-ustr-and-us-departmentcommerce-readout-fourth-indo-pacific-economic-framework-negotiating
39 Author’s conversation with the Thai government officers, 24 February 2023.

136

Thailand’s Perspectives on the IPEF

concerning how the Supply Chain Crisis Response Network handles data. In other words, they
may disagree on the modality of sharing and protecting confidential business data. Due to their
dissimilar data privacy and protection laws, their ideas about how to store, transfer and safeguard
data diverge. Also, issues concerning an enforcement mechanism to monitor and ensure thatall participants comply with the Agreement will be contentious. This matter can trigger concerns
over sovereignty which some ASEAN members at the IPEF talks dearly guard. Therefore, if the
stakeholders cannot arrive at a common approach to share and protect the information, it canhinder the progress of concluding the Agreement.
This analysis anticipates that the actual cooperation under this Agreement will likely begin among
more advanced IPEF stakeholders first. It is because they have capacities to collect, store, shareand protect the international flows of confidential business data. These IPEF members, such as
Australia, New Zealand, Japan, South Korea and Singapore focus on the economic security of the
IPEF.40 Given the high level of economic advancement of these countries, their collaboration willtend to concentrate on high-technology and knowledge-intensive products such as semiconductors
and large capacity batteries.
Pillar 3 (Clean Economy)
The Pillar 3 cooperation highly aligns with Thailand’s BCG model which has been rolled out in
2021. As mentioned earlier, the country has been adopting this model and promoting it abroad.
It is because the state is suffering from global warming and threatening weather conditions.
According to the 2021 Global Climate Risk Index, Thailand ranked ninth in the extreme risk listof countries most vulnerable to the effects of climate change in the next three decades.41 The
recent haze incident in the Chiang Mai province leaving 1.7 million people ill further triggered
public concerns over the environment.42 One of the BCG model’s goals is to attract investment into
four cluster industries: 1) agriculture and food, 2) wellness and medicine, 3) energy, materials andbiochemicals, and 4) tourism and creative economy.43 As this Pillar seeks to mobilise investment
and sustainable finance for clean energy and green projects, this will be welcomed by Bangkok.
Regarding the domestic legal landscape, the authorities have adjusted and enacted legislations tosteer the country towards green economy. Illustratively, the Ministry of Energy is implementing
the Alternative Energy Development Plan of 2018 – 37. The Plan promotes the domestic use andproduction of renewable energy. Moreover, the revised Building Energy Code in effect since
March 2021 requires all new constructions of commercial and government buildings to reducegreenhouse gas emissions and meet the energy conservation and efficiency targets.
Concerning the aspect of ‘Sustainable Land, Water, and Ocean Solutions’ under this Pillar, while
Thailand is not a signatory to the International Convention for the Prevention of Pollution from
Ships, it has domestic rules and regulations addressing this issue. For instance, the Navigation
40 Sang Chul Park, “The Biden Administration and Expectations for IPEF”, Australian Outlook, AustralianInstitute of International Affairs, 16 December 2022, https://www.internationalaffairs.org.au/
australianoutlook/the-biden-administration-and-expectations-for-ipef/
41 “Global Climate Risk Index 2021”, Germanwatch, 25 January 2021, https://www.germanwatch.org/
en/19777
42 Kocha Olarn and Heather Chen, “Smoke from forest fires blankets northern Thailand in thick pollution”,
CNN, 5 April 2023, https://edition.cnn.com/2023/04/05/asia/chiang-mai-air-pollution-thailand-intl-hnk/
index.html
43 “BCG Concept: Background”, National Science and Technology Development Agency, 2021, https://www.
bcg.in.th/eng/background/137

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

in the Thai Waters Act (No. 14) of 1992 mandates that “[i]f the Thai or foreign vessel or object
contains substance that causes or may cause pollution to the environment, the owner or his or her
agent shall clean or prevent such pollution within a period specified by the Master of Harbour.”44
Also, the 2017 Civil Liability for Oil Pollution Damage Caused by Ships Act further sets up rules
governing the oil spill problems in the territorial waters.45 The Climate Change Act, which is being
drafted, outlines the action plans for greenhouse gas mitigation and adaptation as well as citizens’
rights concerning these matters.46
These domestic achievements notwithstanding, Thailand’s international commitments lag behind
other Indo-Pacific nations. It has ratified the Montreal Protocol on Substances that Deplete the Ozone
Layer, the Convention on Trade in Endangered Species, and the Paris Agreement. Nevertheless,the government’s pledges for the latter, namely, to peak its greenhouse gas emissions in 2030
and reach carbon neutrality by 2065, pale in comparison to the other signatories’ targets. Also,
Bangkok did not ink the 2021 United Nations Climate Change Conference (COP 26)’s deal to end
deforestation by 2030 and is not part of the Forests and Climate Leaders’ Partnership at the 2022
United Nations Climate Change Conference (COP 27) which will deliver the countries’ pledges at
COP 26.47
Therefore, the state may face challenges when partaking in Pillar 3 due to differences between
its own and other IPEF members’ climate change ambitions and implementation timelines. A
close look at Thailand’s moves above reveals that the issue can be attributed to the country’s
lack of manpower and financial support that is needed to uphold international commitments. For
example, it may not have sufficient research and development (R&D) capacities and technologies
to expand clean energy production and storage. As a result, Bangkok may not be able to cooperate
on some aspects of this Pillar.
The outcome would partially depend on the technical and financial assistance that developing IPEF
nations including Thailand will receive. ASEAN countries and Fiji reportedly expressed their desire
for US support in helping them develop clean energy technologies.48 Washington is also looking tofund IPEF’s decarbonisation efforts via its entities such as the Export-Import Bank and International
Development Finance Corporation.49 Such assistance would allow Bangkok and other developing
members to foster environment collaboration more effectively under the IPEF.

44 “Navigation in Thai Territorial Waters Act (No. 14), B.E. 2535. (1992)”, Government of the Kingdom ofThailand.
45 “Civil Liability for Oil Pollution Damage Causes by Ships Act, B.E. 2560. (2017)”, Government of theKingdom of Thailand.
46 Nuanporn Wechsuwanarux, Supavadee Sirilerkwipas, and Punika Dasom, “Thailand’s First Climate Change
Bill to be Submitted for Approval”, Chandler MHM, 1 August 2022, https://www.chandlermhm.com/
content/files/pdf/Newsletter/2022/CMHM%20Newsletter%20-%20Thailand%20First%20Climate%20
Change%20Bill%20to%20be%20Submitted%20for%20Approval%201%20August%202022.pdf
47 “News story: World Leaders Launch Forests and Climate Leaders’ Partnership at COP27”, The Governmentof the United Kingdom, 8 November 2022, https://www.gov.uk/government/news/world-leaders-launchforests-and-climate-leaders-partnership-at-cop27
48 Du Juan, “Experts: India not alone in difficulties lying ahead for IPEF”, China Daily, 21 September 2022,
https://global.chinadaily.com.cn/a/202209/21/WS632a414aa310fd2b29e78c4e.html
49 Andrew Schwartz, Scott Miller, and William Alan Reinsch, “Nothing is complete without a 301 investigation”,
Podcast, Center of Strategic and International Studies (CSIS), The United States of America, 15 September
2022, https://www.csis.org/podcasts/trade-guys/nothing-complete-without-301-investigation

138

Thailand’s Perspectives on the IPEF

Pillar 4 (Fair Economy)
As far as Pillar 4 is concerned, Thailand is a party to or has endorsed some internationalarrangements outlined under this Pillar. For example, it ratified the United Nations Convention
against Corruption (UNCAC) in March 2011. Since then, the government has adjusted domestic
legislations to conform with the UNCAC. In 2017, Bangkok endorsed the OECD/G20 Inclusive
Framework for Implementing Measures against Base Erosion and Profit Shifting (BEPS). It also
agreed to the Two-Pillar Solution to Address the Tax Challenges Arising from digitalisation of theeconomy. Moreover, the authorities have participated in several anti-corruption groupings such as
the Asia-Pacific Economic Cooperation (APEC) Anti-Corruption and Transparency Experts’ Working
Group (ACTWG) and ASEAN Parties Against Corruption (ASEAN-PAC).
Nonetheless, Bangkok can face some negotiation challenges as it lags behind other IPEF nations
in certain areas. For example, Thailand scored 36 out of 100 (100 score indicates ‘very clean’
while 0 means ‘highly corrupt’) in the Corruption Perceptions Index of 2022, putting it behindseveral IPEF peers.50 Regarding anti-money laundering, Thailand is not a member of the Financial
Action Task Force (FATF). Its revised Anti-Money Laundering Act (No 6) B.E. 2565 (2022) purposed
to tackle the funding of illicit activities in Thailand came into effect on 23 December 2022.51 In
addition, Thailand is not a signatory to the Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions of the Organisation for Economic Cooperation
and Development (OECD Anti-Bribery Convention). The country is attempting to make headway
on this front. For example, it signed the inaugural three-year Thailand Country Programme with
OECD on 31 May 2018. Sponsored by the Organisation, this scheme’s main objective is to enhance
Bangkok’s structural reform efforts in four aspects: good governance and transparency, businessclimate and competitiveness, Thailand 4.0, and inclusive growth.52 As a result, Thailand may not
be able to comply with all obligations mentioned under Pillar 4. The negotiation outcomes will
partly depend on how the country bargained for its implementation timelines to espouse theinternational conventions as well as the capacity training programmes which other members will
provide to Bangkok to accelerate its adoption of these treaties.

Implementation Challenges
The General Election (GE) was held on 14 May 2023. All 500 seats in the House of Representatives
were up for grabs. However, all 250 seats in the House of Senate were not up for contestation
as their term is yet to expire. The implementation of the IPEF’s commitments will largely dependon the composition of a coalition government and the choice of the Prime Minister (PM). These
outcomes will set the tone and direction of the country’s international economic policy going
forward, including the IPEF.
Defying all the polls, the opposition parties won most seats in the House of Representatives. Move
Forward Party (MFP) gained 151 seats. Pheu Thai Party (PTP) came second with 141 seats. Because
it won most seats, MFP was given an opportunity to form the next government. On 18 May 2023,

50 “Corruption Perceptions Index 2022”, Transparency International, https://images.transparencycdn.org/
images/Report_CPI2022_English.pdf
51 “Thailand Issues a New Anti-Money Laundering Act”, Mahanakorn Partners Group, 12 January 2023,
https://mahanakornpartners.com/thailand-issues-a-new-anti-money-laundering-act/
52 “A solid partnership between Thailand and the OECD”, Organisation for Economic Co-operation andDevelopment (OECD), 2023, https://www.oecd.org/southeast-asia/countries/thailand/

139

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

the MFP (together with PTP and other parties) announced an 8-party coalition. This pact possessed
313 out of 500 House seats. It also nominated Mr Pita Limjaroenrat as the PM candidate.53
However, Pita’s path to the premiership was blocked by the Senate and Constitutional Court.
According to the current Constitution, at least 376 out of the 750 votes from both parliamentarychambers are needed to elect the PM. In short, 250 senators cast their votes along with 500
representatives in the PM selection.
Concerning the senators’ decision, military-linked parties, namely the Phalang Pracharath Party(PP) and the United Thai Nation Party (UTN), have influence over this matter. It is because all ofthese individuals were appointed by the National Council for Peace and Order, which overthrew
the democratically-elected government in May 2014.
Thus, the 8-party grouping must get at least 63 votes from the Senate to meet the 376 votethreshold. It turned out that it was unable to secure sufficient votes from the Upper House. On 13
July 2023, most senators either voted down or abstained their votes. As a result, Pita lost his first
PM bid.54 On 19 July 2023, the Parliament refused his requested second try.55 The final blow to his
premiership was delivered by the Constitutional Court. On 16 August 2023, the Court dismissed
a petition challenging the Parliament’s blockade of Pita’s second bid, sealing his fate of becoming
the PM. Because Pita is the only MFP’s PM candidate and his party is not allowed to nominate
another candidate after the GE, such verdict in effect prevented MFP from being part of the new
government.
The first runner-up PTP then had a chance to form the government. It eventually decided to breakaway from the 8-party pact and unite with ten other parties including the military-linked ones – PP
and UTN – which gained only 40 and 38 seats respectively. Thanks to the senators’ linkages to PP
and UTN outlined above, this PTP-led coalition received enough votes in the Upper house to passthe 376-vote threshold. On 22 August 2023, the Parliament chose the PTP’s candidate Mr Srettha
Thavisin – a businessman-turned-politician – as the PM.56 On 5 September 2023, he and his cabinet
were sworn into office.57
This outcome bodes well for the IPEF implementation. PTP is known for its pro-market stance.
Its predecessor, Thai Rak Thai Party, was widely praised for its significant role in spearheading
Thailand’s economic recovery after the Asian Financial Crisis of 1997 - 98. Just a week after he waselected as the PM, Srettha started implementing plans to boost tourism such as easing the visa
requirement rules for Chinese and Indian travellers and permitting long-stay for all sojourners
in the last quarter of 2023.58 With regard to the IPEF, his Administration will likely amend the
53 Tan Hui Yee, “Thailand’s Move Forward Party announces 8-party coalition, aims to form government”, The
Strait Times, 18 May 2023, https://www.straitstimes.com/asia/se-asia/thailand-s-winning-move-forwardparty-announces-8-party-coalition-with-eye-on-forming-government
54 “Pita loses first PM vote”, Bangkok Post, 13 July 2023, https://www.bangkokpost.com/thailand/
politics/2611078/pita-loses-first-pm-vote
55 “Thai parliament refuses opposition leader Pita second PM vote”, Le Monde, 19 July 2023, https://www.
lemonde.fr/en/international/article/2023/07/19/thailand-s-opposition-leader-pita-suspended-fromparliament_6058859_4.html
56 “Srettha Thavisin elected Thailand PM as Thaksin returns from exile”, Al Jazeera, 22 August 2023, https://www.aljazeera.com/news/2023/8/22/srettha-thavisin-elected-thailand-pm-as-thaksin-returns-from-exile
57 “Thailand’s king swears in new PM and cabinet”, The Straits Times, 5 September 2023, https://www.
straitstimes.com/asia/thailands-king-swears-in-new-pm-and-cabinet
58 “Thailand mulls easing visa rules to lure Chinese, Indian tourists”, Bangkok Post, 30 August 2023, https://www.bangkokpost.com/business/general/2638495

140

Thailand’s Perspectives on the IPEF

domestic rules and regulations to comply with Thailand’s commitments and create more feasible
conditions for doing business in the country.

Prospects for the Future
Looking ahead, how will Thailand’s IPEF membership alter the other FTAs that Bangkok is negotiating
especially with countries outside the Framework such as Canada and the EU? Regarding Canada,
it applied to join the IPEF and all existing members expressed support for its bid.59 However, when
Ottawa will officially accede to the Framework remains unclear. From Thailand’s point of view, it
will continue to negotiate the Thailand-Canada FTA slated to be completed in 2024. The progress
will likely be made due to the complementary nature of the bilateral goods trade which reached
US$6.4 billion in 2022 and both sides’ desire to diversify.60 The Thai government strives to increase
its exports of electrical appliances, canned seafood and processed food, steel, and rubber.61 With
such FTA, Ottawa can boost its exports of fertilizers, paper products, grains and cereals, andmachinery.62
The EU is Thailand’s fourth-biggest trading partner behind China, the US and Japan. The two-way
goods trade in 2022 figured at US$53 billion.63 While the grouping’s probability of entering the
IPEF is unknown, Bangkok plans to tighten the bilateral ties with the bloc via an FTA. Their FTA
talk was recommenced on 15 March 2023 and both sides aim to conclude it by 2025. 64 65 Bangkok
wants to increase its exports of food, raw materials, and electronic products to the EU’s market of
447 million people. Yet, the success of this negotiation will partially rely on how both sides reacha deal. On the one hand, it would depend on how much the Thai government can offer to thegrouping, namely additional market access for the latter’s financial, insurance, and informationand communication sectors as well as loosening government procurement requirements. On theother hand, it would rely on whether the EU opens more markets for Bangkok’s exports namely
agricultural and electronics goods.66

59 “U.S.-led Indo-Pacific Economic Framework backs Canada’s bid to join”, Kyodo News, 16 December 2022,
https://english.kyodonews.net/news/2022/12/870e187f6d92-update2-us-led-indo-pacific-economicframework-backs-canadas-bid-to-join.html
60 “Canada-Thailand relations”, The Government of Canada, 15 August 2023, https://www.international.
gc.ca/country-pays/thailand-thailande/relations.aspx?lang=eng#a2
61 “ASEAN-Canada Tok kem FTA Rob See Keubna Duay Dee Tang Pao Pid Deal Pee Hokjed” [ASEAN-Canada
FTA Progressing, Expected to Conclude in 2025], Press Release, The Department of Trade Negotiation,
The Government of Thailand, 29 June 2023, https://www.dtn.go.th/th/content/category/detail/id/22/
iid/12205
62 Julie Beun, “3 markets to watch: Vietnam, Thailand and the Philippines,” Export Development Canada, 6September 2023, https://www.edc.ca/en/article/markets-to-watch-indo-pacific.html
63 Francesca Regalado, “Thailand, EU agree to restart trade talks halted by 2014 coup”, Nikkei Asia, 16 March
2023, https://asia.nikkei.com/Economy/Trade/Thailand-EU-agree-to-restart-trade-talks-halted-by-2014coup
64 The talk originally commenced in 2013 but was suspended after Thailand’s coup in May 2014. The
negotiation was later restarted after the latter made progress towards democracy. The EU’s goal to reengage Bangkok was mentioned in the 2021 European Commission’s Report. See “Joint Communication
to the European Parliament and the Council: The EU strategy for Cooperation in the Indo-Pacific”,
European Commission, 16 September 2021, https://www.eeas.europa.eu/sites/default/files/
jointcommunication_2021_24_1_en.pdf
65 “Thailand, EU to resume FTA talks in March”, Vietnam Investment Review, 27 January 2023, https://vir.com.
vn/thailand-eu-to-resume-fta-talks-in-march-99411.html
66 Author’s conversation with a trade expert involved in the Thailand-EU FTA, 29 March 2023.

141

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

As mentioned above, Thailand just has a new government led by the pro-business PTP. However,this 11-party coalition looks less stable. It is mainly because the PTP and the military-linked PP
and UTN are long-time rivals which joined hands to specifically prevent the MFP from becoming
the government. Their feud will likely exacerbate rifts within the Srettha Administration. This risks
entailing a Parliamentary dissolution and another GE within the next five years. If it happens, it
could disrupt the country’s IPEF implementation going forward.

142

Thailand’s Perspectives on the IPEF

About the author
Dr Kaewkamol “Karen” PITAKDUMRONGKIT is Head and Assistant Professor at the Centre
for Multilateralism Studies, S Rajaratnam School of International Studies (RSIS) at the Nanyang
Technological University, Singapore. She is also a Non-Resident Fellow at the National Bureau of
Asian Research, United States. Her research interests include international economic negotiation,
Indo-Pacific economic governance and integration, regional-global economic governance dynamics,
ASEAN Economic Community, and ASEAN’s external relations (ASEAN-Plus frameworks). She has
published in various outlets such as The Singapore Economic Review, The International Relations of
the Asia-Pacific, The Pacific Review, Australian Outlook, Review of International Political Economy,
The Diplomat, and East Asia Forum. Her media interviews include Bangkok Post, Bloomberg,
Business Times, Channel News Asia, CNBC Asia-Pacific, New Straits Times, The Strait Times, South
China Morning Post, and Xinhua.

143

Indonesia’s Perspective on the IPEF

Indonesia’s Perspective on the IPEF
Siwage Dharma NEGARA and Maria Monica WIHARDJA

This paper provides an analysis of the Indonesian perspective on joining the Indo-Pacific Economic
Framework for Prosperity (IPEF). Using official documents, other available published materials,
and conversations with several policymakers and experts, it highlights potential challenges in
the negotiation process and later in the implementation of the agreements from Indonesia’s
viewpoint. The paper argues that Indonesia sees the IPEF as an opportunity to engage with theUnited States (US) in shaping common rules and standards to support regional stability. At thesame time, it wants to ensure that the IPEF agreements align with the country and the Associationof Southeast Asian Nations’ (ASEAN) principles, inclusivity and complementarity. While the IPEF
is seen as an ‘empty vessel’ that could increase US-China competition in the region and threaten
ASEAN centrality and integrity, Indonesia nevertheless expects the IPEF to become a new platformto promote the US’ economic re-engagement in the Indo-Pacific, boost regional competitivenessand standards, and address emerging global issues collaboratively.

145

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Introduction
This paper aims to provide Indonesia’s perspective on the Indo-Pacific Economic Framework (IPEF).
Specifically, the paper will try to identify negotiation challenges and anticipated outcomes for the
IPEF negotiations in the four key areas of trade (especially in the digital economy), resilient supply
chains, clean economy (clean energy and decarbonisation), and fair economy (tax, financial andfiscal practices). It will also try to examine some implementation challenges for the IPEF arisingfrom domestic regulatory complexities and political economies in Indonesia. And finally, it looks at
the prospects of the IPEF’s engagement with Europe in the foreseeable future.

What the IPEF Means for Indonesia
The Indonesian government perceives the IPEF as an opportunity to maintain good economic
relations with the United States (US) and the other IPEF members. Airlangga Hartarto, theCoordinating Minister of Economic Affairs, stated that he hoped the IPEF would promote economic
growth and resilience of its member states and also trigger new ideas and innovation for more
intensive cross-border trade and investment.1
Here, the IPEF is seen by the government as both, an economic and strategic goal for Indonesia tosupport the country’s development objectives, such as expediting its clean economy development,
integrating its economy with the global supply chain, and improving its ease of doing business.
The government expects that the IPEF will help Indonesia and other member economies inshaping common rules and standards to support regional trade and investment. This will inturn supplement other trade rules, for example, from the World Trade Organization (WTO) or
the Regional Comprehensive Economic Partnership (RCEP). The IPEF could also help fill in theslow progress in economic cooperation under the more binding fora, including the WTO and the
traditional Free Trade Agreements (FTAs), and serve as a laboratory test for new forms of economic
cooperation to address emerging issues such as supply chain fragmentation.
Interestingly, Indonesia-US economic relations have been growing since the COVID-19 pandemic.
Indonesia’s exports to the US reached more than US$28 billion in 2022, while imports reachedalmost US$12 billion in the same period. Over the years, the trade balance has been tilted towards
Indonesia, with a US$16 billion trade surplus in 2022 (Figure 1). So, the question is: will the IPEF
change this trade pattern by way of reducing the surplus and making it more balanced? Thereis also the question of whether the IPEF will reduce Indonesia’s trade dependency with China.
Currently, according to Statistics Indonesia (Badan Pusat Statistik [BPS]), China accounts for 26-27
per cent of Indonesia’s total trade value, while the US only accounts for 12-13 per cent of its total
trade value.2

1

2

146

“Coordinating Minister Airlangga hopes that IPEF will strengthen the economic resilience of partnercountries”, Antara, 15 March 2023, https://www.antaranews.com/berita/3442251/menko-airlanggaharap-ipef-perkuat-ketahanan-ekonomi-negara-mitra“Balance of Trade of Selected Countries (Million US$), 2020-2022”, Statistics Indonesia (BPS), https://www.
bps.go.id/indicator/8/336/1/neraca-perdagangan-beberapa-negara.html

Indonesia’s Perspective on the IPEF

Could the IPEF increase Indonesia’s bilateral trade with the US without additional
market access?
Figure 1: Trade with the US (US$ billion)

Source: Statistics Indonesia (Badan Pusat Statistik [BPS]).

Indonesia’s Foreign Direct Investment (FDI) from the US significantly increased between 2020 and
2022, reaching US$3 billion in 2022 (Figure 2). Compared to FDI from China, which reached US$8.2
billion in the same period, the figure is relatively low. So, the question is: will the IPEF change thisinvestment pattern by way of increasing FDI from the US and making it more balanced with China’s
FDI?

147

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Will the IPEF further increase FDI from the US and make it more equal with
China’s?
Figure 2: FDI from the US and China (US$ billion)

Source: Indonesia Investment Coordinating Board3 (Badan Koordinasi Penanaman Modal [BKPM]).

From the data above, there is a solid economic rationale for Indonesia to join the IPEF – tostrengthen economic relations with the US and other members. At the same time, the government
perceives joining the IPEF as critical amid rising US-China geopolitical competition. Indonesia,
with its independent and active foreign policy, wants to work with both superpowers to maintainstability and peace. Through this strategic balancing act, Indonesia hopes there will be healthy
competition in the region that will emerge with various economic cooperations and agreements,and subsequently promote economic competitiveness, efficiency and productivity in the region.
This development, however, should not come at the cost of the region’s stability and peace. The
country believes that it is critical to maintaining the Association of Southeast Asian Nations (ASEAN)
Centrality and neutrality in the IPEF.
The private sector, however, has a rather muted view of the benefit of joining the IPEF. While
many Multinational Corporations (MNCs) operating in Indonesia expect that the IPEF will lead toa better business environment through improved standards and regulations, the local business
communities seem more cautious.4 This is because the latter is more interested in their own
survival in the domestic market. Many local companies, especially the Micro, Small and Medium
Enterprises (MSMEs), are still struggling to meet the existing national standards and regulations.
The IPEF, which will offer higher standards and rules for trade and investment, will certainly create
additional challenges for them.

3
4

148

“National Single Window for Investment”, Indonesia Investment Coordinating Board (BKPM), https://nswi.
bkpm.go.id/data_statistik“Civil Society Intervenes Indo-Pacific Economic Framework (IPEF) Stakeholder Event Due to Absence ofMeaningful Participation”, Solidaritas Perempuan, 17 March 2023, https://www.solidaritasperempuan.
org/masyarakat-sipil-mengintervensi-stakeholder-event-indo-pacific-economic-framework-ipef-akibatabsennya-partisipasi-bermakna/

Indonesia’s Perspective on the IPEF

Overall, many Indonesians see the IPEF with scepticism or are unsure about its benefit or evenits feasibility in implementation.5 The scepticism is worsened by the lack of information about the
IPEF and the lack of communication between the negotiators and stakeholders.

Key Negotiation Challenges
In Pillar 1 (Trade), the key challenges for Indonesia are related to cross-border data flow. Indonesia’s
data localisation policy will not align with the IPEF’s objective of seamless data flow.6 For instance,
under Indonesia’s Financial Services Authority (Otoritas Jasa Keuangan, OJK) regulations, all banks
and non-banking financial institutions located in Indonesia must place their electronic system
in Indonesia (data localisation).7 This means all 109 banks and 1,333 non-banking financial
institutions must own or use data centres in Indonesia’s territorial geography. Certainly, building
physical data centres in Indonesia may not be economically viable for foreign financial companies.
Indonesia passed Law No. 27 of 2022 concerning Personal Data Protection (PDP).8 The law stillrequires clearer mechanisms, as well as derivative regulations, on different categories of data,such as sensitive personal data. The IPEF’s standard of free data flow will face serious challenges,
or most likely, will not be accepted by Indonesia’s policymakers due to concerns over its security
and safety. It is important to note that the country has rampant cyber security issues.9
Like the other IPEF members, Indonesia is unlikely to adopt the United States-Mexico-Canada
Agreement (USMCA) regarding labour standards.10 Using the USMCA labour standards in the IPEF
will bring opposition from Indonesia as it is seen as a way of protecting production in the US whereminimum wages are higher than the prevailing wages in Indonesia. Moreover, Indonesia fears thatthe adoption of a USMCA-like model could lead to the US government’s ability to impose sanctions
unilaterally and directly on companies overseas, like in the case of the US-Mexico Rapid Response
Mechanism in the USMCA which bypasses the government of Mexico. The US could potentially
use this as an ‘economic weapon’ on countries or companies deemed as threats. As such, theIndonesian government will not agree to the adoption of the USMCA labour rules.
Concerning Pillar 2 (Supply Chains), the key challenge is that Indonesia has the ambition to develop
its downstream industry by controlling exports of critical minerals and materials.11 The country
wants to take advantage of its vast mineral resources by banning critical mineral exports while5

Sharon Seah, Joanne Lin, Melinda Martinus, Sithanonxay Suvannaphakdy, Pham Thi Phuong Thao, “TheState of Southeast Asia: 2023 Survey Report”, ISEAS-Yusof Ishak Institute (9 February 2023), https://www.
iseas.edu.sg/wp-content/uploads/2025/07/The-State-of-SEA-2023-Final-Digital-V4-09-Feb-2023.pdf
6 Mochamad Januar Rizki, “Menyoal Kejelasan Aturan Main dalam Aliran Data Lintas Batas”, Hukumonline.
com, 5 January 2023, https://www.hukumonline.com/berita/a/menyoal-kejelasan-aturan-main-dalamaliran-data-lintas-batas-lt63b64bac556b1/
7 “About Consumer and Public Protection in the Services Sector Finance (Tentang Perlindungan Konsumen
Dan Masyarakat Di Sektor Jasa Keuangan) – No. 6, POJK.07”, Indonesian Financial Services Authority (OJK),
2022, https://www.ojk.go.id/id/regulasi/Documents/Pages/Perlindungan-Konsumen-dan-Masyarakat-diSektor-Jasa-Keuangan/POJK%206%20-%2007%20-%202022.pdf
8 “About Personal Data Protection (Tentang Pelindungan Data Pribadi) – No. 7”, Laws of the Republic ofIndonesia (Undang-Undang Republik Indonesia), 2022, https://jdih.setkab.go.id/PUUdoc/176837/Salinan_
UU_Nomor_27_Tahun_2022.pdf
9 Nur Janti, “Data breaches still haunt Indonesia as BSI becomes latest victim”, The Jakarta Post, 16 May
2023, https://www.thejakartapost.com/paper/2023/05/16/data-breaches-still-haunt-indonesia.html
10 “U.S. – Mexico – Canada Agreement (USMCA)”, US Customs and Border Protection, https://www.cbp.gov/
trade/priority-issues/trade-agreements/free-trade-agreements/USMCA
11 “Minister of Industry: Industrial downstreaming is the key to national economic progress”, Kementarian
Perindustrian, 23 December 2022, https://kemenperin.go.id/artikel/23792/Menperin:-Hilirisasi-IndustriAdalah-Kunci-Kemajuan-Ekonomi-Nasional

149

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

attracting foreign investment in the local downstream industry. This policy has strong domestic
political support, but it will not align with the idea of the IPEF’s supply chain resilience. The
downstreaming policy through export bans of critical minerals has been followed in retaliations byother countries.12 For instance, Indonesia lost in the WTO against the European Union’s (EU) claims
concerning the nickel export ban.13 It is currently appealing in this regard. Nevertheless, traderetaliations were imposed by the EU and China through anti-dumping duties on steel exports fromIndonesia.
The Indonesian government plans to ban all critical metal ore exports to encourage investmentin the downstream industry.14 After banning exports of nickel ore last year, Indonesia continues
banning exports of bauxite in June this year.15 Moving forward, the government will target othercritical minerals. However, export bans on other metal ores need to wait until the smelter industries
to process these raw minerals are completed.16
Another challenge is Indonesia’s local content requirements, which have intensified in recent
years and target several strategic sectors, such as mineral, oil and gas, and digital sectors.17
Similar to the downstreaming industrial policy, the local content policy has a strong domestic
political support base and will be difficult to reconcile with the IPEF’s supply chain standards andregulations. For example, in the manufacturing of Information and Communication Technologies(ICT) goods, Indonesia has a local content requirement policy, which requires around 30-40 per
cent of local content for Fourth Generation/Long Term Evolution (4G/LTE) equipment.18 This meansthat foreign companies who want to sell their 4G/LTE products must either build a factory or finda local partner in Indonesia. This policy aims to spur innovation in local industry in manufacturing
4G/LTE products.

12 “Critical Minerals: challenges for diversification, climate change and development”, Presentation by Mari
Pangestu, University of Indonesia for Peterson Institute for International Economics Webinar, 27 April
2023, https://www.piie.com/sites/default/files/2023-04/2025-04-27pangestu-ppt.pdf
13 “WTO panel rules against Indonesia’s export limitations on raw materials”, European Commission, 30
November 2022, https://ec.europa.eu/commission/presscorner/detail/en/ip_22_7314
14 “The Ban will Not Stop Exports of Key Raw Minerals Copper, Zinc, Iron Ore from Indonesia, But
Bauxite Shipments will Stop in June”, Hellenic Shipping News Worldwide, 26 May 2023, https://www.
hellenicshippingnews.com/the-ban-will-not-stop-exports-of-key-raw-minerals-copper-zinc-iron-orefrom-indonesia-but-bauxite-shipments-will-stop-in-june/
15 “Bauxite Ore Export Ban; Developing a Domestic Mineral Refining & Processing Industry in Indonesia”,
Indonesia Investments, 6 July 2023, https://www.indonesia-investments.com/news/news-columns/
bauxite-ore-export-ban-developing-a-domestic-mineral-refining-processing-industry-in-indonesia/
item9638#:~:text=On%2010%20June%202023%20the,bauxite%20processing%20and%20refining%20
industry
16 Erwida Maulia, “Indonesia bets on critical mineral export bans as deadline nears”, NIKKEI Asia, 23 May
2023,
https://asia.nikkei.com/Spotlight/Asia-Insight/Indonesia-bets-on-critical-mineral-export-bansas-deadline-nears?utm_campaign=GL_editor_in_chief_picks&utm_medium=email&utm_source=NA_
newsletter&utm_content=article_link&del_type=2&pub_date=20230526150007&seq_num=11&si=__
MERGE__user_id__MERGE__
17 “Note! Electric Cars Must Have Local Components of At Least 35%”, CNBC Indonesia, 8 August 2019,https://www.cnbcindonesia.com/news/20190808141026-4-90690/catat-mobil-listrik-wajib-komponenlokal-minimal-35;
Ignacio Geordi Oswaldo, “Komponen Lokal Wajib Digenjot, Ini Pentingnya, detikfinance, 27 July 2022,
https://finance.detik.com/berita-ekonomi-bisnis/d-6201534/komponen-lokal-wajib-digenjot-inipentingnya
18 Siwage Dharma Negara, ‘The Impact of Local Content Requirements on the Indonesian Manufacturing
Industry’, ISEAS Yusof Ishak Institute, Economics Working Paper No. 2016-4 (October 2016), https://www.
iseas.edu.sg/images/pdf/ISEASEWP2016-04Negara.pdf

150

Indonesia’s Perspective on the IPEF

Although the Pillar 2 (Supply Chains) Ministerial Statement19 will need to undergo domestic
consultation and legal review, the abovementioned non-tariff trade measures (barriers) could
stifle the resilience, efficiency and fairness of the supply chains of the IPEF member countries andhence become a point of contestation and tension if the provisions in the agreements were to
become binding.
In Pillar 3 (Clean Economy), the key challenge is to phase out many fossil fuel-based power plants
and large state subsidies to the sector. Around 60 per cent of the country’s energy industry is
still based on coal while renewable energy sources account for only 14 per cent by 2022. The
latter is dominated by hydropower, geothermal and biofuels. Fossil fuel-based power plants are
critical to providing affordable access to electricity for the population. Meanwhile, fuel and energy
subsidies have helped to maintain prices at lower levels, given the current high energy prices.
This is in turn important for the government to maintain political stability as removing fossil fuelsubsidies will be politically costly for any government. And going into next year’s Presidential
Election, there will be no incentive to reduce it. Ironically, more than 70 per cent of the current
fuel subsidies benefitted the middle and upper classes.20 The IPEF could potentially be used toencourage a critical shift in the current fuel subsidies policy towards more pro-poor (Pillar 4) andpro-environment spending. It is important to note, however, that coal and fossil fuels industries
have contributed to state revenue through tax and export earnings.21 The coal sector has a very
powerful lobby in the government, and they will certainly challenge any rules that adversely affecttheir business operation in Indonesia.
Finally, in Pillar 4 (Fair Economy), while there seems to be no significant challenge regarding thevalue of improved transparency, accountability and the rule of law (good governance) as thefoundation for inclusive and sustainable development, the implementation of such rules andregulations will be not easy in Indonesia. Indonesia has been among the first countries to sign the
United Nations Convention against Corruption (UNCAC) and has ratified it through Law No. 7 of
2006. In 2011, Indonesia became one of the first countries reviewed by other member countries in
the UNCAC scheme. Yet, Indonesia’s Corruption Perceptions Index score fell by a record amountaccording to the 2022 Transparency International’s ranking, bringing the country nearly all theway back to its 2012 rating. In fact, Indonesia’s position is closer to the group of the most corrupt
countries in the world, such as Angola, El Salvador and Mongolia.22
Under Pillar 4, Indonesia could use the IPEF to push for domestic reforms in slowly phasing out
the costly, poorly targeted and environmentally unfriendly fuel subsidies. One of the key factors insuccessfully phasing out fuel subsidies will be through a robust social registry system to improve
the targeting of social protection programmes. In this regard, Indonesia’s social registry thattargets poor and vulnerable households needs significant improvement,23 and the country could
19 “Ministerial Statement for Pillar II of the Indo-Pacific Economic Framework for Prosperity”, US Departmentof Commerce, September 2022, https://www.commerce.gov/sites/default/files/2022-09/Pillar-IIMinisterial-Statement.pdf
20 Sekretariat Presiden, “Konferensi Pers Presiden Jokowi dan Menteri Terkait perihal Pengalihan Subsidi
BBM”, 3 September 2022, https://www.youtube.com/watch?v=gsL6-YtDObA
21 “Bos Adaro Puji Luhut yang Lobi China Agar Ekspor Batu Bara RI Meningkat”, Kumparan BISNIS, 20 October
2020, https://kumparan.com/kumparanbisnis/bos-adaro-puji-luhut-yang-lobi-china-agar-ekspor-batubara-ri-meningkat-1uQfnkmoaM2
22 “Corruptions Perceptions Index”, Transparency International, 2022, https://www.transparency.org/en/
cpi/2022
23 “Improving Data Quality for an Effective Social Registry in Indonesia”, World Bank and AustralianGovernment, 2022, https://openknowledge.worldbank.org/handle/10986/38157

151

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

use the IPEF as a platform to support the development of a robust, dynamic and high-quality social
registry system.
The evolving international standard on global taxation under the Organisation for Economic
Cooperation and Development – Group of Twenty (OECD-G20) Inclusive Framework on Base
Erosion and Profit Shifting (BEPS)24 - may require Indonesia to adjust its tax collection mechanism
and tax-incentive policies. The tax collection system adjustment may require new regulations
related to the digital economy, while adjustment to tax-incentive policies will need to consider
Indonesia’s overall business climate and equal distribution of tax revenues within and acrosscountries.
Pillar 4 also includes anti-terrorism financing. Indonesia faces high terrorism financing risks,
although it has developed risk-based policies and strategies for mitigating them.25 Indonesia has
been seeking full membership in the Financial Action Task Force (FATF) since 2017. In 2022, it
underwent a Mutual Evaluation Review to assess its fitness.26 The report, published in April 2023,
shows that although Indonesia has prepared a legal framework to tackle money laundering andterrorist financing, and makes good use of financial intelligence as well as domestic and international
cooperation, it still needs to focus on improving asset recovery, risk-based supervision, andproportionate and dissuasive sanctions. Given this gap, Indonesia could use the IPEF to support
its capacity in the above aspects, thus achieving the FATF’s standards.

Potential OutcomesWith a tight negotiation timeline since the US intends for it to be concluded by the end of the year,
the outcomes are likely to be in the form of loose partnerships to allow various interests frommember states. In this regard, the Ministerial Meeting in Singapore (8-15 May 2023) did show an
encouraging sign that the IPEF negotiations might be concluded quite soon. Yet, the impositionon labour standards may continue to become a sticking point.27 The Ministerial Meeting in Detroit
on 27 May 2023 concluded with a deal to keep the supply chains ‘resilient and secure’ by forminga Council to coordinate and monitor supply chain activities and a Crisis Response Network tocoordinate actions in the case of potential supply disruptions.28 The supply chains management
deal ‘slips in’ a new Labo[u]r Rights Advisory Board, which could lead to a highly sensitive andcontentious area for many IPEF member countries.29

24 BEPS recommends avoiding new direct taxes on digital activity, and envisages other actions to begeneralised to tackle the digital economy. For indirect taxes, it recommends a shift to tax collection in
the jurisdiction of consumption.
25 “Anti-money laundering and counter-terrorist financing measures – Indonesia,

26

27

28

29

152

Fourth Round Mutual Evaluation Report”, FATF, 2023, https://www.fatf-gafi.org/content/fatf-gafi/en/
publications/Mutualevaluations/MER-Indonesia-2023.html
Agatha V, Kenzu, “Minister Indrawati, FATF president discuss Indonesia’s full membership”, Antara, 17 April
2023, https://en.antaranews.com/news/278925/minister-indrawati-fatf-president-discuss-indonesiasfull-membership
Su-Lin Tan, “Disagreements between US, Asian nations complicate IPEF negotiations”, South China Morning
Post, 23 May 2023, https://www.scmp.com/week-asia/economics/article/3221547/disagreementsbetween-us-asian-nations-complicate-ipef-negotiations“Readout of Indo-Pacific Economic Framework for Prosperity Virtual Ministerial”, US Department ofCommerce, 29 June 2023, https://www.commerce.gov/news/press-releases/2023/06/readout-indopacific-economic-framework-prosperity-virtual-ministerialDavid Lawder, “U.S.-led Indo-Pacific talks produce deal on supply chain early warnings”, Reuters, 28 May
2023, https://www.reuters.com/markets/asia/us-led-indo-pacific-talks-produce-deal-supply-chain-earlywarnings-2023-05-27/

Indonesia’s Perspective on the IPEF

To succeed in the negotiation process, Indonesia needs to be proactive and clear about what it
wants from the IPEF, especially when the US has not been transparent in terms of what it wants fromthe IPEF other than economic re-engagement in the region. Below are some recommendations ofwhat Indonesia could push for in the IPEF.
For Pillar 1, Indonesia could use the IPEF to improve its digital governance standards, such as
cybersecurity, so that it could take advantage of cross-border data flows because leveraging dataflows has many benefits for businesses, individuals and the government. With the ASEAN Digital
Economy Framework Agreement (DEFA) just launched in early September,30 Indonesia could
ensure that the IPEF digital economy standards do not diverge from those of the ASEAN DEFA.
For Pillar 2, it is clear that Indonesia wants to convince the other IPEF members to support its
downstreaming policy and attract investment at home. However, without competitiveness,such an industrial policy will become costly for the government and the consumers. Restrictive
trade policies leveraging on natural resources alone will not be sufficient to develop Indonesia’s
downstream industry. Indonesia could instead use the IPEF to support a more competitive
downstreaming industry in exchange for a less restrictive export ban policy (for example, export
tariff instead of the blanket export ban), including by improving basic infrastructure, talents andtechnologies.
For Pillar 3, Indonesia could use the IPEF as a platform to attract cross-border finance, tradeand investment in green technology, among which is by enhancing the clean energy businessenvironment and streamlining the implementation of the Energy Transition Mechanism (ETM) andthe Just Energy Transition Partnership (JET-P)31.
For Pillar 4, Indonesia could use the IPEF as a platform to build a robust, dynamic and high-quality
social registry system. Well-targeted social assistance programmes should be less costly thansubsidising fossil fuels, most of which benefitted non-poor households. This will help Indonesia
move towards a fairer economy. Indonesia could also use the IPEF to continue improving theelements in the FATF that are still below standards, namely improving asset recovery, risk-based
supervision and, proportionate and dissuasive sanctions.
Overall, in order to achieve what it wants, Indonesia needs competent negotiators and experts in thefour main Pillars to advance and safeguard Indonesia’s interests. Unfortunately, they are currently
lacking as the existing negotiators are overwhelmed with several other priority agendas within the
ASEAN, especially given that Indonesia currently holds the chairmanship of the Association.

Concluding Thoughts
IPEF negotiations should be made more transparent. It should provide more information on what
is on the plate for member states and give sufficient time for public consultation, especially if theimplementation of new rules requires parliamentary approval. So far, there are no clearly definedpolicy proposals, except perhaps the Ministerial Statement on Supply Chains (Pillar 2). The US, as
30 “Leaders’ Statement on the Development of the ASEAN Digital Economy Framework Agreement (DEFA),ASEAN, September 2023, https://asean.org/wp-content/uploads/2023/09/Leaders-Statement-DIGITALECONOMY-FRAMEWORK-AGREEMENT.pdf
31 “Towards a Win-Win Cooperation: ASEAN Centrality and Indonesia’s Role in the Indo-Pacific Economic
Framework”, Presentation by Dr Edi Prio Pambudi, Deputy Minister for Coordination of International
Economic Cooperation for Yusof Ishak Institute ISEAS Studies Programme Webinar, 6 April 2023, https://www.iseas.edu.sg/wp-content/uploads/2025/07/ISEAS-Presentation-Edi-Pambudi.pdf

153

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

the initiator, has not been clear on how its approach can promote trade and investment among
the IPEF members, balance the interests of workers and businesses, protect the environment,
promote innovation and strengthen competitiveness. These multiple objectives will certainly not
be easy to achieve. So, it is important to be more realistic about what can be achieved and what
may take a long time to achieve.
While the US wants high standards and rules in the IPEF, it also needs to consider the different
development stages of the IPEF member states. Imposing the US employment or environmental
model for trade or investment initiatives will face serious opposition from other member states,
including Indonesia. It is important to ensure the legally binding provisions of the agreement tomake it credible and to have clear enforcement mechanisms. At the same time, there is a needto give sufficient time for members to achieve the capacity to implement the binding provisions
effectively.
The IPEF needs to provide clarity on the definition of ‘critical sector(s)’ and the criteria to determine
such a sector. Establishing criteria to identify critical sectors and goods has been agreed in Pillar 2(Supply Chains) Ministerial Statement32. Clearly, different countries have different opinions about
the critical sector. For instance, unlike the US, Indonesia does not consider semiconductors as oneof the critical sectors. In this case, there is a need to provide some flexibility for member states todetermine their respective critical sectors.
Apart from this, there is wide variation in implementation capacity, for example, in areas such as
digital technology capability. Many MSMEs do not have the advanced digital capacity as the MNCs,
highlighting a need for different standards or mechanisms to ensure interoperability of standards.
Higher standards could be accompanied by some means to lower barriers or improve access,including through capacity building and technical assistance. Moreover, by ‘descaling’ technologies,
it is possible to ‘upscale’ access to these technologies by allowing more disadvantaged groups toonboard. It is important to consider that imposing higher standards should not mean higher costs,
or even exclusion, of some segments of businesses, especially MSMEs.
To be successful, the IPEF will require the US’ long-term commitment, especially in the postBiden Administration era. To begin with, will the US commit to providing a sufficient budget for
implementing the IPEF? Learning from the US withdrawal from the Trans-Pacific Partnership (TPP),
member states will remain sceptical if the US has a long-term political commitment to implement
multilateral agreements. Also, its own Creating Helpful Incentives to Produce Semiconductors(CHIPS) and Science Act33 and the Inflation Reduction Act34 will likely have significant implications
for, if not hinder, the success of the IPEF.
Various activities surrounding trade liberalisation are taking place between the IPEF members andthird parties outside of the framework, such as the CPTPP and the RCEP, among others. This will
make the IPEF less relevant in shaping regional supply chains and trade and investment flows,
and influencing broader relationships and regional dynamics. The challenge for the IPEF is how to
32 op. cit.
33 “FACT SHEET: CHIPS and Science Act Will Lower Costs, Create Jobs, Strengthen Supply Chains, and Counter
China”, The White House, 9 August 2022, https://www.whitehouse.gov/briefing-room/statementsreleases/2022/08/09/fact-sheet-chips-and-science-act-will-lower-costs-create-jobs-strengthen-supplychains-and-counter-china/
34 “One Hundred Seventeenth Congress of the United States of America – H.R. 5376”, Authenticated
US Government Information, 3 January 2022, https://www.congress.gov/117/bills/hr5376/BILLS117hr5376enr.pdf

154

Indonesia’s Perspective on the IPEF

ensure that the agreement will provide tangible benefits, especially if the US will not offer the kindof market access that has traditionally been the trade-off for developing countries to accept new
high-standard rules.
Lastly, as the ASEAN Chairman this year, Indonesia’s leadership to keep ASEAN Centrality and unity
during the IPEF negotiation process is imperative. It needs to balance between reaping benefits
from the IPEF and preserving ASEAN Centrality and ASEAN Outlook on the Indo-Pacific at the heartof the negotiation process and outcomes. Indonesia should continue to promote the inclusion of
the other three ASEAN countries currently not in the IPEF, and make the framework more inclusive.
While the IPEF may turn out to be a weak partnership and has little chance of success to be ahigh-standard agreement, the EU should follow the key issues under negotiations closely. The
US-framed rules for digital trade and technology could have some ramifications for European
interests if they eventually create standards that may not necessarily be aligned to those of the EU.
For example, the right-based EU and the market-based US Artificial Intelligence (AI) governanceand other digital governance standards, such as data protection policy, are not always in line.
With or without the IPEF, participating members, excluding the US, may have to choose whether
to follow the EU or the US digital governance standards (or in between these standards). The
narrower the gaps, the better for the rest of the IPEF members. It also means the closer we are tohaving global standards in digital governance, which is ideal, it highlights the need to bring China
to the negotiation table.
The EU has been an important investor, trading partner, and development cooperation actor in
the Indo-Pacific region. Some areas of cooperation under the IPEF could be relevant and could be
strengthened, particularly the post COVID-19 economic recovery and climate crisis, and supportinga rules-based order. More importantly, concerning trade, the EU can fulfill some of the needs ofparticipants in the IPEF when the US is unable or unwilling to do so. The EU has concluded tradenegotiations with almost all IPEF participants, including on issues such as renewable energy andresilient infrastructure. The EU’s initiative to promote Global Gateway and Strategy for Cooperationin the Indo-Pacific35 should be moved forward for concrete implementation. Given this, the EU
could be involved in developing standards for future green trade and new technologies in the IndoPacific region. Also, the EU and the IPEF countries could jointly establish dialogue on mechanisms
to monitor and strengthen the application of sustainable trade and investment policies. Certainly,
further integrating economic ties with Indo-Pacific countries could enhance regional stability,
security, prosperity, and sustainable development.

35 European Union External Action, “EU Strategy for Cooperation in the Indo-Pacific”, 21 February 2022,
https://www.eeas.europa.eu/eeas/eu-strategy-cooperation-indo-pacific_en

155The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

About the authors
Dr Siwage Dharma NEGARA is Co-Coordinator of the Indonesia Studies Programme andCoordinator for the Singapore APEC Study Centre at the ISEAS Yusof Ishak Institute. He is an editorial
member of the Journal of Southeast Asian Economies. His research focuses on macroeconomic anddevelopment issues, and industrial and trade policies with a special focus on Indonesia. Before
joining the institute, he worked as a researcher at the Indonesian Institute of Sciences (LIPI) andeconomist consultant for the World Bank Office Jakarta. He received his PhD (Economics) from the
University of Melbourne, Australia.
Dr Maria Monica WIHARDJA is a visiting fellow at ISEAS Yusof Ishak Institute and a former WorldBank Economist in the World Bank’s Poverty and Equity Global Practice. She was the recipientof the Nikkei Asia Scholarship 2023. In 2017, she was seconded to the Executive Office of the
President of the Republic of Indonesia as a senior advisor to the Deputy Chief Staff in charge ofstrategic economic issues, where she oversaw the food policy reforms and stunting prevention
agenda. She has a PhD in Regional Science from Cornell University, an MPhil in Economics from
Cambridge University, and a BA in Applied Mathematics-Economics from Brown University.

156

Philippine Perspective on the IPEF Agreement

Philippine Perspective on the
IPEF Agreement
Francis Mark A. QUIMBA					This paper aims to contribute to the discussion on the Indo-Pacific Economic Framework (IPEF)
through five parts. The first is through the identification of anticipated outputs from each of the
IPEF Pillars that the Philippines can expect from participating in the agreement. Second, the paper
then outlines the opportunities presented by the agreement by its alignment to key Philippine
development plans and trade and industry development strategies. Third, there are issues thatneed to be addressed to avoid being obstructions to the IPEF negotiations and even implementationof IPEF provisions such as muddling talks related to other discussions with the United States(US), shifts the Philippines’ focus away from traditional bilateral Free-Trade Agreements (FTAs).
Here, data sharing challenges, and low levels of stakeholder awareness of the agreement are also
discussed. Fourth, the paper proceeds to discuss how the IPEF may affect relations with Europe.
To conclude, strategies to reap the benefits of the IPEF are presented.

157

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Launched in May 2022 involving 14 member partners – Australia, Brunei, Fiji, India, Indonesia,
Japan, South Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, United States (US),and Vietnam – the Indo-Pacific Economic Framework for Prosperity (IPEF) is an agreement thatendeavours to come up with an ‘economic arrangement designed to tackle 21st-century challenges’
by establishing ‘high-standard commitments’ around four main Pillars. These include trade (largelyon the digital economy); supply chain resilience; clean energy, decarbonisation and infrastructure;and tax and anti-corruption.
The negotiations are conducted such that mutually beneficial outcomes, and a boost in trade andinvestment opportunities in the region are ensured.
At the Ministerial Meeting of the IPEF in September 2022, the ministers provided broad guidanceon the negotiating objectives of partner countries in achieving an inclusive and high-standard
economic regional framework. Due to the varied levels of development across partner countries,
members have committed to ensuring mutually beneficial outcomes, and boosting trade andinvestment opportunities for peoples and markets within the region, and in particular, for thepartner countries.
During the various negotiating rounds held so far, representatives from the US have met with
Philippine officials on various occasions to discuss areas for cooperation and to reinforce the tiesof the US with partners in the Indo-Pacific region. This includes the September 2022 meeting of
the Philippine Secretary of Trade and Industry Alfredo Pascual with US Commerce Secretary Gina
Raimondo, and the 17 and 18 April 2023 visit of the US Trade Representative Katherine Tai to thePhilippines as part of the Biden Administration’s efforts to strengthen ties with key partners in the
Indo-Pacific region.
The most recent development (27 May 2023) in the IPEF negotiations is the announcement by
the 14 partners of the substantial conclusion of negotiations on the Supply Chains Agreement(Pillar II). The agreement fosters avenues for coordination among partner countries to identify
potential supply chain challenges before they become widespread disruptions.1 In addition, theSupply Chain Agreement includes forming an IPEF Supply Chain Council tasked to coordinate
supply chain action plans designed to build resilience and competitiveness in critical sectors
such as semiconductors and critical minerals; establishing an IPEF Supply Chain Crisis Response
Network to share information and prepare crisis responses when one or more partners face acutesupply chain crisis; and creating an IPEF Labo[u]r Rights Advisory Board to promote skills training
and development in critical sectors while ensuring facility-specific allegations of labour rights
inconsistencies are addressed.2
Other Pillars have also progressed in their negotiations. Negotiations on Trade (Pillar I) haveachieved commitments to craft high-standard, inclusive, free, fair, and open trade commitmentsthat build upon the rules-based multilateral trading system. The IPEF partners seek to develop new
and creative approaches to trade and technology policies that advance a broad set of objectives.
Recognising different levels of economic development and capacity constraints, the Trade Pillar
partners have committed to consider flexibilities where appropriate, and to work with partners

1

2

158

“Substantial Conclusion of Negotiations on Landmark IPEF Supply Chain Agreement”, US Departmentof Commerce, 27 May 2023, https://www.commerce.gov/news/press-releases/2023/05/substantialconclusion-negotiations-landmark-ipef-supply-chain#:~:text=IPEF%20will%20help%20the%20
United,market%20for%20American%2Dmade%20goods
Ibid.

Philippine Perspective on the IPEF Agreementon providing technical assistance and capacity building. The press releases of various economies(Singapore and the US) have reported that substantial progress has also been made regarding thetext on Technical Assistance and Economic Cooperation.3
Regarding Pillar III, the IPEF partners have put forward a variety of innovative ideas and approaches
to accelerate their transition to a clean economy. Also, they are concurrently identifying anddeveloping initiatives and proposals to advance cooperation in key areas that are critical torealising country-specific4 pathways towards net zero emission economies.
One specific pathway introduced by a group of interested IPEF partners is the regional hydrogen
initiative to encourage widespread deployment of low-carbon and renewable hydrogen and its
derivatives in the region.5 The IPEF partners are eager to work together, combining their knowledge
from both the public and private sectors. This collaboration is anticipated to stimulate fresh
investments, industrial development, and job prospects, which will subsequently drive innovationand productivity as they strive to achieve economies with net-zero emissions. Additional IPEF
partners may choose to participate in the initiative when they are prepared to do so.
On Pillar IV, the IPEF partners have made good progress toward the development of the text of anagreement that will strengthen the implementation of effective anti-corruption and tax measures
to boost commerce, trade, and investment among IPEF economies. The IPEF partners look forward
to intensifying their efforts in the subsequent negotiating rounds to achieve a high-standard andmutually beneficial Fair Economy Agreement.6
Given the developments, this paper aims to contribute to the discussion through the identificationof anticipated outputs of the IPEF; an assessment of the possible challenges to ratification andimplementation of the IPEF; and prospects of the IPEF’s engagement with Europe in the foreseeable
future.

Philippines’ Expectations
Based on the documents released by the US Department of Commerce, countries can expect aforward-looking agreement that addresses various aspects of regional integration and trade ingoods and services (despite excluding market access provisions). Fuelled by this, the Philippines
has actively participated in the negotiations.
According to the Undersecretary Ceferino S. Rodolfo of the Philippines’ Department of Trade andIndustry (DTI), the framework can be used to provide “incentives to our stakeholders, tied up withthe reforms that we are already undertaking domestically, through having a mechanism to link
the Trade Pillar with Pillars on supply chain resiliency and green energy transition. We also see this

3

4
5

6

“Minister Gan Kim Yong attends the Indo Pacific-Economic Framework For Prosperity (IPEF) Ministerial
Meeting In Detroit, Michigan, 26 – 27 May 2023”, Ministry of Trade and Industry Singapore, https://www.
mti.gov.sg/-/media/MTI/Newsroom/Press-Releases/2023/05/MTI-Press-Release-on-IPEF-MinisterialMeeting.pdf
The pathways recognise the unique national circumstances and development needs of each IPEF partner.
“Press Statement for the Trade Pillar, Clean Economy Pillar, and Fair Economy Pillar”, Ministry of Economy,
Trade and Industry, 27 May 2023, https://www.meti.go.jp/press/2023/05/20230528001/20230528001-29.
pdf“IPEF Joint Statement for the Trade Pillar, Clean Economy Pillar, and Fair Economy Pillar”, Office of theUnited States Trade Representative, 27 May 2023, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2023/may/ipef-joint-statement-trade-pillar-clean-economy-pillar-and-fair-economy-pillar

159

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

as a vehicle to spur investments from the private sector in these areas.”7 Additionally, the Trade
Pillar may help address concerns on labour rights and ensuring human capital development. For
instance, the Pillar is expected to include provisions that “identify and collaborate on emerging
labo[u]r issues, including related to promoting labo[u]r rights of workers in the digital economy
and inclusive and equitable workforce development”,8 which is particularly significant for thePhilippines on account of a growing number of its workforce employed in Information andCommunications Technology (ICT) and the digital economy.9 Separately, the new DTI Secretary
Alfredo Pascual welcomed Secretary Raimondo’s IPEF Upskilling Initiative in which 14 of the largest
US digital companies such as Apple, American Towers, and Amazon will provide digital skills
training to seven million women and girls in less-developed IPEF member countries, including thePhilippines.10
Based on the public summaries11 of Pillar I, it is expected to effectively promote inclusive digitaltrade by guaranteeing the safety and fairness of the digital economy by addressing data protection,
consumer protection, and artificial intelligence. Access to digital infrastructure, equipment andsoftware will also be promoted to ensure that all citizens in partner countries can fully participate
in and benefit from the digital economy. The proposed text includes provisions that promote
access to the Internet and online services and information, and addresses the challenges ofclosing the digital divide by promoting digital equity and inclusion and investing in education andtraining. This is in line with the Philippines’ goal of promoting the growth of the digital economy
and enhancing opportunities for digital trade.12
Regarding the pillar on supply chains, DTI Secretary Pascual believes13 that the grants that thePhilippines has received [for example, the US Trade and Development Agency (USTDA) grants14]
7
8

9

Kris Crismundo, “Pillars of US-led economic framework aligned with PH policies”, Philippine News Agency,
14 June 2022, https://www.pna.gov.ph/articles/1176672“IPEF Pillar 1 text summaries USTR April 2023”, Office of the United States Trade Representative, April2023,
https://ustr.gov/sites/default/files/2023-04/IPEF%20Pillar%201%20text%20summaries%20
USTR%20April%202023.pdf
The number of employed persons in the Philippine digital economy has grown by 8 percent from 5.59
million in 2021 to 6.02 in 2022.

See “Philippine Statistics Authority”, Republic of the Philippines, https://psa.gov.ph/digital-economy
10 “The Asia Foundation Partners with U.S. Commerce Department to Launch Indo-Pacific Economic
Framework for Prosperity Upskilling Initiative”, The Asia Foundation, 9 September 2022, https://
asiafoundation.org/2022/09/09/the-asia-foundation-partners-with-u-s-commerce-department-tolaunch-indo-pacific-economic-framework-for-prosperity-upskilling-initiative/
11 op. cit.
12 “Philippine Development Plan 2023-2028”, National Economic Development Authority (NEDA), https://
pdp.neda.gov.ph/wp-content/uploads/2023/01/PDP-2023-2028.pdf
13 Catherine Talavera, “Pascual highlights Philippines role in supply chain resilience”, The Philippine Star, 15January 2023, https://www.philstar.com/business/2023/01/15/2237625/pascual-highlights-philippinesrole-supply-chain-resilience
14 To advance the clean energy transition by producing critical minerals that are key elements in the supply
chain for batteries and energy storage systems, US Vice President Kamala Harris launched a USTDA
grant to Eramen Minerals, Inc. (EMI), a Filipino mining company, for a feasibility study to develop of
an environmentally sustainable nickel processing facility in the Philippines. This project advances thegoals of the Biden-Harris Administration’s Partnership for Global Infrastructure and Investment and theIndo-Pacific Economic Framework, through the development of clean energy supply chains including the
responsible mining of metals and critical minerals.
See “Vice President Harris Launches USTDA Critical Minerals Processing Project in the Philippines”, US
Trade and Development Agency, 22 November 2022, https://ustda.gov/vice-president-harris-launchesustda-critical-minerals-processing-project-in-the-philippines-2/

160

Philippine Perspective on the IPEF Agreement

can be expanded under the IPEF to support additional investments that would increase thecountry’s participation in value chains of high-value critical products such as electronics, cathodes,
refined copper and chemicals. The Philippines can expect new economic opportunities throughgreater collaboration on logistics and connectivity,15 emergency preparedness and coordinatedresponses to mitigate supply chain disruptions. By improving the security and resilience of local
and regional supply chains, businesses will be more confident in investing in the country andengaging in cross-border trade.
The Supply Chain Agreement can also stimulate innovation in the region. By promoting
collaboration among partner governments with technical and financial assistance, the agreement
can help foster innovative solutions to supply chain challenges, further driving economic growthand competitiveness. Another economic impact is the potential for increased efficiency and costsavings by allowing businesses to better manage supply chain risks and reduce costs associatedwith disruptions and delays.16
The US has already identified several activities in support of the goals of the Agreement. These
would include:
1. Holding a series of trainings and symposiums on issues related to supply chain monitoring andoperations which would involve discussions by IPEF partner experts on cargo risk assessment
practices, best practices in incident response planning, and identifying import dependencies
and other potential supply chain bottlenecks.
2. Launching an IPEF STEM Exchange Program which would match early- and mid-career
professionals from IPEF countries with professional development opportunities related tosupply chain operations.
3. Linking American exporters to opportunities in sectors that IPEF Partners are seeking increased
diversification and resilience.
4. Supporting cooperation on digital shipping including pilot projects with IPEF Partners startingwith the Port of Singapore.
5. Conducting reverse trade missions which brings experts from IPEF markets to the United States
to meet with leading US exporters to support supply chain modernisation in IPEF markets.17
While the Philippines should expect to participate in these activities and strategies, it is more
important that the country maximises its participation by identifying the internal goals that it
wants to achieve as it participates in these activities.
Related to the third Pillar, the Philippines looks at the IPEF and the US grants as a means of
expanding investments in green and renewable energy. One such grant involves the processing of
nickel ore through a partnership with an American company that owns patents in the manufacture

15 Logistics has often been cited as a main bottleneck in Philippine industry development. While thePhilippines’ Logistics Performance Index is at 3.2, besting Indonesia, it is still below Malaysia (3.6),
Thailand (3.7), China (4), Japan (4.2) and Singapore (4.6). Vietnam is tied with the Philippines at 3.2.
16 Cyn-young Park, “Global Supply Chains Need Fixing: Help Is on The Way”, Asian Development Blog, 2023,
https://blogs.adb.org/blog/global-supply-chains-need-fixing-help-way
17 op. cit.

161

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

of batteries.18 The US firm supplies US military and critical industries including hyperscale data
centres, renewable energy projects, and long-haul trucking companies. Another is the grant for afeasibility study on the Philippines’ first offshore wind farm and cited this as indicative of the US’vision for the IPEF.19
It is expected that the framework will eventually be beneficial in lowering energy costs by tapping
into renewable energy sources. In November 2022, US Vice President Kamala Harris launched the
USTDA grant to Eramen Minerals Inc. (EMI), a Filipino-based mining company, to assess the viabilityof developing an ore-to-battery grade nickel sulphate/hydroxide and cobalt sulphate processing
facility to produce battery grade precursor materials.20
The IPEF is also expected to leverage Philippine strengths in electronics manufacturing and further
expand the industry’s capabilities. “It’s also proximate and reachable that [we will] be able to create
wafer fabrication in the Philippines. [We have] already proven the capabilities of Filipino engineers
through internal circuit design. There is an American company operating with one thousand IC[Integrated Circuit] design engineers here,” Pascual said in a forum.21
The Philippines can also expect to lessen information asymmetries through mechanisms that
promote commercially oriented knowledge-sharing platforms aimed at developing Micro, Smalland Medium Enterprise (MSME)-inclined ecosystems through the utilisation of carbon credit
markets and green financing instruments. The country, likewise, supports ‘green lanes’ and otherinvestment facilitation vehicles for existing and future grants dedicated to establishing crossborder private joint venture partnerships in the region.
Broadly, the Philippines looks forward to the US sharing its expertise with the IPEF Partners on
areas such as laws, regulations, and policies that would help economies advance low- and zerogreenhouse gas emissions solutions, and promote energy transition.22

The IPEF as an Opportunity
The Philippines, in general, perceives the IPEF as an opportunity to increase economic cooperationand integration with the countries in the region, promote trade and investment, and support
infrastructure development and growth. This is manifested in the speech delivered by the then
Secretary of Trade and Industry, Ramon Lopez, in the virtual launch of the IPEF in May 2022 where
he highlighted that the broad themes of the IPEF and the Philippines’ economic and development
priorities are generally aligned. The IPEF’s focus on advancing resilience, sustainability, inclusiveness,and competitiveness are consistent with the Philippines’ interests and development objectives. In
addition, the Secretary of Trade and Industry Alfredo Pascual expressed the need to promote
emerging areas in trade, technology, and the digital economy.23

18 “PH pushes for green metal processes, renewable energy investments in IPEF Ministerial Meeting”,
BusinessChannel.ph, 16 September 2022, https://businesschannel.ph/2022/09/16/ph-pushes-for-greenmetal-processes-renewable-energy-investments-in-ipef-ministerial-meeting/
19 Ibid.
20 “Trade Chief Highlights PH’s Role in Attaining Resilient Supply Chains”, Mindanao Daily News Network,
16 January 2023, https://mindanaodailynews.com/trade-chief-highlights-phs-role-in-attaining-resilientsupply-chains/
21 Ibid.
22 “IPEF Public Summary: Pillar III (Clean Economy)”, US Department of Commerce, 2023, https://www.
commerce.gov/sites/default/files/2023-03/IPEF-Pillar-III-Clean-Economy-Public-Summary.pdf
23 Bernie Cahiles-Magkilat, “Pascual to focus on innovation, digitalization,” Manila Bulletin, 31 May 2022,
https://mb.com.ph/2022/05/30/pascual-to-focus-on-innovation-digitalization/

162

Philippine Perspective on the IPEF Agreement

The administration of President Marcos, Jr., which came to power in May 2022, continues thispositive view of the agreement as it is aligned with key strategies identified in the Philippine
Development Plan (PDP) 2023 – 28, which work towards the achievement of the Philippine longterm vision of a Matatag (strongly rooted), Maginhawa (comfortable) at Panatag na buhay (securelife).24 These strategies include revitalising industry by linking industrial policy with trade andinvestment policy, and promoting trade and investments by advancing purposive, assertive, andforward-looking Free Trade Agreement (FTA) strategies.
Trade strategies that support industrial development include pursuing FTAs and arrangements tocreate an enabling environment for facilitating investments from target-source countries, like the
US and South Korea, in terms of capital and technology. By actively participating in negotiations
with the innovation- and technology-rich countries, the Philippines aims to support key industrial
clusters, particularly those related to transport manufacturing, ICT, creative industries, and healthsciences. Strengthening the supply chains of these sectors is a particular strategy that is strongly
associated with the IPEF. Apart from this, participating in the discussions and crafting disciplines
on digital economy, e-commerce and other related issues is closely related to the Philippines’
strategy of positioning itself as a hub for knowledge and technology-intensive export industries.
Although not necessarily a trade agreement, IPEF negotiations are aligned with the Philippine
strategy of advancing purposive, assertive, and forward-looking FTAs. For the Philippines, tradenegotiations in the IPEF would help the country strengthen its National Quality Infrastructure(NQI) to the benefit of local producers, enhancing in turn their capability to conform to technicalregulations, and sanitary and phytosanitary standards. The government sees the IPEF as an avenue
to negotiate the sharing of knowledge, technology, and best practices to comply with standards inforeign markets and maximise the market access offered through FTAs.
Furthermore, the Philippines, as a member of the Association of Southeast Asian Nations (ASEAN),
is pleased that the vision of the IPEF is in line with the 2020 ASEAN Comprehensive Recovery
Framework,25 the ASEAN Outlook for the Indo-Pacific26 and the ASEAN Economic Community (AEC)
Blueprint 202527 as the Agreement would provide avenues for the achievement of these goals.

Negotiation and Implementation Challenges
The IPEF muddles the talks related to other discussions with the US
The Philippines is facing a delay28 in the renewal of the US Generalized System of Preference (USGSP) program due to issues in the US Congress and the focus on the IPEF. The US-GSP is crucial

24 “Ambisyon Natin 2040 A long-term vision for the Philippines”, (Manila: NEDA), National Economic
Development Authority, https://2040.neda.gov.ph/wp-content/uploads/2016/04/A-Long-Term-Visionfor-the-Philippines.pdf
25 “ASEAN Comprehensive Recovery Framework”, Association of Southeast Asian Nations, 2020, https://
asean.org/book/asean-comprehensive-recovery-framework/
26 “ASEAN Outlook on the Indo-Pacific”, Association of Southeast Asian Nations, 22 June 2019, https://asean.
org/asean2020/wp-content/uploads/2021/01/ASEAN-Outlook-on-the-Indo-Pacific_FINAL_22062019.pdf
27 ASEAN Secretariat, “ASEAN Economic Community Blueprint 2025”, Association of Southeast Asian Nations,2021, https://asean.org/book/asean-economic-community-blueprint-2025/
28 Catherine Talavera, “Philippines sees delay in renewal of US GSP”, The Philippine Star, 1 February 2023,
https://www.philstar.com/business/2023/02/01/2241591/philippines-sees-delay-renewal-us-gsp

163

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

for the Philippines as it offers zero duties on 3,500 tariff lines,29 and the country is among the top
five beneficiaries of this programme. The Philippines is collaborating with fellow ASEAN members
like Thailand and Vietnam30 to advocate for the renewal of their respective GSPs. However,progress has been slowed down by the IPEF’s trade-related developments. The hope remains forreauthorisation of the US-GSP as it has consistently benefited the Philippines by serving as a major
supplier of affordable imports for American manufacturers and consumers, as noted by Trade
Secretary Pascual in November 2022.31
This delay, however, may be viewed as an opportunity for the Philippines. According to Leanardo A.
Lazona, an economist from the Ateneo de Manila University, the Philippines’ potential readmission
into the US preferential trading scheme could interfere with efforts to diversify its export baseas the US-GSP program “creates a dependency on the US markets, making [the country] more
vulnerable to changes and uncertainties of the US economy”.32 Lanzona suggests that the country
focus its efforts on making its existing trade agreements work for the country.
The discussions on the IPEF shifts the Philippines’ focus away from traditional bilateral
FTAs
USTR Ambassador Tai has stated that a bilateral FTA between the Philippines and the US
government was not on the negotiating table as the Biden Administration was more focused on
its IPEF initiative.33 “In terms of a more ‘traditional’ FTA, we’re not currently negotiating any suchagreements with trading partners in particular because we do not see that traditional [FTA] being
appropriate for the types of challenges and opportunities that we’re facing right now,” Tai told
members of the Philippine media in a briefing in Makati City on 18 April 2023.
Establishing the IPEF Supply Chain Crisis Response Network would have data sharing
challenges
Challenges to the implementation of the agreements in the Supply Chain Pillar would be related
to the information requirements necessary to set up the crisis response network. Yeo and Cutler
alluded to this challenge when they deduced that “countries may need domestic legislation or
regulations to deal with information sharing of the private sector”.34 The Philippines’ Data Privacy
Act35 provides protection to the businesses and private companies but the stringent application of
the provisions of the law may prevent the effective implementation of the crisis response sharing
because of limited data sharing.

29 “Generalized system of preferences”, Department of Trade and Industry, https://www.dti.gov.ph/generalized-system-of-preferences/
30 op. cit.
31 Ibid.
32 Kyle Aristophere T. Atienza, “US GSP could disrupt PHL export diversification”, Business World, 7 May
2023,
https://www.bworldonline.com/economy/2023/05/07/521330/us-gsp-could-disrupt-phl-exportdiversification/
33 Revin Mikhael D. Ochave, “US not keen on PHL free trade deal”, Business World, 19 April 2023, https://www.bworldonline.com/top-stories/2023/04/19/517678/us-not-keen-on-phl-free-trade-deal/
34 Han-Koo Yeo and Wendy Cutler, “Strengthening Regional Supply Chain Resiliency Through the IndoPacific Economic Framework (IPEF)”, Asia Policy Society Institute, May 2023, https://asiasociety.org/policyinstitute/strengthening-regional-supply-chain-resiliency-through-indo-pacific-economic-framework-ipef
35 Republic Act 10173 Data Privacy Act of 2012, National Privacy Commission, https://privacy.gov.ph/dataprivacy-act/

164

Philippine Perspective on the IPEF Agreement

Low levels of awareness of the agreement would slowdown implementation
One of the observations during negotiations for the various trade agreements of the Philippines
is the low levels of awareness of Filipinos (across all sectors) of the Philippine’s participationin the trade agreements. One of the major criticisms hurled at the DTI during the discussions
for Senate concurrent to the ratification of the Regional Comprehensive Economic Partnership(RCEP) was that “very little information on the contents of the agreement [were] made available
to the public”.36 A related issue raised by critics of the RCEP is the alleged lack of consultations
with agricultural stakeholders. Consultations, after all, are of prime importance in any tradenegotiation since they guide the development of the country’s negotiating position. In contrast,
the Department of Agriculture (DA) reported that consultations with agricultural stakeholders
have been undertaken37 through the Philippine Council for Agriculture and Fisheries Committee
on International Trade (PCAF-CIT) since the launch of RCEP negotiations in November 2012. These
consultations were reportedly attended by different agricultural sector groups. Also, the Tariff
Commission (TC) conducted a public consultation38 in May 2015 as well which was in accordancewith Section 1609 of the Customs Modernization and Tariff Act (CMTA) to allow stakeholders to
express their concerns and to submit positions papers which were considered in the Commission’sreport on its findings and recommendations about the agreement.
While the level of awareness has been improving over time and the discussions conducted during
the deliberations for Senate concurrence of RCEP seem to reflect improvements in Filipinos’awareness of international agreements, it is noteworthy that Filipinos tend to become awareof and interested in the participation of the government towards the completion of negotiation
processes. Around this stage of discussions, however, critics of the agreement39 perceive thatlittle can be done anymore to address their issues in the text so they would push for the nonconcurrence or non-ratification of the agreement. This can all be avoided if there is a consultative
process undertaken at every step of the negotiation process to ensure that all concerns are
addressed while the negotiations are taking pace.

How the IPEF Will Affect Engagement with Europe?
While not necessarily an FTA, the formation of the IPEF creates frictions between IPEF partners andnon-IPEF partners. IPEF negotiations are then influenced by broader diplomatic considerations.
A closer relationship with the US and other Asia-Pacific Economic Cooperation (APEC) partnercountries could have implications for the Philippines’ relations with other countries in Europe.
It is therefore important that as the Philippines pursues stronger ties with IPEF partners, it also
explores ways to further strengthen its relationship with the European Union (EU).

36 Joseph Purugannan, “[ANALYSIS] Debunking government claims on RCEP”, Rappler, 3 November 2021,
https://www.rappler.com/voices/thought-leaders/analysis-debunking-government-claims-on-rcep/
37 “The Regional Comprehensive Economic Partnership”, Senate Economic Planning Office , November
2022, https://legacy.senate.gov.ph/publications/SEPO/Policy%20Brief%20on%20RCEP_Final.pdf
38 Ibid.
39 Catherine Talavera, “Farmers seek consultations before RCEP ratification”, The Philippine Star, 4November 2021. https://www.philstar.com/business/2021/11/04/2138737/farmers-seek-consultationsrcep-ratification

165

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

One such way is by pursuing the resumption of the Philippines-European Union (PH-EU) FTA
negotiations.40 DTI Secretary Pascual calls the FTA an essential mechanism in the Philippines’
engagement with the EU.41 With the US putting a halt to the PH-US FTA discussions, it may do wellfor the Philippines to focus its energies on the pursuit of other FTA agreements such as the PH-EU
FTA. The pursuit of the PH-EU FTA resumption of negotiations comes at an opportune time as well.
The administration of President Marcos, Jr. appears to have better relations with the EU comparedto the previous administration. This is evidenced by the President having already visited Brussels
early in his term.42
In addition, since the IPEF muddles the discussion on the US GSP, the pursuit for the continuationof the Generalised Scheme of Preferences Plus (GSP+) afforded by the EU becomes more critical.
As one of its strategies is to encourage the import of goods from developing countries, the EU
implemented the GSP+, which went into force in 2014. Eight countries benefit from the scheme,
which is branded as a “special incentive arrangement for sustainable development and good
governance.”43. The EU GSP+ is a special incentive arrangement for sustainable development andgood governance in the form of zero duties. It is a unilateral trade arrangement, which offers zero
tariffs on 6,274 products or 66 per cent of all EU tariff lines. It is a part of the broader Generalised
System of Preferences (GSP) of the EU and, as a developmental tool, it seeks to encourage export
diversification in developing countries, including Armenia, Bolivia, Cape Verde, Kyrgyzstan,
Mongolia, Pakistan, the Philippines, and Sri Lanka. The Philippines reports several communities
benefiting from the GSP+ such as the areas with economic zones (that is, Laguna, Rosario Caviteand Batangas). Foreign companies have also established operations in the Philippines in order tomaximise the opportunities of the GSP+.44
Thus, given the significance of the GSP+ and the absence of the US GSP to the Philippine arsenal
for exporters, it would do well for the Philippines to exert efforts in ensuring that the GSP+ isrenewed.

Reaping the Benefits of the IPEF
To conclude, this paper provides some recommendations that may help maximise the benefits
from future negotiations and are based on lessons from previous negotiations conducted by thePhilippines. The Philippines has had a history of participating in international trade agreements
both bilateral (Philippines – Japan Economic Partnership Agreement [PJEPA], Philippines-European
Free Trade Agreement [PH-EFTA], Philippine-Korea FTA [PH-Korea] [forthcoming]) and multilateral(World Trade Organization [WTO], ASEAN+1, RCEP). To achieve more fruitful negotiations with the
IPEF partners, the Philippines can draw upon several lessons from previous negotiations. These
would include the following:

40 The Philippines and the EU also launched exploratory talks on bilateral FTA in 2013. While there havebeen two negotiations conducted (Brussels in 2016 and Cebu in 2017), talks have been on hiatus since2017.
41 Revin Mikhael D. Ochave, “DTI’s Pascual calls free trade agreement ‘essential’ to European Union relationship”,
Business World, 16 February 2023, https://www.bworldonline.com/economy/2023/02/16/505381/dtispascual-calls-free-trade-agreement-essential-to-european-union-relationship/
42 Zacarian Sarao, “Marcos to push for PH priorities at ASEAN-EU Summit in Brussels”, Inquirer.net, 11
December 2022. https://globalnation.inquirer.net/209034/bongbong-marcos-to-push-for-ph-prioritiesat-asean-eu-summit-in-brussels
43 “Generalized system of preferences”, Department of Trade and Industry, https://www.dti.gov.ph/generalized-system-of-preferences/
44 Ibid.

166

Philippine Perspective on the IPEF Agreement

Balancing national interest with regional goals
Trade negotiations require careful consideration of the balance between national interests andregional goals. In the past FTA negotiations, the Philippines has had to consider how to maintain its
national interests while contributing to the broader objective of regional economic integration. Byutilising the Agreements’ provisions to Philippines’ domestic goals, the country can work towards
achieving national interest along with regional goals. The country can further align strategies
identified in the Philippine Development Plan to the agreements and principles outlined in the
IPEF.
Consider the various interests of various stakeholders
Trade negotiations impact various stakeholders, including different industries, workers andconsumers. It is crucial to ensure that the interests of these groups are taken into account in thenegotiation process. This could involve engaging in consultations with industry groups, labour
unions and other stakeholders to understand their concerns and priorities.
Addressing sensitive industries
Some sectors of the economy may be more sensitive to changes in policy or international shocks
than others. In the IPEF, the environment and mining sector may be considered sensitive areas innegotiations as it can be vulnerable to shifts in policy in other countries. The Philippines shouldhave a strategy for dealing with these sensitive industries. Relatedly, trade agreements can lead tojob displacement in certain sectors due to increased competition. However, they can also create
job opportunities in other sectors. The government should have plans in place to help workers
transition to new jobs, if necessary. This could involve measures like retraining programmes andsocial safety nets. An example would be the Lifelong Learning Development Bill which aims todevelop a Lifelong Learning Framework through the Philippine Qualifications Framework–National
Coordinating Council (PQF-NCC). The PQF–NCC shall determine and set standards for developing
action components and desirable success measures for promoting lifelong learning in cities,municipalities, and educational institutions.45
Leveraging competitive advantage
The Philippines, like all countries, has industries where it has a comparative advantage. These
industries, which might include areas like Business Process Outsourcing (BPO), electronics andcertain green metals sectors, should be leveraged in the negotiation process. The Philippines
should also negotiate disciplines that would maintain its strength in the digital services trade.46
Investing in capacity building
To maximise the benefits from trade agreements, it is important to invest in capacity building forboth the public and private sector. Summary of the IPEF texts have all mentioned the presenceof technical assistance and economic cooperation. It would do well for the Philippines to utilise
these opportunities to enhance the skills of workers, improving infrastructure, and promoting
innovation in industries.
45 op. cit.
46 Francis Mark A. Quimba, Sylwyn C. Calizo Jr, Jean Clarisse T. Carlos and Jose Ramon G. Albert, “How
Ready Are We? Measuring the Philippines’ Readiness for Digital Trade Integration with the Asia-Pacific”,
Philippine Institute for Development Studies, June 2021, https://pidswebs.pids.gov.ph/CDN/PUBLICATIONS/
pidsdps2117.pdf

167

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

About the author
Dr Francis Mark A. QUIMBA is a Research Fellow at the Philippine Institute for Development
Studies (PIDS) and the Director of Philippine APEC Study Center Network. He has worked on several
research topics including agriculture, trade, and rural development. His current research interest
is in innovation activity of local firms. He has participated in round table discussions on issues oftrade, industrial development, innovation and e-commerce.
Dr Quimba obtained his master’s in International Development from the International Universityof Japan. He obtained another master’s degree and his PhD in Development Economics from the
National Graduate Institute for Policy Studies, Tokyo, Japan.

168

Vietnam and the IPEF: Negotiating Prospects, Opportunities and Challenges

Vietnam and the IPEF:
Negotiating Prospects, Opportunities andChallenges
Linh H. DANG and Linh T. T. TRAN

This paper provides an in-depth analysis of Vietnam’s economic development and its potential
participation in the Indo-Pacific Economic Framework for Prosperity (IPEF). Vietnam is an emerging
economy in the Indo-Pacific, actively engaged in trade agreements and regional economic
integration. Led by the United States (US), the IPEF aims to foster a connected, clean, fair, andresilient economy in the region, aligning with Vietnam’s long-term economic policies. Participationin the IPEF offers promising prospects for addressing critical issues like supply chain diversification,technology innovation, climate change mitigation, and green development. Vietnam’s active rolein the Association of Southeast Asian Nations (ASEAN) enhances its leadership and influence inthe region. The paper highlights potential benefits for Vietnam’s resilient and clean economy, butchallenges like low localisation rates and resource limitations need attention. Vietnam’s participationin the IPEF can offer support for improving competitiveness and achieving sustainability goals.
Overall, the paper provides insights into Vietnam’s economic strengths, challenges, and thepotential benefits of joining the IPEF for sustainable and inclusive economic growth.

169

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Introduction
Vietnam has made substantial strides in economic development, establishing itself as one of the
key emerging economies in the Indo-Pacific region. Its unwavering commitment to multilateralism
has been demonstrated through active participation in various trade agreements, including theComprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional
Comprehensive Economic Partnership (RCEP).1 These agreements signify Vietnam’s dedication toregional economic integration, facilitating market access expansion, increased trade opportunities,
and potential economic growth.
Vietnam’s economic development perspective, as outlined in its 13th Party Congress, prioritises
building a self-reliant economy by renewing the growth model and restructuring the economy;
promoting qualified human resources; supporting agricultural enterprises; promoting research,technology transfer, fostering the digital economy and proactive international integration.2 As
President Nguyen Xuan Phuc said at the United Nations General Assembly (UNGA), Vietnam values
multilateralism, international solidarity, and upholds principles of ‘Partnership for sustainable
peace’, based on the UN Charter and international laws on the global stage.3
Aligning with the Indo-Pacific Economic Framework for Prosperity (IPEF) can be an opportunity
for Vietnam to restructure, upgrade its economy, and address critical regional and global issues
such as supply chain diversification, technology innovation, climate change mitigation, green
development, tax matters and corruption. In May 2022, during the announcement ceremony tokick off the discussion on the IPEF, Prime Minister Pham Minh Chinh emphasised the urgent needto adjust Vietnam’s growth model and economic linkage to create a more sustainable and selfreliant economy that maximises internal resources while optimising external forces.4 The IPEF, led
by the United States (US), can help in moulding a mechanism with regional and global influence.
Any participating member can benefit from a common high-standard environment. In September
2022, Minister of Industry and Trade Nguyen Hong Dien confirmed at the Ministerial Meeting for
IPEF members that Vietnam’s participation in the IPEF is entirely possible, depending on further
discussions to clarify the Initiative’s role and alignment with Vietnam’s multilateral economic foreign
policies.5 At the Ministerial Meeting for IPEF partners in May 2023, he also highly appreciated the
US’ reception of opinions from member countries and stated that Vietnam will continue to work
closely with the other IPEF countries, including those from the Association of Southeast Asian
Nations (ASEAN) to complete basic negotiations of the Initiative this year.6

1

2

3

4

5
6

170

“Vietnam’s FTAs as of May 2023”, Center for WTO and International Trade, Vietnam Chamber ofCommerce and Industry, 10 May 2023, https://wtocenter.vn/thong-ke/13814-vietnams-ftas-summaryas-of-april-2019‘The 13th National Congress Resolution’, Communist Review, No.959, https://www.tapchicongsan.org.vn/
web/english/focus/detail/-/asset_publisher/FMhwM2oQCZEZ/content/the-13th-national-party-congressresolutionp“Speech of President Nguyen Xuan Phuc at the UN General Assembly”, ASEAN Vietnam Portal, 23
September 2021, https://aseanvietnam.vn/en/post/speech-of-president-nguyen-xuan-phuc-at-the-ungeneral-assembly“Vietnam premier attends launching ceremony of Indo-Pacific Economic Framework for Prosperity”,
Tuoi Tre News, 24 May 2022, https://tuoitrenews.vn/news/politics/20220524/vietnam-premier-attendslaunching-ceremony-of-indopacific-economic-framework-for-prosperity/67282.html“Vietnam willing to join efforts for CPTPP elevation, IPEF negotiations”, Vietnamplus, May 29 2023, https://en.vietnamplus.vn/vietnam-willing-to-join-efforts-for-cptpp-elevation-ipef-negotiations/253797.vnp
op. cit.

Vietnam and the IPEF: Negotiating Prospects, Opportunities and Challenges

Vietnam’s prospects to participate in all four Pillars are promising, but they come with theirrespective challenges. Under the Supply Chains Pillar, despite Vietnam attracting significant
Foreign Direct Investment (FDI) in recent years7 and demonstrating a strong export performance8,
low localisation rates9 and a low-skill workforce10 remain crucial challenges. These issues need tobe addressed through collaboration in the IPEF. In the Clean Economy Pillar, Vietnam has showna strong commitment to reducing emissions, as reiterated in the Conference of the Parties tothe United Nations Framework Convention on Climate Change (UNFCC) (COP27).11 But it faces
capacity and resource challenges. Collaboration in the Clean Economy Pillar can help facilitate
Vietnam’s transformation and provide the necessary assistance. While progress has been made infighting corruption, reforming the tax system, and improving institutional mechanisms,12 there is
still a long way to go for Vietnam. Among all Pillars, the one on Fair Economy may have the least
potential for Vietnam to catch up with. Vietnam’s active participation in Free Trade Agreements(FTAs) and the need to upgrade the Bilateral Trade Agreement (BTA), which went into effect in
2001,13 contribute to its prospects in the Trade Pillar.
As an active ASEAN member, Vietnam plays a crucial role in IPEF negotiations. Both US-led andChina-led economic initiatives cannot exist as a whole without the support of ASEAN. Together
with the other ASEAN members, Vietnam is upgrading the ASEAN-China Free Trade Agreement(ACFTA)14 and negotiating the Global Development Initiative (GDI)15 while maintaining a neutral
stance and considering national interests.16 In this regard, at a high-level forum with US President
Joe Biden in March 2023, General Secretary Nguyen Phu Trong emphasised Vietnam’s welcome
for the US support to ASEAN’ centrality. Together with the US and the other ASEAN countries, thecountry aims to promote the ASEAN Vision for the Indo-Pacific.17

7

8
9
10
11

12

13
14
15

16
17

“Vietnam’s foreign direct investment powers economy into the future”, TTWTO VCCI, 13 February 2023,
https://wtocenter.vn/chuyen-de/21346-vietnams-foreign-direct-investment-powers-economy-into-thefuture#:~:text=In%202020%2C%20Vietnam%20was%20among,27.72%20billion%20USD%20in%202022“Strong 2022 export results set to continue on front foot”, Vietnam Investment Review, 15 February 2023,
https://vir.com.vn/strong-2022-export-results-set-to-continue-on-front-foot-99764.html“Low localisation rate hindering progress”, VietNamNet News, 17 March 2023, https://vietnamnet.vn/en/
low-localisation-rate-hindering-progress-2121255.html“Vietnam ranks low in total workforce index ranking in 2022, VietNamNet News, 22 December 2022,
https://vietnamnet.vn/en/vietnam-ranks-low-in-total-workforce-index-ranking-in-2022-2093317.html
COP27: Viet Nam reiterates strong commitments to climate change, en.baochinhphu.vn, 9 November
2022 https://en.baochinhphu.vn/cop27-viet-nam-reiterates-strong-commitments-to-climatechange-111221109161831911.htm
Nguyen Khac Giang, “Vietnam’s Anti-corruption Campaign: Economic and Political Impacts”, ISEAS-Yusof
Ishak Institute, 18 May 2023, https://www.iseas.edu.sg/articles-commentaries/iseas-perspective/202341-vietnams-anti-corruption-campaign-economic-and-political-impacts-by-nguyen-khac-giang/“Vietnam - Country Commercial Guide”, International Trade Administration, 15 December 2022, https://www.trade.gov/country-commercial-guides/vietnam-trade-agreements“ASEAN and China meet to upgrade ASEAN-China Free Trade Area”, The ASEAN Secretariat, 12 April 2023,
https://asean.org/asean-and-china-meet-to-upgrade-asean-china-free-trade-area/“China and ASEAN join hands to bring the ‘Asian moment’ in global governance”, Mission of the People’s
Republic of China to ASEAN, 23 November 2022, http://asean.china-mission.gov.cn/eng/stxw/202211/
t20221123_10979831.htm
Kasit Piromya, “Neutrality and Non-alignment Are the Way Forward For ASEAN”, The Diplomat, 9 February
2023, https://thediplomat.com/2023/02/neutrality-and-non-alignment-are-the-way-forward-for-asean/“Readout of President Joe Biden’s call with General Secretary Trong of Vietnam”, The White House, 29March 2023, https://www.whitehouse.gov/briefing-room/statements-releases/2023/03/29/readout-ofpresident-joe-bidens-call-with-general-secretary-trong-of-vietnam/

171

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

The geopolitical and regional context
Currently, the world economy is at a significant turning point into a new era. This process is being
driven by many trends including international realignment, energy transition to renewables andglobal supply chain restructuring.
Global competition among major countries has intensified, especially in safeguarding supply
chains. After the US pledged US$52 billion for the domestic semiconductor industry in August2022 through its Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act,in April 2023, the European Parliament passed the CHIPS Act for reducing dependencies on foreign
suppliers.18 The trend of shifting from traditional energy to renewable energy for reducing climatechange effects is becoming more and more obvious. The COVID-19 pandemic has caused a severe
breakdown in global supply chains, causing production to stagnate and a host of companies tobecome non-functional and go bankrupt. Hence, the world has been taking ‘resilience’ as a major
imperative for supply chains. Regardless of the causes, whether pandemic, natural disaster, or
conflict, in an unstable world like today, the risk of supply chain disruption is significant. This has
given rise to new trends including reshoring, nearshoring, and friend-shoring, for protecting supply
chains.
Amid current trends, the Indo-Pacific region is a key area where major powers are implementing
strategies to increase political and economic influences. The most notable strategic competition is
between the US and China. While China’s foreign policy is following the roadmap that progresses
from economy to security, the US is deploying a roadmap to compete for influence with China, but
in the opposite direction, shifting from defence and security to economics. China has reaped somesuccess with the Belt and Road Initiative (BRI), which promotes the signing and implementation of
the RCEP. It has also applied for accession to the CPTPP. In September 2021, President Xi Jinping
announced the Global Development Initiative (GDI) at the UNGA, and the Global Security Initiative(GSI) a few months later, which aims to build a security architecture fostering balance, stability,
and sustainability. According to the Ministry of Foreign Affairs of the People’s Republic of China,
more than 80 countries and international organisations have expressed their appreciation andsupport for the GSI.19 This shows that China’s foreign policy orientation, from economy to security,
is posing challenges to the US in its strategy of competing for influence in the region in the near
future.
In contrast, on 11 February 2022, in order to restore ‘leadership’ and restructure the Asia-Pacificorder, US President Joe Biden announced the new Indo-Pacific Strategy (IPS).20 The US strategy
in competing for influence with China involves shifting from defence and security to economy.

18 Susan Caminiti, “After the CHIPS Act: U.S. still has a long road ahead to rival Asia in semiconductor
manufacturing”, CNBC, 2 August 2022, https://www.cnbc.com/2022/08/02/after-chips-act-us-has-longroad-to-rival-asia-in-semiconductors.html#:~:text=Technology%20Executive%20Council-,After%20
the%20CHIPS%20Act%3A%20U.S.%20still%20has%20a%20long%20road,rival%20Asia%20in%20
semiconductor%20manufacturing&text=After%20three%20years%20of%20stops,and%20improve%20
competitiveness%20with%20China; “Chips Act: Council and European Parliament strike provisional
deal”, Council of the European Union, 18 April 2023, https://www.consilium.europa.eu/en/press/pressreleases/2023/04/18/chips-act-council-and-european-parliament-strike-provisional-deal/
19 “Global Security Initiative: China’s Proposal for Solving Security Challenges”, Ministry of Foreign Affairs of
the People’s Republic of China, 3 April 2023, https://www.fmprc.gov.cn/eng/wjb_663304/zwjg_665342/
zwbd_665378/202304/t20230410_11056912.html
20 “Indo-Pacific Strategy of the United States”, The White House, February 2022, https://www.whitehouse.
gov/wp-content/uploads/2022/02/U.S.-Indo-Pacific-Strategy.pdf

172

Vietnam and the IPEF: Negotiating Prospects, Opportunities and Challenges

This was evident from announcement of economic initiatives, such as the Partnership for Global
Infrastructure and Investment (PGII), during the 48th Meeting of the Group of Seven (G-7) heldat Schloss Elmau in Germany in June 2022. As part of this initiative, the G-7 aims to mobilise
approximately US$600 billion to invest in infrastructure projects in developing countries over the
next five years (until 2027).21
The IPEF is the US’ instrument for increasing its economic influence in the Indo-Pacific region. With
President Donald Trump’s withdrawal from the Trans-Pacific Partnership (TPP), the US’ economic
presence in the region is no longer significant. The challenge facing the US today is to reach a highstandard economic agreement that supports its domestic economy and is also appealing enoughfor attracting partners in the Indo-Pacific. The IPEF is different in that it is not following the path ofcreating a traditional multilateral trade agreement framework for the region, but instead focusing
on establishing overarching regional rules for economics and trade. The biggest drawback of the
IPEF so far is that, while it aims to establish standards, principles, and obligations to shape an
economy under four Pillars, there is a lack of US market access for member countries.
Both the US and China will engage in competition focusing on ASEAN through the implementationof the IPEF and the GDI. In the long term, the competition will expand to cover the entire IndoPacific region. For China, ASEAN is not only geographically close but also its largest global trading
partner. The maintenance and promotion of stable economic, trade, and geopolitical relations
between China and the ASEAN contribute to the development of both ASEAN and China. To further
enhance their partnership, ASEAN and China have conducted initial consultations for upgrading
the ASEAN-China FTA in February 2023.22 These negotiations cover various areas such as trade,investment, digital, and green economy, aiming to build a more comprehensive, modern, andinclusive ASEAN-China FTA that benefits both sides. The content of the ASEAN-China FTA and the
GDI align closely with the objectives of the IPEF.
On the other hand, if the US is not supported by ASEAN, both the IPS and the IPEF will havesignificant gaps. The global strategic focus of the US is in the Indo-Pacific region, particularly
Southeast Asia, where its biggest long-term strategic competitor, China, is located. As a key
member of ASEAN, Vietnam believes that the IPEF “should be based on open, comprehensive
and transparent principles in line with international law, while ensuring ASEAN’s central role andsupplementing existing economic links”, stated Foreign Ministry Spokesperson Le Thi Thu Hang.23
These links also include the upgraded ASEAN-China FTA.
Vietnam plays a significant role in the Indo-Pacific region due to its extensive economic engagement,
supply chain restructuring, geopolitical significance, balancing act, and critical leadership role in
ASEAN. With rapid economic growth and active participation in initiatives like the CPTPP and the
RCEP, Vietnam promotes trade liberalisation and economic cooperation. As a manufacturing hub
attracting foreign investments, it diversifies supply chains and deepens integration into the global
supply chain network. Geographically located in Southeast Asia with land borders with China and21 “The G7 stands united alongside Ukraine”, G7 Germany, 27 June 2022, https://www.g7germany.de/g7-en/
g7-summit
22 See “ASEAN and China meet to upgrade ASEAN-China Free Trade Area”, Association of Southeast Asian
Nations, 12 April 2023, https://asean.org/asean-and-china-meet-to-upgrade-asean-china-free-tradearea/
23 “IPEF should be based on open, inclusive, transparent principles: Spokesperson”, The World and Viet Nam
Report, 26 May 2022, https://en.baoquocte.vn/ipef-should-be-based-on-open-inclusive-transparentprinciples-spokesperson-185086.html

173

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

a coastline along the South China Sea, Vietnam actively addresses regional security concerns
while maintaining stability. Its foreign policy emphasises maintaining friendly relations with major
powers, leveraging its position in the ever-evolving regional dynamics. Vietnam’s leadership in
ASEAN further showcases its commitment to regional economic integration and inclusive growththrough active involvement in ASEAN-centred initiatives.

Brief Overview of Vietnam’s Economy
The year 1975 was an important historical milestone when North and South Vietnam were unified,
officially ending the war in this country. Thereafter, the country embarked on building a closed andself-sufficient economy; however, the government soon realised the weaknesses of this model.
During the ‘Renewal period’ that began in the mid-1980s, Vietnam implemented various economic
policies to transition from a centrally-planned economy to a ‘Socialist-oriented market economy’.
Since then, Vietnam has consistently adopted a multilateral viewpoint at all levels of international
integration, particularly economic, with the goal of constructing an independent and autonomous
regional economy, actively engaging and cooperating with the world.
The above points are important in shaping the core views of the economic policies of theVietnamese government, leading to strategies, plans and actions. Currently, Vietnam is heading
towards an open, integrational, and autonomous economy. The spirit of independence is deeply
ingrained in the Vietnamese people. The Vietnamese government understands the value ofpeace and independence, and therefore adopts a multilateral stance at all levels of international
integration. Vietnam’s difficulties during its period as a closed economy motivates the goalof eradicating poverty and fostering strong cooperation. This spirit encourages the country to
welcome opportunities that have benefits for all.
The Vietnamese economy’s openness is demonstrated by its participation in numerous bilateraland multilateral economic cooperation mechanisms in the region and around the world. To date,it has signed 15 FTAs covering more than 60 countries and territories, including some of the largest
markets globally,24 the latest being an FTA with Israel in April 2023.25 Three more FTA talks are on
with a group of four countries in Europe (Switzerland, Norway, Iceland, and Liechtenstein), Canada
and the UAE. Two important FTAs in the Indo-Pacific that Vietnam has joined are the CPTPP and
the RCEP. Additionally, Vietnam is now one of the 14 countries participating in the negotiations
on the IPEF. Becoming a member of two mega FTAs like the RCEP and the CPTPP demonstrates
Vietnam’s strong commitment to regional economic integration and free trade. These agreements
provide Vietnam with expanded market access, increased trade opportunities, and the potential
for greater economic growth. By joining these regional trade agreements, Vietnam enhances its
attractiveness as a foreign investment destination in the Asia-Pacific.
Vietnam’s viewpoint when participating in any multilateral cooperation mechanism is maintaining
an independent and objective stance without choosing sides. This is also reflected in the economic
development perspective of Vietnam’s 13th Party Congress: Building a self-reliant economy basedon technological advances, proactive integration, market diversification, and enhancing theadaptability of the economy.26 However, there are still untapped potentials, including human

24 op. cit.
25 “Vietnam’s FTAs as of August 2023”, WTO Center, 10 August 2023, https://wtocenter.vn/thong-ke/13814vietnams-ftas-summary-as-of-april-2019
26 op. cit.

174

Vietnam and the IPEF: Negotiating Prospects, Opportunities and Challenges

and natural resources as well as obstacles related to technological advancement, labour skills,
infrastructure, and financial capacity.

The Prospect of Vietnam Joining the IPEF
The IPEF aligns with current global trends and Vietnam’s long-term foreign economic policies.
When the idea of the IPEF was first announced, it was assessed that while the Framework
creates obligations, it falls short in delivering the benefits to its member countries.27 However,as mentioned, at the Ministerial Meeting for IPEF partners in May 2023, Minister of Industry andTrade Nguyen Hong Dien underscored Vietnam’s positive perspective on the IPEF.28
In May 2022, during the announcement ceremony to kick off the discussion on the IPEF, Prime
Minister Pham Minh Chinh stressed the importance of upholding multilateralism and strengthening
international solidarity based on sincerity, trust, and responsibility.29 In this regard, the IPEF cancreate a platform for initiating and promoting collaboration among countries in the Indo-Pacific.
Through active exchanges and discussions, members can join forces to address significant regionaland global issues. These include the diversification and sustainability of supply chains, fostering
technology innovation, driving digital transformation, promoting e-commerce, combating climatechange, reducing emissions, advancing green development, addressing tax matters, and combating
corruption. The Ministry of Foreign Affairs of Vietnam believes that the IPEF will promote a positiveand efficient economic environment, benefitting people and contributing to regional and global
security and peace. Ministry spokesperson Hang Le reaffirmed that the country’s participation in
the IPEF will depend on the outcomes of the discussions among the parties.30
The attitude and level of participation of seven ASEAN nations, including Vietnam, that are
members of the IPEF will determine its progress. These ASEAN countries, along with the remaining
three ASEAN member states, are discussing upgrading of the ASEAN-China FTA and negotiating
the GDI on the basis of conformity with their national interests, without setting out the principle ofchoosing sides. General Secretary Nguyen Phu Trong has emphasised that Vietnam welcomes the
US to support ASEAN’s central role, and together with the ASEAN countries promote the ASEAN
Vision for the Indo-Pacific.31

27 Anh T. Nguyen, “Khuôn khổ kinh tế Ấn Độ Dương - Thái Bình Dương vì thịnh vượng: Xu hướng liên kết kinhtế mới trong khu vực”, Communist Review, 12 April 2023, https://www.tapchicongsan.org.vn/web/guest/
the-gioi-van-de-su-kien/-/2018/827256/khuon-kho-kinh-te-an-do-duong---thai-binh-duong-vi-thinhvuong--xu-huong-lien-ket-kinh-te-moi-trong-khu-vuc.aspx
28 op. cit.
29 “Vietnam premier attends launching ceremony of Indo-Pacific Economic Framework for Prosperity”,
Tuoi Tre News, 24 May 2022, https://tuoitrenews.vn/news/politics/20220524/vietnam-premier-attendslaunching-ceremony-of-indopacific-economic-framework-for-prosperity/67282.html
30 “Discussion outcomes will determine Vietnam’s accession to Indo-Pacific economic initiative: Ministry ofForeign Affairs”, Vietnam Law & Legal Forum, 27 May 2022, https://vietnamlawmagazine.vn/discussionoutcomes-will-determine-vietnams-accession-to-indo-pacific-economic-initiative-ministry-of-foreignafairs-48635.html
31 “Readout of President Joe Biden’s call with General Secretary Trong of Vietnam”, The White House, 29March 2023, https://www.whitehouse.gov/briefing-room/statements-releases/2023/03/29/readout-ofpresident-joe-bidens-call-with-general-secretary-trong-of-vietnam/

175

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

The IPEF negotiations are advancing intensively and several outcomes have been achieved,
especially the Supply Chain agreement.32 33 Speaking at the Ministerial Meeting for IPEF members
in 2023, Minister of Industry and Trade Nguyen Hong Dien mentioned that Vietnam supports theshared goal of the IPEF to conclude negotiations on the remaining Pillars as soon as possible andaims for positive outcomes by the end of this year. Vietnam values the US’ efforts in coordinating andorganising discussions, and respects the opinions of member countries to achieve commitments
and regulations that are high-standard, balanced, and considerate of institutional differences andlevels of development among nations.
Vietnam’s expectations for the IPEF reflect its commitment to promoting regional cooperation andsustainable development. Its leadership has stressed the importance of creating a framework that
benefits the people, ensures peace and security for the region and the world. This requires an open,
inclusive, and a balanced process that is responsive to the justifiable interests of stakeholders
and in alignment with international law. Vietnam values the importance of working together withother nations to address common challenges and achieve shared objectives. This approach isreflected in its participation in various regional and international frameworks and by being one of
the negotiating members of the IPEF from the beginning.
Vietnam also recognises the importance of leveraging digital technologies to boost economic growthand improve the well-being of its citizens. The country has made significant progress in this regard
in recent years, but there is much work to be done. By joining the IPEF and sharing experiences andsustainable solutions with other members, Vietnam hopes to achieve a sustainable digital society.
Indeed, with resilient Supply Chains and Clean Economy emerging as the two primary Pillars, theIPEF holds the potential to digitally empower Vietnam and achieve sustainable development goals.

The Supply Chain Pillar
Vietnam is considered a rising star in the global supply chain network due to several key factors.
First, it has attracted significant FDI and is undergoing a shift in its industrial structure. In 2022,
the country received US$17,889.9 million, ranking third after Singapore (US$141,181.2) andIndonesia (US$21,968.2).34 Additionally, there has been a noticeable transition in FDI inflow awayfrom traditional industries like garments and towards hi-tech manufacturing sectors such as
computers, electronic equipment, and information/communication.35 This shift reflects Vietnam’s
growing capabilities and attractiveness in higher-value manufacturing.
Secondly, Vietnam has demonstrated robust export performance compared to other Southeast
Asian countries. In 2022, the country’s total trade (import and export) was US$732.5 billion,
representing a 9.5 per cent increase from the previous year. Vietnam’s commodity exports have

32 “Press Statement for the Trade Pillar, Clean Economy Pillar, and Fair Economy Pillar”, US Department ofCommerce, 27 May 2023, https://www.commerce.gov/news/press-releases/2023/05/press-statementtrade-pillar-clean-economy-pillar-and-fair-economy
33 “Substantial Conclusion of Negotiations on Landmark IPEF Supply Chain Agreement”, US Departmentof Commerce, 27 May 2023, https://www.commerce.gov/news/press-releases/2023/05/substantialconclusion-negotiations-landmark-ipef-supply-chain
34 “Flows of Inward Foreign Direct Investment (FDI) to ASEAN Countries (in million US$)”,ASEANStatsDataPortal, https://data.aseanstats.org/indicator/FDI.AMS.TOT.INF
35 “FDI Firms Continue to Recover and Shift into High-tech Industries”, Vietnam Chamber of Commerce andIndustry, 15 May 2023, https://vccinews.com/news/49233/fdi-firms-continue-to-recover-and-shift-intohigh-tech-industries.html

176

Vietnam and the IPEF: Negotiating Prospects, Opportunities and Challenges

positioned it as the second-highest in ASEAN-6, surpassing countries like Malaysia, Indonesia,
Thailand, and the Philippines. Its total exports of US$371.5 billion exceeded the combined
exports of Thailand (US$287.07 billion) and the Philippines (US$78.84 billion).36 The strong export
performance marks its ability to capture large shares of the global markets and its growing
integration into the global supply chain. Vietnam benefits from its strategic geographic location
with easy access to international shipping routes. This makes it an appealing destination for global
businesses seeking to diversify their supply chains and optimise logistics operations. Vietnam has
also displayed a welcoming attitude towards trade and investment, significantly reducing policy
restrictions on FDI over the past decade.
Nevertheless, Vietnam still faces challenges, particularly in terms of localisation rates.37 The Vietnam
Association of Supporting Industry Enterprises’ data shows that the localisation rate supporting
industry products of Vietnamese enterprises is quite low. Currently, Vietnam has only about 500
enterprises engaged in supporting industry production, accounting for more than 0.2 per centof the total of nearly 1 million enterprises.38 Improving the localisation rate is crucial to enhance
the competitiveness of Vietnamese enterprises on the global stage. To achieve this, Vietnam
must prioritise improving the quality of its human resources and preparing its workforce for thedigital economy. This requires a focus on digital transformation and equipping many workers with
the necessary skills. When participating in the IPEF, through an initiative led by a technologicallyadvanced country like the US, Vietnam can gain access to various benefits, including expertise,technology, education, and legal frameworks, which can help enhance Vietnamese labour skills
and technological capabilities. As a result, Vietnamese businesses can maintain their competitiveedge and achieve sustainable economic growth.
The Supply Chain Pillar of the IPEF can provide Vietnam with vital support in improving its localisation
rate and preparing its workforce for the digital economy. It would enhance the competitiveness ofVietnamese enterprises and ensure that it remains an attractive destination for foreign investors
seeking to diversify their supply chains. Ultimately, these efforts will contribute to Vietnam’s
pursuit of sustainable and inclusive economic growth, aligning with its ambitious goal of becoming
a high-income economy by 2045.

The Clean Economy Pillar
In recent years, Vietnam has made significant progress, in transitioning from one of the world’s
poorest countries to a dynamic emerging market. But environmental challenges remain a serious
threat to its economic development. According to the World Bank, Vietnam will need to invest
approximately 6.8 per cent of its Gross Domestic Product (GDP) each year, amounting to US$368
billion, during 2022 – 40, for building resilience and achieving decarbonisation.39

36 Thái Bình/Quynhlan, “Reaching US $ 700 billion, Vietnam’s import and export surpassed Thailand andIndonesia, ranking 2nd in ASEAN”, Customs News, 21 December 2022, https://english.haiquanonline.com.
vn/reaching-us-700-billion-vietnams-import-and-export-surpassed-thailand-and-indonesia-ranking-2ndin-asean-24848.html
37 Localisation rate or local content rate is defined as percentage of “added value” of products processed
domestically.
38 Tran Thuy, “Vietnam’s supporting industry needs a revolution”, Vietnamnet Global, 7 February 2022,
https://vietnamnet.vn/en/vietnams-supporting-industry-needs-a-revolution-813801.html
39 “Key Highlights: Country Climate and Development Report for Vietnam”, World Bank, 1 July 2022, https://www.worldbank.org/en/country/vietnam/brief/key-highlights-country-climate-and-development-reportfor-vietnam

177

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Vietnam’s commitment to cut emissions to net zero by 2050, as announced in COP26 andreaffirmed in COP27 by Minister of Natural Resources and Environment Tran Hong Ha, shows thehigh determination of the country in pursuing sustainable economic development.40 The 13th Party
Congress of Vietnam has also emphasised the need to build a green economy, protect biodiversity
and ecosystems, and eliminate projects causing environmental pollution.41 The commitment
is quite ambitious considering Vietnam’s current capacity in terms of technology, labour skills,
infrastructure, and finance. Therefore, Clean Economy might be the Pillar that draws muchattention of the Vietnamese government. The IPEF can generate a good opportunity for Vietnam
in its decarbonisation efforts as it is led by the US, a global leader in advanced technology andfinancial capacity.
To support decarbonisation goals, Vietnam has passed several laws and policies in 2022, including
the Law on Environmental Protection,42 which outlines the responsibilities of businesses,organisations, and individuals in reducing greenhouse gas emissions and combating climatechange. However, a close and synchronous linkage between the central and local levels of thegovernment is still lacking, which poses a significant challenge for foreign donors and investors.
The concern over negative effects of artificial materials in food such as additives, preservatives,
colourings, flavourings, and other synthetic substances is growing among Vietnam’s consumers.
A survey by Nielsen Vietnam found that approximately 80 per cent of consumers are willing tospend more on clean and green products produced from environmentally friendly ingredients.43
This trend indicates that awareness and actions towards green growth and a green economy are
spreading throughout Vietnam’s economy, from governmental policies to business execution andconsumer behaviours. Vietnam’s strong emphasis on building a clean economy, combined with its
recognition of the importance of international cooperation, makes it an active participant in the
Clean Economy Pillar of the IPEF.

Vietnam and the Fair Economy Pillar
The Fair Economy Pillar of the IPEF presents challenges for Vietnam due to necessary commitments,
including effective tax systems and anti-corruption mechanisms.
Corporate Income Tax (CIT) Incentives are considered one of the most attractive features of theVietnamese business landscape. The two main CITs are preferential tax rates, which are reduced
tax rates and tax holidays, which are tax exemptions.44 However, businesses and individuals face

40 “COP27: Viet Nam reiterates strong commitments to climate change”, Social Public of Viet Nam Government
News, 9 November 2022, https://en.baochinhphu.vn/cop27-viet-nam-reiterates-strong-commitments-toclimate-change-111221109161831911.htm
41 “Major Breakthroughs and Orientations of the Socio - Economic Development Strategy for the Period of2021 – 2030”, National Institute for Finance, The Ministry of Finance of the Socialist Republic of Vietnam
https://mof.gov.vn/webcenter/portal/vclvcstcen/pages_r/l/detailnews?dDocName=MOFUCM199333
42 “Law on Environmental Protection and Decree No 08/2022/ND-CP”, Winrock International,2022,
https://winrock.org/document/law-on-environmental-protection-and-decree-no-082022-nd-cp/#:~:text=2022%2FND%2DCP-,Law%20on%20Environmental%20Protection%20
and,08%2F2022%2FND%2DCP&text=The%20project%20is%20implemented%20for,through%20a%20
collective%20impact%20approach
43 “Green consumption – key for plastic waste reduction”, Vietnam Plus, 16 September 2022, https://en.vietnamplus.vn/green-consumption-key-for-plastic-waste-reduction/237439.vnp
44 “Vietnam - Corporate - Tax credits and incentives”, PwC, 3 April 2023, https://taxsummaries.pwc.com/
vietnam/corporate/tax-credits-and-incentives

178

Vietnam and the IPEF: Negotiating Prospects, Opportunities and Challenges

many difficulties in paying taxes. Even though the country has made efforts to simplify the tax
system by approving tax system reform strategy up to 2030,45 its efficiency is doubtful. According
to the World Bank, it takes businesses 384 hours to pay taxes in Vietnam compared to 64 hours in
Singapore, 174 hours in Malaysia and 191 hours in Indonesia.46
Tax evasion is another big challenge for the Vietnamese tax system. According to Nguyen Thi Thu
Huong, senior governance program manager of Oxfam in Vietnam, tax evasion and avoidance
practices led to annual losses of up to VND20.7 trillion (US$872.3 million) to Vietnam’s tax revenue
in 2013.47
Participating in the IPEF offers several opportunities for Vietnam such as enhanced transparency,
exchange of information, capacity building, and technical assistance. It can also support
international tax reform efforts. However, implementing and complying with the Framework’s
provisions, coordinating with other members, and assessing the impact on domestic tax policies
pose challenges. Vietnam must balance its participation in global tax initiatives while maintaining
a competitive and attractive tax system for investment.
While the Vietnamese people desire to combat bribery and corruption, progress in this area
has been slow. General Secretary Nguyen Phu Trong’s anti-corruption campaign, known as the‘burning furnace’ has achieved some success.48 However, rumours about the General Secretary’s
health and his potential term extension until 2026 could undermine the campaign’s continuity andimpact.
Vietnam also faces sensitivity towards certain sub-themes within the Fair Economy Pillar andgovernment officials may hesitate to engage in dialogues on anti-corruption measures. In 2022,
Vietnam intensified its fight against corruption, resulting in significant progress. The focus wason personnel management, strict handling of violations, and dismissals of officials in line withparty and state regulations. Institutional mechanisms were improved, and various resolutions andregulations were implemented to strengthen party building and combat corruption.49
Vietnam’s stable political system provides a safe environment for foreign investors. It needs tocontinue making progress in implementing effective tax systems, anti-money laundering measures,
and anti-corruption mechanisms by engaging actively in the Fair Economy Pillar.

45 Tax system reform strategy up to 2030 approved, PwC, 9 May 2022, https://www.pwc.com/vn/en/
publications/news-brief/220509-tax-reform.html
46 “Vietnam: Doing Business 2020, Challenges and Solutions”, World Bank, 8 January 2020, https://www.
worldbank.org/en/news/speech/2020/01/08/speech-by-ousmane-dione-world-bank-country-directorfor-vietnam-at-the-event-vietnam-doing-business-2020-challenges-and-solutions
47 “Tax evasion causes annual losses to US$900 million in Vietnam’s tax revenue”, Hanoitimes, 28 April
2020,
https://hanoitimes.vn/tax-evasion-causes-annual-losses-to-us900-million-in-vietnams-taxrevenue-311914.html
48 “Vietnam’s Institutional Corruption: Why Nguyen Phu Trong’s “Blazing Furnace” Will Be Meaningless
In The Long Term”, The Vietnamese Magazine, 21 April 2021, https://www.thevietnamese.org/2021/04/
vietnams-institutional-corruption-why-nguyen-phu-trongs-blazing-furnace-will-be-meaningless-in-thelong-term/
49 “Hundreds of Party members disciplined for corruption and wrongdoings in 2022”, Vietnam News, 12January 2023, https://vietnamnews.vn/politics-laws/1449269/hundreds-of-party-members-disciplinedfor-corruption-and-wrongdoings-in-2022.html

179

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Vietnam and the Trade Pillar
Vietnam’s strengths lie in the expansive free markets and reduced trade barriers created by its
FTAs, particularly the newer generation agreements such as the European Union-Vietnam FTA(EVFTA) and the Vietnam – UK FTA (UKVFTA). However, it is important to note that even though the
US is Vietnam’s largest export market with exports of US$109.1 billion in 2022,50 it does not haveany FTA with the US, which represents a significant gap in its FTA network. A BTA was signed in 2000
between Vietnam and the US but the terms and conditions have not been upgraded since then.
The IPEF presents a good opportunity for Vietnam to upgrade its trading network and potentiallyestablish a cooperative agreement with the US.
Working in the Trade Pillar will align with Vietnam’s active participation in FTAs and its commitment
to high-standard, inclusive, free, fair, and open trade commitments. Vietnam can benefit fromthe flexibilities, technical assistance, and capacity building support offered by the Trade Pillar
partners, which can help address specific challenges that the country may face in meeting the highambition commitments. Vietnam’s involvement in the Trade Pillar will also expand opportunities
for workers, companies, and people in other markets. It would offer a platform to boost trade andinvestment flows, enhance standards, and reduce trade barriers, which would contribute to thecountry’s economic growth and development.
To ensure that Vietnam and the other members stay well engaged in the Trade Pillar, the US andother major members of the IPEF must be proactive. The US, being a key player in the international
economic landscape, should take the initiative to engage with Vietnam and the other members.
Overall, by actively engaging in the IPEF, Vietnam stands to harness opportunities for economic
resilience, environmental sustainability, and regional leadership, while addressing inherent
challenges such as localisation rates and resource constraints. Embracing the IPEF signifies a
promising path towards sustainable and inclusive growth, while aligning with Vietnam’s long-term
economic vision.

50 Pham Huan, “The US is Vietnam’s largest export market in 2022”, VOV World, 31 December 2022, https://
vovworld.vn/en-US/news/the-us-is-vietnams-largest-export-market-in-2022-1164819.vov

180

Vietnam and the IPEF: Negotiating Prospects, Opportunities and Challenges

About the authors
Dr Linh H. DANG, a distinguished economist and educator, holds a PhD in Economic Geography
from the University of Hannover, Germany (2009), and achieved the rank of Associate Professor in
Economics in 2015. His impactful contributions span academia, research, and leadership. Dr Linh
has held notable positions, including heading the Department of International Economics at the
Diplomatic Academy of Vietnam and serving as Deputy Director of the Training Department.
With a robust research profile, Dr Linh has authored eight international papers and over 50 articles
in domestic journals. His international involvement encompasses presentations at diplomatic
events, dialogue with foreign dignitaries, and language skills evaluation for diplomatic personnel.
Dr Linh’s impact resonates through his leadership, research excellence, and diplomatic endeavours,with his notable contributions in the fields of economics, education, and international relations.
Ms Tran T. T. LINH is a lecturer at the Faculty of International Economics at the Diplomatic
Academy of Vietnam (DAV) where she teaches subjects relating to international finance. She isalso currently pursuing her PhD at the DAV on the current global supply change trends and theimpacts on international politics, primarily focused on the Indo-Pacific region. Prior to teaching at
the DAV, she worked across several companies specialising in education and finance.
Ms Tran holds a master’s degree in International Business from Ulster University, United Kingdom
and a bachelor’s degree in Financial Investment & Analysis.

181

Engaging and Path-Finding: A Singapore Perspective on the IPEF

Engaging and Path-Finding:
A Singapore Perspective on the IPEF
Simon TAY

The paper discusses the strategic and economic reasons of the Indo-Pacific Economic Frameworkfor Prosperity (IPEF) from a Singaporean perspective. Assessments of the IPEF differ, especiallyconsidering the lack of market access, but this paper argues that the IPEF provides other avenues
for more robust trade relations. The initiative provides an opportunity for the Biden Administration
to re-engage with the region and vice versa. The IPEF also represents a return to a stable, open, andrules-based order with the United States (US) as the status-quo world power, an environment that
Singapore has done exceedingly well in. Negotiations on key issues also complement Singapore’s
efforts to pursue green, digital, and trade resilience through a combination of other bilateral andmini-lateral agreements. Ultimately, it is not an issue of choosing between the IPEF or engagementwith China and other trading partners but rather about pursuing all avenues that are available
with willing and enthusiastic partners.

183

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Introduction: One Agreement, Different Assessments
The Indo-Pacific Economic Framework for Prosperity (IPEF) has attracted considerable attention
since it was first proposed by the United States (US) in May 2022. With 14 countries in the region
participating in the negotiations for the agreement, the IPEF is being regarded as the economic
flagship initiative of the Biden administration. Yet, assessments of the IPEF differ.
To its proponents, the IPEF has the potential to deepen commercial linkages, green economic
growth and development, and strengthen supply chains. Another reason some welcome the IPEF
is strategic: to increase American commitment to the region. The IPEF adds an economic layer in
addition to improving security relationships within the region and the US over the last few years.
They also point to the flexibility of the arrangements. The IPEF allows for participating countries
to choose which Pillars they would like to join and provides a layer of flexibility to countries atdifferent stages of development and regulatory levels to join where possible. As countries develop
and improve their internal rules, they could then seek to join other Pillars over time. As the intent
of the IPEF is to be as inclusive as possible, the flexibility provided by the different Pillars would be
an incentive for any country looking to leverage the benefits of the IPEF.
Inclusivity and flexibility, however, have limits. American proponents are explicit that the IPEF isintended to counter Beijing’s economic clout in the region.1 There are also limits on what the
US is prepared to do. The IPEF is not about market access or new trade agreements. It is an
executive agreement under Biden’s Presidential authority. As such, it is subject to change in a
future administration.
Consider the fate of the Trans Pacific Partnership (TPP), so strongly pushed through the years of
the Obama administration (in which Biden was the Vice President). It was abandoned summarily
by President Donald Trump, on his very first day in office. While the remaining partners, led by
Japan, continued to completion as the renamed Comprehensive and Progressive Agreement forTrans-Pacific Partnership (CPTPP), the volte face has led to questions about the consistency anddependability of the US in committing to comprehensive trade frameworks. The IPEF is not inured
from similar potential setbacks arising from American domestic politics and a potential change inleadership.
Moreover, while the IPEF was not fettered as a trade agreement, it is certainly seen as a tradefacilitation agreement by the countries joining it, though the lack of improved market access or
any reduction in tariffs is held as a mark against it by critics of the IPEF. Without the prospect ofmarket access, there appears to be limited benefits from the IPEF. The lack of market access may
disincentivise countries and slow down progress in some of the Pillars. The nature of the IPEF
appears to be aspirational with countries signing up to Pillars that they would like to participate
in and as such will have to adjust national policies for. This sort of benchmark-led agreement sets
the stage for coalitions of countries that have similar interests, goals and aspirations. While gains

1

The Chinese Foreign Ministry issued a statement saying “Facts will prove that the so-called ‘Indo-Pacificstrategy’ is essentially a strategy for creating divisions, a strategy for inciting for inciting confrontation,
and a strategy for destroying peace.” This statement reveals that the Chinese administration perceives
that part of the reason for the IPEF is to counter China and to build around China.
See Teddy Ng, “China says Washington’s ‘divisive’ Indo-Pacific strategy doomed to fail”, South China
Morning Post, 23 May 2022, https://www.scmp.com/news/china/diplomacy/article/3178764/chinasays-washingtons-divisive-indo-pacific-strategy-doomed?campaign=3178764&module=perpetual_scroll_0&pgtype=article

184

Engaging and Path-Finding: A Singapore Perspective on the IPEF

may not be instantaneous, it does allow for the development of common rules and frameworks
for better market interactions.
Against this background, this chapter considers Singapore’s participation in the US-led negotiations,
examining its trade and economic policy in relation to, first, engaging the US and, secondly in threeareas of specific interest to the country: growing the digital economy, increasing supply chain
resilience and greening growth. The discussion is set within the context of Singapore’s national
interests, as a small and highly trade-dependent economy, and one that is invested in a rulesbased international order.

Engaging America: Strategic and Economic Dimensions
Singapore has long regarded the US as an essential and valued offshore balancer and a key
contributor to the stability of the region. While no one is naive about US power and prerogatives,
on balance, Singaporean policy makers have regarded the US as a status-quo power andacknowledged the American role in creating and maintaining the international rules-based order.
At the launch of the IPEF in May 2022, Prime Minister Lee Hsien Loong shared that Singapore
welcomed the IPEF. He spelt out the reasons: Singapore has always been a country that has
supported an open, inclusive, and rules-based order that builds stability and a shared prosperity.2
In that context, Singapore’s engagement in the IPEF is first and foremost founded on strategic
consideration. The Biden administration presents the IPEF as a manifestation of its return to aleadership role in rules-setting within the region and Singapore is prepared to participate in the
IPEF as a means to engage America. This is undertaken even after the experience of the TPP, forwhich Singapore was an early and strong advocate.
After the American withdrawal from the TPP, Singapore proceeded with the CPTPP that emerged.
It has also been, as part of the Association of Southeast Asian Nations (ASEAN), a keen participant
in the creation of the Regional Comprehensive Economic Partnership (RCEP), which includes
China as its largest member. Bilaterally with China, Singapore has strengthened its long-standing
relationship with large investment and trade flows.3
Singapore has also engaged in economic and trade agreements with more distant but key partners
outside the region. There is, for example, a Free-Trade Agreement (FTA) with the EU. Singapore
is also the first partner state for the Pacific Alliance that brings Chile, Columbia, Mexico, and Peru
together. For the digital economy, Singapore has embarked on the Digital Economy Partnership
Agreement (DEPA) with Chile and New Zealand, as well as the Singapore-UK Digital Economy

23“Intervention by PM Lee Hsien Loong at the virtual launch of the Indo-Pacific Economic Framework on
23 May 2022”, Prime Minister’s Office Singapore, 23 May 2022, https://www.pmo.gov.sg/Newsroom/
Intervention-by-PM-Lee-Hsien-Loong-at-the-Virtual-Launch-of-the-Indo-Pacific-Economic-Framework
Singapore and China shared a total merchandise trade of US$127.26 billion in 2022, representing thelargest merchandise trade between Singapore and another country. Singapore and China shared atotal trade in services of US$36.87 billion in 2021. This represents the fourth largest services trade that
Singapore has with a partner country. Excluding a number of Caribbean countries that are likely to beoffshore centres, China is the third largest Foreign Direct Investor in Singapore.
See “Singapore’s International Trade”, Department of Statistics Singapore, https://www.singstat.gov.sg/
modules/infographics/singapore-international-trade;“Investment”, Department of Statistics Singapore, https://www.singstat.gov.sg/publications/reference/
ebook/trade-and-investment/investment

185

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Agreement, which represents new approaches to trade agreements. The country has and is, in thisregard, pursuing multiple and diverse avenues to continue, and where possible, deepen economic
ties. These multiple engagements are especially energised by signs that the global system isslowing and fragmenting, with regional blocs and clusters potentially emerging. In this context,
the IPEF is of considerable interest to Singapore as a means to further engage the US in the region.
Trade between Singapore and the US is also significant. The US is Singapore’s number one trade
partner for goods and services. Combined, this accounts for approximately US$894.51 billion, or
9.2 per cent of Singapore’s merchandise trade and 18.3 per cent of Singapore’s services tradeand 12.5 per cent of Singapore’s total cumulative trade volume.4 While the US is not No.1 in the
trade of goods (Figure 1) (that distinction falls to China), the US has the largest trade of services
with Singapore (Figure 2). There is, moreover, headroom for this to grow. The US is also the single
largest source of Foreign Direct Investment (FDI) in Singapore, with a total stock of US$449.8 billion(as of 2021) cumulatively invested in Singapore. Notably, this is more than the total stock of FDI
that has been invested in Singapore by Asian countries.5
Figure 1: Top 5 Countries by Trade Volume of Merchandise with Singapore

Source: SingStat – Department of Statistics Singapore

4
5

186

op. cit.
SingStat Table Builder, Department of Statistics Singapore, 21 June 2023, https://tablebuilder.singstat.
gov.sg/table/TS/M083801

Engaging and Path-Finding: A Singapore Perspective on the IPEF

Figure 2: Top 5 Countries by Trade Volume of Services with Singapore

Source: SingStat – Department of Statistics Singapore

Consider the US-Singapore FTA that came into force in January 2004. Following its implementation,
trade in goods has increased by almost 65 per cent6 or at an annualised basis of 2.8 per centa year. The US enjoys a positive trade surplus of US$14.5 billion7 with Singapore, which shouldease concerns about the fairness of trade that many Americans raise. The previous administration
constantly raised the issue that the US had been taken advantage of in the global trade environment
where their open markets had been flooded by global goods and in doing so it has killed many
local business and driven unemployment and ballooned the trade deficit. China in particular bore
the brunt of that assessment though most of Asia faced that accusation in some form. If the IPEF
can succeed and open new avenues for continued engagement, especially on newer and growing
sectors, this can further accelerate economic ties.
Yet, commercial considerations are not the only reason for Singapore to welcome the IPEF. The
flexibility of the IPEF – wherein countries are able to choose which Pillars to join – is also welcomeas this allows more countries to accede to new Pillars as their laws and economic development
priorities allow. This is appealing to Singapore as a hub in the region, and for ASEAN. The IPEF
has brought in seven ASEAN member states to participate in negotiations (as compared to the
TPP/CPTPP which includes only four and RCEP which includes all 10 members of ASEAN). While
this is not all 10 ASEAN members, the seven represent the vast bulk of the group’s economy.
Further, since the IPEF is an open agreement, there is always the possibility that the other three
countries will eventually join. While the IPEF itself does not strengthen ASEAN centrality, it can bea particularly useful tool for establishing common rules, roadmaps and potentially new projects
for ASEAN countries that are part of the Framework. Increased economic collaboration alongnewer trade areas like the green and digital economies and building more resilient supply chains
have the potential to improve linkages between ASEAN members as well as other parties to theagreement, further expanding potential economic gains.

6
7

op. cit.
“Trade in Goods with Singapore”, United States Census Bureau, https://www.census.gov/foreign-trade/balance/c5590.html

187

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Singapore also places some hope in the American aspiration that the IPEF can be a way tostrengthen the rules-based order. While the IPEF does not have a formal dispute resolution
mechanism that some associate with a rules-based order, its efforts can help establish norms
and more harmonised approaches in new frontiers that are yet to be included and governedby international agreements. In this regard, the IPEF represents a relatively new approach toformalising and normalising cooperation in newer areas such as digital trade, the green economy
and supply chains – all of which are of interest to Singapore.

Progressing the Digital Economy
Emerging from the COVID-19 pandemic, Singapore has recognised the importance of growing thedigital economy, embracing a ‘must-have’ approach not only for technology companies but fortransforming all sectors. The digital economy in Singapore has grown on the backs of increased
data flows in the region, driven by a growing and younger demographic in the wider ASEAN
region, widespread internet access at close to 71 per cent8 penetration and increased smartphone
penetration, with the digital economy predicted to grow to be as large US$1 trillion by 2030.9 It has
therefore sought to increase trade linkages with countries in the region through new and diverse
initiatives. Of special note are the digital agreements, including the minilateral Digital Economy
Partnership Agreement (DEPA) with Chile and New Zealand, as well as bilateral agreements withdifferent partners like the EU and South Korea. Efforts are underway for wider digital agreements,
including one amongst ASEAN members.10
It is in this context that the IPEF is also welcome. The US, through the IPEF, shows some ambition
to set and lead on new rules on the digital economy. The American approach and interests inthis sector can be discerned in the US-Japan Digital Trade Agreement (USJA) and the US-MexicoCanada Agreement (USMCA), with the USMCA11 having, in fact, stricter clauses, for example aroundintellectual property rights as well as custom duties on digital transactions for instance, while itallows domestic taxes on digital trade as long as it is non-discriminatory. There are also American
fingerprints in the digital provisions in the TPP.
This is not to say that Singapore will accept the American standards and approaches in toto. But
for its own national interest, Singapore potentially gains if there can be established common
rules or practices on issues like consumer protection, personal data safeguards, the promotionof reliable artificial intelligence capabilities and security rules. While it is unlikely that Singapore’s
digital agreements with the UK or Korea will feature prominently in the IPEF, as it will likely leanheavily on the language of its US counterparts like the USJA and the USMCA, Singapore is in abetter negotiating position having already made such agreements before. The country is therefore
supportive of efforts to create shared rules for the region and will see participation and dialogue
in the IPEF as helping bring on board more countries.

“Internet usage in Southeast Asia - statistics & facts”, Statista, 31 August 2023, https://www.statista.com/
topics/9093/internet-usage-in-southeast-asia/#topicOverview
9 “e-Conomy SEA 2022”, Bain&Company, Google and Temasek, 2022, https://services.google.com/fh/files/
misc/e_conomy_sea_2022_report.pdf
10 “Digital Economy Framework Agreement (DEFA): ASEAN to leap forward its digital economy and unlock
US$2tn by 2030”, Association of Southeast Asian Nations, 19 August 2023, https://asean.org/asean-defastudy-projects-digital-economy-leap-to-us2tn-by-2030/
11 “United States-Mexico-Canada Agreement”, International Trade Administration, https://www.trade.
gov/usmca#:~:text=United%20States%2DMexico%2DCanada%20Agreement,economic%20growth%20
in%20North%20America
8188

Engaging and Path-Finding: A Singapore Perspective on the IPEF

Resilient Supply Chains
Another effort within the IPEF is to make supply chains more resilient. This is important, given theexperience during the COVID-19 pandemic as well as the effects of the war in Ukraine and thesanctions against Russia. Looking forward, the splitting of supply chains, imposition of import andexport restrictions as well as disruptions and shortages that can arise from climate impacts canfurther stress global supply chains.
Against this background, the importance of making supply chains more resilient is commonly
recognised. For Singapore, as a trade hub, and also with very limited land and resources for
production within the country, the issue can be critical. In a Singapore Public Sector Outcome
Review (SPOR),12 strengthening of Singapore’s supply chain resilience was highlighted as a key partof Singapore’s ability to globally integrate and play a part in the overall global economic system.
The IPEF does aim to make progress on this front. It is developing a framework13 that would potentiallyallow participating countries to share information and increase supply chain transparency. While
this does not ironclad supply chains, such transparency requires companies to be aware andable to map the activities both upstream and downstream, internally and externally. This is being
increasingly demanded by consumers as they are more sensitive to issues such as environmental
degradation, labour issues and concerns over governance. This effort is being undertaken under
the Second Pillar of the IPEF.14
As part of this work, Singapore is establishing an information-sharing and crisis response
mechanism that will allow for more timely exchange of information between the government andprivate sector. This ties in with proposed efforts15 in the Supply Chain Pillar to promote taking
stronger steps to strengthen IPEF supply chains and add regulatory transparency through increased
collaboration. This early warning mechanism will allow the government to be more aware ofpotential disruptions to supply chains and take more appropriate and efficient actions to preventor respond to the circumstances early. The IPEF can therefore assist these efforts by building boththe policies and technical framework for the exchange of information to help Singapore identify
and work more closely with trusted partners who would likely continue to supply even during acrisis. It would also allow Singapore to engage with a wide range of stakeholders to mitigate theimpact of disruptions.
This could be a significant complement to Singapore’s existing strategy:16 to increase thediversification of sources to ensure a reliable supply of critical goods. This diversification increases
Singapore’s adaptability to shocks and allows it to work with other trusted and cultivated partners
to ensure that critical supplies continue to flow even under the most strained circumstances.
Singapore has also continued to invest heavily in new and existing connectivity infrastructure to

12 “Strengthening Our Supply Chain Resilience”, Singapore Public Sector Outcomes Review, https://www.
mof.gov.sg/singapore-public-sector-outcomes-review/citizens/our-shared-future-and-place-in-theworld/strengthening-our-supply-chain-resilience
13 “U.S. Department of Commerce Publishes Text of Landmark Indo-Pacific Economic Framework for
Prosperity (IPEF) Supply Chain Agreement”, US Department of Commerce, 7 September 2023, https://www.commerce.gov/news/press-releases/2023/09/us-department-commerce-publishes-text-landmarkindo-pacific-economic
14 Ibid.
15 Ibid.
16 op. cit.

189

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

strengthen its role as a global trading and logistics hub. The investments and improvements in the
supply chain logistics, including infrastructure, border and transport linkages, and the building ofcommon frameworks will help to address existing or potential roadblocks.
These internal actions would be greatly enhanced by the IPEF’s efforts, in particular, the proposed
Articles 2 and 3 of the Supply Chain Pillar17, with both private and public sector stakeholders toprovide access and share data relevant to supply chains while maintaining the protection andconfidentiality of data. This new approach would be potentially challenging since the mapping of
supply chains has largely only been done for commodities or agricultural products rather thanmore complex manufactured goods. Private and public stakeholders would need to develop sometrust with each other as companies may be asked to provide sensitive corporate information totheir public sector counterparts as part of the mapping process of critical materials or linkages.
While Singapore’s public and private stakeholders have a particularly good working relationship sofar, there would likely need to be assurances given by the government that confidential informationthat is shared with other countries in the IPEF would be secured and protected. Another potential
benefit is to enable Singaporean Micro, Small and Medium Enterprises (MSMEs) to be better
integrated into global supply chains across critical sectors, without having to impose additional
unnecessary costs.

Strengthening the Green Economy
The green economy is another area where Singapore’s priorities can gain from the IPEF’s efforts. As
part of Singapore’s 2030 Green Plan, the Green Economy represents one of six pillars.18 Singapore
is looking to leverage the acceleration in the global green economy to create new jobs, transform
industries and remain competitive. The global transition to a low-carbon economy brings about
new opportunities in economic sectors such as green finance, carbon services and trading as wellas the decarbonisation of the industrial sectors. Within the IPEF and through collaboration withother IPEF members, there is potential to accelerate this transition. In particular, Singapore would
look to work with other IPEF partners, such as Japan which is looking to build out a hydrogen
supply chain or Australia which is looking to become a regional battery and renewable energy
export hub, to improve energy security and transition to a low-carbon energy source.
Examining Singapore’s specific circumstances contributing to its energy policy is useful inunderstanding the country’s position. Singapore does not have energy resources of its own andit currently generates 95 per cent of its electricity from imported natural gas.19 While natural gas
does have a lower greenhouse gas (GHG) footprint than coal, it is still carbon-based. Turning todifferent sources, from solar to geothermal energy and hydrogen, is a key pathway to reduce thecountry’s carbon footprint. Of these, the solar option is constrained, given the country’s limited
size and other necessary uses of land.

17 op. cit.
18 “Sustainable Development – A Core Belief”, Singapore Green Plan 2030, https://www.greenplan.gov.sg/
vision/19 In 2021, Singapore imported 10.6 Mtoe of natural gas via pipelines with Malaysia and Indonesia as wellas in the form of LNG from Australia, USA, Eqypt and Qatar among other countries. Of the total natural
gas imported, 7.4 Mtoe was Piped Natural Gas and 3.4 Mtoe was Liquefied Natural Gas.
See “Chapter 1: Energy Supply” in Singapore Energy Statistics 2022, Energy Market Authority of Singapore,
2022, https://www.ema.gov.sg/resources/singapore-energy-statistics/chapter1;“Singapore”, US Energy Information Administration, August 2021, https://www.eia.gov/international/
analysis/country/SGP

190

Engaging and Path-Finding: A Singapore Perspective on the IPEF

Steps to explore hydrogen are being taken. In October 2022, a large Singapore company, Sembcorp
Industries, entered a strategic collaboration with the Japanese government and several Japanesefirms to develop hydrogen and other initiatives.20 As Singapore’s largest importer of natural gas,
Sembcorp’s move to develop a hydrogen solution adds another major decarbonisation pathway.
While these arrangements were in place before the IPEF was agreed upon, IPEF partners are also
introducing a regional hydrogen initiative to further accelerate the adoption of low-carbon andrenewable hydrogen and its derivative products in the region. IPEF partners could look forward
to better collaboration, such as tapping on the expertise of both the public and private sectors,
increasing investments, job prospects, and developing new pathways towards a lower emissions
future.
More broadly, there are prospects that technological partnerships and bilateral assistance might
be provided. These forms of incentives and assistance may not necessarily be captured in thestatements on the IPEF negotiations. But in many cases, these examples of concrete cooperation
arose under the aegis of the IPEF. They potentially constitute, in that sense, deliverables from theinitiative.

Conclusion: Path-Finding and Many Paths
The world and the Asian region are facing a number of concurrent and interactive crises – whichsome dub a ‘poly crisis.’ Some of these include Sino-American tensions, the stress on supply
chains, the slowing of trade and globalisation concurrent to the rise of ‘home-shoring.’ There arealso many pressures on the international rules based order as well as the need to have dialogue
and work towards agreement in dealing with newer issues like the digital and green economy.
The IPEF represents an effort for dialogue and path-finding on a number of key issues. Someview the IPEF as a new type of trade agreement for countries to set common rules as well as
express common interest to drive greater trade while others state that it is an attempt to make‘something out of nothing’; – since the US and the Biden administration do not have the political
will to negotiate a more traditional trade agreement.
Known to be pragmatic, Singaporean policymakers are not likely to spend too much time on what
is not on the table. Their focus is to make the most of what is on the agenda, set by the Biden
administration, given its priorities as well as constraints. As reviewed, from this menu, Singapore
can find a number of initiatives on issues that resonate with Singaporean priorities and interests.
These provide reasons for Singapore’s active participation and support for the IPEF.
However, the attention and effort given to the IPEF should not blind observers to other undertakings
by Singapore. Whether through FTAs with partners further afield or in the newer green economy
and digital agreements, the country is pursuing multiple opportunities. It is not a question ofchoosing the IPEF and the US over engagement with China and others. It is ‘and’ and not ‘either/or’ that best describes the Singaporean response to the IPEF.
With that basic strategic response, Singapore can therefore accept that the IPEF is far from perfect;whether the concern is that there is no market access or that the IPEF itself might prove to beephemeral if there is a change of administration in the US. For Singapore, it is sufficient that the

20 “Sembcorp Enters Strategic Collaborations with Japan on Low-Carbon Hydrogen Initiatives”, Sembcorp, 25
October 2022, https://www.sembcorp.com/en/media/765433/sembcorp-enters-strategic-collaborationswith-japan-on-low-carbon-hydrogen-initiatives.pdf

191

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

IPEF does engage the US for now, and that the negotiations and initiatives under the IPEF – orsome of them at least – may link to and complement the efforts made by Singapore and align withthe country’s own priorities.
While traditional FTAs dominated the trade agreements of the 1980s and 90s, more specialised
trade agreements have risen to occupy attention. While this is partly due to the concerns overpotential bifurcation of global trade between competing global powers like the US and China, it
is also because countries at different developmental levels are able to find common ground on
rules, regulations and investments, without having or wanting to give up market access. A path tomove ahead, amidst negative global conditions, is critical and Singapore has been very active in
pathfinding, taking steps down many diverse pathways, of which the IPEF – alongside the US andother countries – is one to be explored.

192

Engaging and Path-Finding: A Singapore Perspective on the IPEF

About the author
Associate Professor Simon Tay is Chairman of the Singapore Institute of International Affairs. He
is concurrently a tenured Associate Professor, teaching international law at the National Universityof Singapore Faculty of Law.
His book, Asia Alone: the Dangerous Post Crisis Divide from America (Wiley 2010), was well reviewed in
the Economist, Financial Times and regional media. His commentaries feature regularly in regional
newspapers. Professor Tay is also a prize winning author with five books of stories and poems.
In 2010, his novel, City of Small Blessings was awarded the Singapore Literature Prize. He recently
published a collection of short stories titled Middle and First.
From 1992 to 2008, he served in a number of public appointments for Singapore. These included
serving as Chairman of Singapore’s National Environment Agency; and as an independent
Nominated Member of Parliament (1997-2001). In 2006, Professor Tay received a National Day
Award.

193

14
1

External Perspectives

The EU, the Indo-Pacific and the US-led IPEF: Which Way Forward?

The EU, the Indo-Pacific and the US-led
IPEF: Which Way Forward?
Françoise Nicolas

The paper provides a European Union (EU) perspective on the Indo-Pacific Economic Framework(IPEF). First, the recent progress made by the IPEF has given new momentum to the EU’s engagementwith the Indo-Pacific (IP) partners and to its recently launched Indo-Pacific strategy. In terms of
substance, two issues appear to be at the forefront of the IPEF as well as of the EU’s Indo-Pacificstrategy, namely supply chain resilience enhancement and various aspects of the digital economy.
There is probably scope for convergence and cooperation between the EU and the IPEF countries
on the former issue, which is addressed indirectly in different EU’s digital partnerships, while it is
the area where the IPEF has made most substantial progress. However, the differences between
the EU’s and the United States’ (US) approaches to some aspects of the digital economy may act
as stumbling blocks and give rise potentially to some form of competition in the IP region, making
cooperation on data-based efforts to enhance supply-chain resilience rather complicated.

197

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Introduction: Why the Indo-Pacific and the IPEF Matters for the EU
The Indo-Pacific region, a priority for the EU
For the European Union (EU), the Indo-Pacific region is of utmost importance, both economicallyand strategically. Due to its growing economic, demographic, and political weight, the Indo-Pacificregion is perceived both by individual member states and by the European Commission (hereafter
the Commission or EC) as a key player in shaping the international order and in addressing global
challenges.
France was the first member state to use the ‘Indo-Pacific’ concept and develop a specific strategy
vis-à-vis the region (2018), and it was soon followed by Germany and the Netherlands (2020)1. As
a result, the EC has also decided to step up its strategic engagement with the Indo-Pacific region
through the definition of a new strategy issued in September 2021. As set out in the EU Strategy
for Cooperation in the Indo-Pacific2 (hereafter EU’s IP strategy), the EU considers its relations in theregion as a priority. The futures of the two regions are inextricably linked given the interdependenceof the economies and the common global challenges.
The EU has a broader definition of the Indo-Pacific than the US; in the EU strategy the IP extends
from the Eastern coast of Africa all the way to the South Pacific, including seven Group of 20(G20) members – Australia, China, India, Indonesia, Japan, the Republic of Korea and the Republicof South Africa – as well as the Association of Southeast Asian Nations (ASEAN). Also, unlike the
US Indo-Pacific strategy, “the EU strategy does not address the root cause of the Indo-Pacificdiscourse: the rise of China and its challenge to the US-led order in Asia.” 3 The EU’s real added
value is building inclusive, rules-based multilateralism and providing economic, health, physicaland digital infrastructure.
The EU’s engagement with Indo-Pacific partners is already important: the EU is the top investor,
the leading development partner and one of the biggest trading partners in the Indo-Pacific region.
However, it is among the EU’s ambitions to further deepen its relations with the region and todiversify supply chains with reliable partners, in particular after the COVID-19 pandemic and theRussian war of aggression against Ukraine, as well as in the context of the green transition.
Potential implications of the IPEF for the EU
While the US approach to the Indo-Pacific had shifted almost exclusively towards security andaway from economic issues after President Trump withdrew from the Trans-Pacific Partnership(TPP) agreement in 2017, it has changed quite dramatically under the Biden administration,
especially with the launch of the IPEF in May 2022. This initiative marks the US’ comeback in theeconomic sphere. The first-of-its-kind framework includes relatively challenging US requests
for higher labour, environmental, and other standards that are not counterbalanced by market
access. In this respect, it differs substantially from the EU’s approach. In spite of differences, there
1

2
3

198

Gudrun Wacker, “European Approaches to the Indo-Pacific, Same, Same, But Different”, in European
Strategic Approaches to the Indo-Pacific, ed. by Christian Echle and Jan Kliem (Panorama: Insights into
Asian and European Affairs, KAS, Singapore, 2022), 7 - 23.
“Joint Communication to the European Parliament and the Council”, European Union External Action, 16
September 2021, https://www.eeas.europa.eu/eeas/joint-communication-indo-pacific_en
Frederick Kliem, “The EU Strategy on Cooperation in the Indo-Pacific: A Meaningful Regional Complement?”,
in European Strategic Approaches to the Indo-Pacific, ed. by Christian Echle, Jan Kliem (Panorama: Insights
into Asian and European Affairs, KAS, Singapore, 2022) 55 – 69.

The EU, the Indo-Pacific and the US-led IPEF: Which Way Forward?

is undeniably an increased alignment in views between the EU and the US on the importance of
the Indo-Pacific and of economic engagement in the region, with the US moving, on the latter
point, closer to the EU.
The objective of this paper is to examine how the EU is engaging Indo-Pacific partners today,and how it will engage them in the future, while taking into account the existence of the IPEF. A
key issue is to figure out whether and how the EU’s and US’ initiatives may dovetail (or not) withrespect to the Indo-Pacific region.

The EU’s Current Engagement with IPEF Countries
EU’s Free Trade Agreements with IPEF countries
The EU’s IP strategy as a framework provides broad directions to be followed in the multiple
bilateral relations with Indo-Pacific partners, but it does not offer any details on how these
relations should be operationalised. Even before the EU’s IP strategy was defined, the number ofFree Trade Agreements (FTAs) negotiations launched with IP partners is a testament to the EU’s
long-standing interest in deepening its trade engagement with the Indo-Pacific region. The EU has
FTAs or Economic Partnership Agreements (EPAs) in force or under negotiation with nine of the
14 IPEF countries.
FTAs with South Korea, Japan, Singapore and Vietnam have been in force for some time already,while the EU-New Zealand (NZ) FTA was concluded recently (late June 2022). The EU has had
an EPA in force with Fiji since 2014, and negotiations with Australia were restarted in late 2022,
after their abrupt interruption due to the Morrison government’s French submarine decision.4
Moreover, negotiations are still ongoing with Indonesia and India. Lastly, although some serious
obstacles must be overcome, EU negotiators are still assessing the possibility of the resumptionof FTA negotiations with Malaysia, the Philippines, and Thailand, and perhaps even on a region-toregion basis with ASEAN.
Although the degree of commitment may vary from one agreement to another, all of themoffer standard trade liberalisation; tariff reduction and market access commitments are at theheart of these arrangements. Moreover, new issues are now almost systematically included in
FTAs negotiated by the EU, such as sustainable development (environmental) or labour rights
considerations, and deals with IP partners are no exceptions.5 In contrast, rules on digital services
and e-commerce are rather thin in these agreements. Since 2021, the EU has developed a ‘model’
digital chapter that advances its own digital trade regulatory agenda, which has only been includedin the most recent deals.
As a preliminary attempt to upgrade existing FTAs, the EC seeks to build Digital Partnerships
with some of its IP partner countries to enhance reciprocal technical, policy, and Research and4
5

Justin Brown, “EU in the driver’s seat on Indo-Pacific trade deals”, The Interpreter, 10 October 2022, https://www.lowyinstitute.org/the-interpreter/eu-driver-s-seat-indo-pacific-trade-deals
For instance, the recently concluded EU-NZ agreement integrates the new approach on trade andsustainable development (TSD) with strong sustainability commitments. The TSD commitments are legallybinding and enforceable through dispute settlement, and for the first time in an EU trade agreement,
as a matter of last resort, there is the possibility of trade sanctions for serious violations of core TSD
commitments like the International Labor Organization fundamental principles and rights at work and
the Paris Agreement on Climate change.

199

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Development (R&D) cooperation on key technologies, such as artificial intelligence, the digitaltransformation of businesses and public services, and the facilitation of digital trade. The main
goal is to develop and entrench standards for emerging technologies in line with EU principles
and values. Such partnerships have been negotiated with Japan, South Korea and Singapore, andcreating a digital partnership with ASEAN is also part of the EU’s IP strategy.6 The aim of thesepartnerships is to advance cooperation on the full range of digital issues, including trade facilitation,
trusted data flows and data innovation, digital trust, standards, digital skills for workers, and thedigital transformation of businesses and public services. Although these digital partnerships are
initially non-committal, they are expected to pave the way towards binding rules covering diverse
aspects of digital trade.
Importantly, the EU-NZ FTA7 includes a full-fledged digital trade chapter, which contains, among
other things, details provisions on cross-border data flows, the protection of privacy and personaldata, customs duties on electronic transmissions, electronic contracts, electronic authenticationand trust services, the transfer of or access to source code, online consumer trust, unsolicited direct
marketing communications, open government data, and regulatory cooperation on digital trade.
This will facilitate cross-border data flows by prohibiting unjustified data localisation requirements
while preserving a high level of personal data and privacy protection. It also includes ambitious
articles on the protection of source code, the use of e-contracts, and e-invoicing or paperlesstrading.
The EU as a normative power
The EU is used to developing new rules on trade policy in its bilateral FTAs with the hope thatsome of these rules – for example on subsidies and sustainability – will eventually make it to theWorld Trade Organization (WTO) rulebook. The exclusive supranational power of the Commission
to negotiate trade deals on behalf of the member states comes with significant regulatory power
through setting trade, industrial, labour, and human rights standards, and its large market (the EU
is the second largest economy in the world) gives Brussels a great deal of political leverage in the
pursuit of its objectives.
With respect to its IP partners, the EU’s aim is to engage them to build more resilient and sustainableglobal value chains by diversifying trade and economic relations, and by developing technologicalstandards and regulations that are in line with its values and principles. As a normative actor, inboth self-perception and practice, the EU’s strengths lie in setting and raising regional standardsof good governance, equitable trade, and capacity building in many non-traditional security areas
as well as in advancing ecological sustainability and high-quality infrastructure. This regulatory
objective is reflected in the increasing width and depth of trade agreements.
The EU’s overall IP strategy is meant to compensate for the lack of an economic strategy vis-à-vis
the region. However, in concrete terms, the EU still relies on an array of bilateral agreements. In
contrast to the US, the EU is approaching its IP partners in a patchy way, on a bilateral basis. Thisis a major difference compared to the IPEF, which works as a platform.

6

7

200

In the Plan of Action to Implement the ASEAN-EU Strategic Partnership (2023-2027), which was issuedin early 2022, the two regional organisations reaffirmed their commitment to cooperate in the realm of
the digital economy, and a joint working group has been created to scope out the parameters of a future
deal.
“Key elements of the EU-New Zealand trade agreement”, European Commission – Directorate-Generalfor Trade, 30 June 2022, https://policy.trade.ec.europa.eu/news/key-elements-eu-new-zealand-tradeagreement-2022-06-30_en

The EU, the Indo-Pacific and the US-led IPEF: Which Way Forward?

The EU-US Trade and Technology Council (TTC)
At the same time, the EU has also set up a platform together with the US (EU-US Trade andTechnology Council - TTC)8 where various trade-related issues (also covered in the IPEF) will
be discussed. Interestingly, the EU-US TTC will not exclusively focus on bilateral trade-related
tensions but will also potentially contribute to upholding the international order based on therule of law, multilateral institutions, and free trade, and contribute to addressing the challenges
raised by non-market economies. What happens between the EU and the US also must be taken
into consideration for two reasons. First, because the EU-US TTC format is quite close to the IPEF
format: both of them work as platforms of discussion to address specific trade-related issues.
Secondly, the outcome of the discussions conducted in the EU-US TTC may shed light on therespective positions of the two partners.
Three simultaneous dialogues are thus currently being conducted with implications for the IP
region (see Figure 1): i) between the EU and its IP partners (under the umbrella of EU’s Indo-PacificStrategy), ii) between the US and several IP partners (through IPEF), and iii) between the EU andthe US (through the TTC).
Figure 1: Various discussion formats between IP partners

Source: Compiled by author

Two dreams in one bed: contrasting IPEF and the EU’s IP strategy
Both the EU and the US are engaging their IP partners, but through different instruments andwith different objectives. This section focuses on two interrelated issues, namely supply-chain
resilience, which is the area where the US has progressed the most, and the digital economy.

8

The TTC is a diplomatic forum aimed at harmonising the US-EU approach to trade and technology policy,
including by developing a common approach to supply chain issues and emerging technology areas
where regulation is sparse. See (from TTC, IPEF and the Road to… 2022, Atlantic Council.)

201

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Different approaches to supply-chain resilience
The IPEF Supply Chain Agreement
Although the IPEF is a recent endeavour, it has made unexpectedly quick progress, leading as earlyas May 2023 to the substantial conclusion of the negotiations of a first-of-its-kind international
Supply Chain Agreement.9 Through this agreement, the IPEF partners aim to identify items thatare at risk of supply network disruption, share information in normal times, expand sources forthe procurement of important goods and items among participating countries, as well as allow for
flexible procurement during crises.10
The supply chain agreement would establish an emergency communications channel for the IPEF
partners to seek support during a supply chain disruption and to facilitate information-sharing
and collaboration among the IPEF partners during a crisis. The proposed mechanisms include (1)an IPEF Supply Chain Council to oversee the development of sector-specific action plans designed tobuild resilience in critical sectors, and (2) an IPEF Supply Chain Crisis Response Network that can serveas an emergency communications channel. In addition, a tripartite body made up of government,
worker, and employee representatives (IPEF Labour Rights Advisory Board) is to be set up to help
identify areas where labour rights concerns pose risks to the resilience and competitiveness ofpartners’ supply chains.11
EU’s supply-chain cooperation with IP partners
In parallel to the IPEF progress, there has also been some degree of US-EU convergence, mostnotably on supply chain issues and export controls.12 On the former issue, there is a clear overlap
between the IPEF and the EU-US TTC. Under working group 10 of the TTC, the US and the EU
have agreed to establish early warning and monitoring mechanisms to prevent and prepare forpossible supply chain disruptions.
Supply chain security, controls over technology transfers, industrial policy, and strategic sectors
are at the heart of the EU’s public debate. Cooperation on supply chain resilience is also part ofthe strategic partnerships between the EU and several of its IP partners (such as South Korea orIndia).13 While EU’s and US’ goals appear to be clearly aligned on the need to enhance supply-chain
resilience through cooperation with IP partners, the difficulty will lie in the operationalisation or
the definition of the measures to be put in place to achieve the set goal.

9

10
11

12

13

202

“Press Statement on the Substantial Conclusion of IPEF Supply Chain Agreement Negotiations”, US
Embassy and Consulates in Indonesia, 31 May 2023, https://id.usembassy.gov/press-statement-on-thesubstantial-conclusion-of-ipef-supply-chain-agreement-negotiations/Seiya Sukegawa, “Can the IPEF Protect Corporate Supply Chains?”, The Diplomat, June 12, 2023, https://thediplomat.com/2023/06/can-the-ipef-protect-corporate-supply-chains/
Aidan Arasasingham, Emily Benson, Matthew P Goodman and William Alan Reinsch, “Domestic
Perspectives on IPEF’s Digital Economy Component”, Center for Strategic and International Studies, CSIS
Briefs, 26 January 2023, https://www.csis.org/analysis/domestic-perspectives-ipefs-digital-economycomponent
Frances Burwell and Andrea G. Rodríguez, “The US-EU Trade and Technology Council: Assessing therecord on data and technology issues”, Issue Brief, The Atlantic Council, 20 April 2023, https://www.
atlanticcouncil.org/in-depth-research-reports/issue-brief/us-eu-ttc-record-on-data-technology-issues/
The EU and India are working together on resilient value chains as part of the EU-India Trade andTechnology Council. See “First EU-India Trade and Technology Council focused on deepening strategic
engagement on trade and technology”, European Commission, 16 May 2023, https://ec.europa.eu/
commission/presscorner/detail/en/ip_23_2728

The EU, the Indo-Pacific and the US-led IPEF: Which Way Forward?

The issue of supply-chain resilience has primarily been addressed by the EU through the digital
partnerships mentioned earlier. These instruments are meant, among other things, to facilitate
supply-chain cooperation. The EU-Japan Digital Partnership,14 that was concluded in May 2022,
is not a treaty but “an ambitious statement of intent to develop the relationship in the digital
economy.”15 This effort furthers the ‘Data Free Flow with Trust’ agenda, aimed at facilitating safe
and secure cross-border data flows. In a joint statement, the two partners stressed that “theyintend to work towards achieving joint monitoring, exchange of information in anticipation of
disruptions in the supply chain, effective early warning mechanisms, crisis preparedness, exchange
of information on long-term investment strategies and coordination of export controls among therelevant authorities.”16
Similarly, through the EU-Korea17 and the EU-Singapore18 Digital Partnerships, the two parties haveagreed to work together on a range of diverse issues including semiconductors, trusted data flows
and data innovation, digital trust, standards, and digital trade facilitation. The two parties will work
together to make safe data exchange possible and use digital solutions to enhance supply chain
resilience. The two digital partnerships (with South Korea and Singapore) have an important tradeaspect and include as a key deliverable Digital Trade commitments between the EU and its twopartners. They demonstrate a high level of convergence with the EU’s approach to digital trade,19
and are designed to provide a common framework for digital strategies.
Whether the EU’s approach to supply-chain resilience enhancement fits with all IP partners’
objectives remains to be seen.
EU – US divergences on the digital economy
The digital noodle bowl in the Indo-PacificWith the development of the digital economy, data has become a key factor of production thathas been the basis for new services such as cloud computing or the Internet of Things. Different
categories of data may be part of digital trade transactions, including data that can be used to
identify natural persons, that is, personal data. A key aspect of digital trade concerns the crossborder flow of data.
Digital economy issues constitute one of the nine sub-components of the IPEF’s trade pillar andare arguably its most consequential facets. The IP is witnessing the world’s fastest growth in digital

14 “Joint Statement EU-Japan Summit 2022”, European Council, 12 May 2022, https://www.consilium.europa.
eu/en/press/press-releases/2022/05/12/joint-statement-eu-japan-summit-2022/
15 Mathieu Duchâtel, “Economic Security: The Missing Link in EU-Japan Cooperation”, Policy Paper, Institut
Montaigne, April 2023.
16 Dreyer on digital partnerships 2023.
17 “Joint statement European Union - Republic of Korea Summit 2023”, European Commission, 22 May 2023,
https://ec.europa.eu/commission/presscorner/detail/en/statement_23_2863
Ramon Pacheco-Pardo, “The EU-ROK Digital Partnership”, Brussels School of Governance, 1 December
2022 https://brussels-school.be/publications/other-publications/eu-rok-digital-partnership
18 Goh Yan Han, “New Singapore-EU pact to boost cooperation and establish common framework in digital
realm”, The Straits Times, 15 December 2022, https://www.straitstimes.com/singapore/politics/newsingapore-eu-pact-to-boost-cooperation-and-establish-common-framework-in-digital-realm
19 “Recommendation for a COUNCIL DECISION authorising the opening of negotiations for digital trade
disciplines with the Republic of Korea and with Singapore”, Council of the European Union, 14 April 2023,
https://data.consilium.europa.eu/doc/document/ST-8304-2023-INIT/en/pdf

203

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

connectivity and internet access, and evolving digital rules are poised to shape the developmentof industries and national economies. E-commerce and digital services make up a growing
contribution to economic growth across the region, and digital skills development is increasingly apriority for regional economies.20
Countries in the IP region have been, in the last few years, developing a rich network of regional andbilateral agreements that are progressively building standards on digital trade. These standards
are sometimes set out in a dedicated chapter with digital trade rules of a comprehensive free
trade agreement providing detailed rules on market access.21 In other cases, IP countries haveconcluded specific agreements on digital trade, as in the case of the Digital Economy Partnership
Agreement (DEPA) between Singapore, New Zealand and Chile.
While all the major regional models ostensibly support cross-border flows of data and reject forced
data localisation, there may be substantial differences on other points. Furthermore, the existing
agreements provide different levels of commitments on digital trade, with a variety of rules andformulations resulting in a spaghetti bowl that may lead to a fragmentation of the rules applied todigital trade.22
For instance, the Regional Comprehensive Economic Partnership (RCEP) allows broad and selfjudging exceptions to the ban on forced data localisation23 while the United States-Mexico-Canada
Agreement (USMCA) contains more limited exceptions. Similarly, the US pushes for the eliminationof barriers to digital trade while the EU seeks to maintain a more cautious stance on allowing thetransfer of personal data.
Figure 2: The ‘Digital Noodle Bowl’

Source: Hinrich Foundation24

20 op. cit.
21 This is for instance the case in the CPTPP.
22 Hyo-Young Lee, “Digital Trade Rules in the Asia-Pacific Region: Fragmentation of Rules and the Way
Forward”, Ifans Perspectives, no. 02 (24 January 2022).
23 To be more specific, the twin provisions on data flows and data localization allow members to adopt any
measures considered necessary to protect national security.
24 Stephanie Honey, “The long road to a seamless global digital economy”, Hinrich Foundation, 30 May 2023,
https://www.hinrichfoundation.com/research/article/digital/the-long-road-to-a-seamless-global-digitaleconomy/

204

The EU, the Indo-Pacific and the US-led IPEF: Which Way Forward?

China, the EU, and the US are each pursuing their own approach to digital governance. The‘US approach’ (or the “firm sovereignty model”, as reflected in the CPTPP/USMCA), the ‘Chinese
approach’ (or the state sovereignty model), and the ‘EU approach’ (or the “individual sovereignty
model”) form three distinct global ‘data realms’ or ‘digital kingdoms’.25
The IPEF trade pillar is expected to include comprehensive digital trade rules building upon
the far-reaching digital commitments in the USMCA’s digital trade chapter26 and the US – Japan
Digital Trade Agreement.27 But aligning all the IPEF countries on digital policy will require intensive
dialogue, and achieving a convergence of views on issues such as data privacy, cross-border data
flow, digital payments, and taxation may prove elusive.
While for different reasons and through different means, Beijing and Brussels are both restricting
free cross-border data flows in ways that are unacceptable to the US. The EU seeks to regulate themarket for industrial data and restrict that for private data,28 while the US does not have a settled
policy. With regards to digital platforms, the EU seeks to constrain their behaviour, while the US
favours a more laissez-faire approach. Achieving regulatory convergence in this area seems almost
out of reach.
The EU as a digital norm-setter
With respect to the digital economy, the EU defends a human-centric vision that seeks to ensurethat technology serves the people, that human rights are respected, and that societies are open,
democratic, and sustainable.29 This is exemplified by the enactment of the Global Data Protection
Regulation (GDPR) in 201830 and confirmed by several other measures such as the Digital Services
Act (DSA) of 2022.31 The EU approach has become a de facto global standard for many countries

25 Susan Ariel Aaronson and Patrick Leblond , “Another Digital Divide: The Rise of Data Realms and its
Implications for the WTO”, Journal of International Economic Law, vol. 21, June, 2018, pp. 245-72;

26

27

28
29
30
31

Henry Gao, “Data sovereignty and trade agreements: Three digital kingdoms”, Hinrich Foundation, January2022, https://www.hinrichfoundation.com/research/article/digital/data-sovereignty-trade-agreementsdigital-kingdoms/
Tech companies managed to add digital trade rules to the US-Mexico-Canada Agreement that prohibits
parties from reviewing the source code for artificial intelligence programmes, and there are efforts toinclude similar provisions in the IPEF trade talks.
“U.S.-Japan Digital Trade Agreement Text “, Office of the United States Trade Representative, 7October 2019, https://ustr.gov/countries-regions/japan-korea-apec/japan/us-japan-trade-agreementnegotiations/us-japan-digital-trade-agreement-text
EU diverges from the CPTPP approach to data flows by seeking to enjoin partners to recognise that data
privacy is a human right and to carve out privacy protection from any necessity or proportionality test.
“Responsible digitalisation”, European Commission, https://international-partnerships.ec.europa.eu/
policies/digital-and-infrastructure/responsible-digitalisation_en
The landmark legislation of the GDPR set the global standard for the fundamental rights of data privacy
and data protection.
Florina Pop, Jannigje Bezemer and Laura Grant, “The Digital Services Act: creating accountability for
online platforms and protecting users’ rights?”, European Institite of Public Administration, 6 September2022,
https://www.eipa.eu/blog/the-digital-services-act-creating-accountability-for-online-platformsand-protecting-users-rights/

205

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

when it comes to designing data protection rules.32 This ‘Brussels effect’33 is reflected in many
countries either adopting GDPR-like frameworks or negotiating adequacy decisions.34
EU’s and US’ approaches to the digital economy: can they be reconciled?
There are clear differences in the philosophy underlying the EU’s and the US approaches to data
governance and to the digital economy at large. On the one hand, the EU seeks to regulate themarket for industrial data (and restrict that for personal data), while on the other hand, the US
does not have a settled data policy (although the Biden administration has recently endorsed
the idea of a privacy law at the federal level).35 Also, the EU seeks to constrain the behaviour of
platforms through its regulations (The Digital Markets Act [DMA] and the DSA), while the US favours
a more laissez-faire approach.36 The EU’s digital regime is characterised by heavy regulation, which
may be in contradiction with the US vision and US digital companies’ interests.37
The divergence between the EU and US approaches is discussed in the EU-US TTC, with Working
Group 5 in charge of Data Governance and Technology Platforms. But until now, no agreement
has been reached on sensitive regulatory areas, such as platform regulation or data governance.
The TTC’s work in this area is a prime example of values alignment (defence of democracy, of afree, open global internet, et cetera) without requiring regulatory convergence or harmonisation.

A Perspective on EU’s Future Engagement with IPEF Countries
EU’s scepticism about the IPEF
Both EU experts and EU officials follow the development of the IPEF with some scepticism. First,
they tend to anticipate a difficult negotiation for many reasons that have to do with the negotiation
method of the IPEF. The à la carte approach is expected to prevent potential trade-offs and to
give rise to a weak agreement since it will, by definition, not be signed and ratified in full by all
negotiating parties. EU officials’ scepticism is primarily due to their strong preference for FTAs,

32 This may be in the hope to be accorded adequacy status by the EU in the future, and therefore, facilitate
the access to the EU market, and/or it may reflect a view that the EU approach constitutes good practice.
33 After the title of Anu Bradford’s book (The Brussels Effect – How the EU Rules the World, New York, Oxford
University Press, 2020), which makes the EU the world’s regulator by default;

34

35

36
37

206

“Is the EU overreaching with new digital regulations?”, The Economist, 1 September 2022, https://www.
economist.com/europe/2022/09/01/is-the-eu-overreaching-with-new-digital-regulations
An adequacy decision is one of the tools provided under the GDPR to transfer personal data from the
EU to third countries guaranteeing a comparable level of protection of personal data to that in the EU.
The decision covers both data transfers for commercial and regulatory purposes. Adequacy does not
require the third country’s data protection system to be identical to the one of the EU but is based on thestandard of ‘essential equivalence’.
Gerhard Peters and John T. Woolley, “Joseph R. Biden, Op-Ed by the President: Republicans and
Democrats, Unite Against Big Tech Abuses”, The American Presidency Project, 11 January 2023, https://www.presidency.ucsb.edu/documents/op-ed-the-president-republicans-and-democrats-unite-againstbig-tech-abuses
op. cit.
“US/EU data flows stuck between surveillance and privacy”, Economist Intelligence Unit (EIU), 29 March
2022, https://viewpoint.eiu.com/analysis/article/1331989516, “Transatlantic data flows are only one
area of conflict between the US and the EU when it comes to data and digital trade. Another is the idea ofsovereign cloud. The 2018 Cloud Act and a following court order gives US authorities the right to accessdata hosted by a US company anywhere in the world, without informing the country involved.”

The EU, the Indo-Pacific and the US-led IPEF: Which Way Forward?

which are still perceived by most as the best instrument to improve European resilience. The EU’s
approach (through FTAs and a more normative approach) is unlikely to be questioned.
Secondly, the asymmetrical nature of the negotiation, with many US requests and only few US
offers, is again expected to make the negotiation more complicated and the opportunities forbargaining and trade-offs limited. Moreover, the IPEF seems to be about the US offering adhesion
to its own standards, without offering anything in exchange. Usually, market access is provided
as an incentive for partner countries to trade off economic reforms as part of an FTA. With theabsence of such an incentive, getting partners to agree to engage in economic reforms may be
daunting.
Thirdly, there is a problem of durability of the agreement in the absence of support from the US
Congress. This will create uncertainty both for the parties as well as for their partners (including
the EU).
Fourthly, the substantial development gaps between the negotiating parties will make it difficult for
all of them to be on the same page, particularly with regards to digital, labour and environmental
standards. The digital economy is arguably one of the most important facets of the agreement, but
it may also be one of the most difficult to agree on.
The IPEF giving new momentum to EU’s Indo-Pacific economic engagement
The EU will no doubt continue its engagement with the IPEF countries. Interestingly, the progress
made by the IPEF has supposedly given renewed momentum to the EU’s initiatives in the region,
as exemplified by the acceleration in the FTA negotiation with Australia, and the multiplication ofdigital partnerships with Japan, South Korea and Singapore.
With the IPEF advancing, the EU is probably feeling the need to be more proactive vis-à-vis its
IP partners. As argued by Dreyer,38 the EU cannot expect the ‘Brussels effect’ of the EU’s new
regulations – as with its GDPR for data privacy – to work ‘just by magic’. What has worked for data
governance and digital trade regulation may be replicated in other domains, but if the EU wants topromote its basic regulatory principles for other issues such as artificial intelligence platforms andthe like, then it needs to be more proactive, engage in negotiations and do deals.
Interestingly, the Commission and the business sector clearly do not see eye to eye on how toapproach the IP region. To be fair, the EU used to favour a bloc-to-bloc approach (in particular,
between the EU and ASEAN), but this is no longer the case for essentially pragmatic reasons. The
business community, by contrast, would undoubtedly like to see the Commission approach the
IP region as one single entity. As explained by the European Services Forum’s Managing Director
Pascal Kerneis, “There is frustration in the business community with the EU’s Indo-Pacific strategy.
They fail to see the coherence in holding discussions on a digital partnership agreement separately
instead of jointly with all interested partners, so as to create synergies in terms of regulation andstandardisation of the digitalisation of the economy.”39

38 Iana Dreyer, “Digital Partnerships in Asia -Pacific: EU needs to be more than non-committal”, Borderlex,
12 May 2022.
39 “Interview with Pascal Kerneis: EU and Singapore need to upgrade their trade agreement”, interview by
Iana Dryer, Borderlex, 3 October 2022, https://borderlex.net/2022/10/03/interview-eu-and-singaporeneed-to-upgrade-their-trade-agreement/

207

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Whither EU’s engagement with IP partners?
The EC will keep an eye on the progress made under the IPEF and adjust its strategy accordingly.
Moreover, the existence of IPEF negotiations will likely have an impact on how the EU deals withthe region.
Due to the divergences highlighted earlier, both in terms of approach and of content, joining the
IPEF is out of the question for the EU, at least for the time being. But further engagement with IP
partners may also go through joining the Comprehensive and Progressive Agreement for TransPacific Partnership (CPTPP), for instance, even though the membership differs to some extent.
This is an option that has been advocated for by former Commissioner Cecilia Malmström40 as well
as by the European Parliament41, but the violent and negative reactions generated by this proposal
make it also highly unlikely. A major reason for opposing the EU joining the CPTPP is that the latter
is no longer at the cutting edge of trade policy. As a result, there may be better alternatives suchas deepening dialogues with IP partners on genuinely new trade issues.
Perhaps another direction would be to expand the EU-US TTC to bring other countries (such as
Japan, South Korea and Singapore) into its fold.

40 Cecilia Malmström, “The EU should expand trade with the Indo-Pacific region”, Peterson Institute forInternational Economics, 7 November 2022, https://www.piie.com/blogs/realtime-economics/eu-shouldexpand-trade-indo-pacific-region
41 “European Parliament resolution of 5 July 2022 on the Indo-Pacific strategy in the area of trade andinvestment (2021/2200(INI))”, European Parliament, 5 July 2022, https://www.europarl.europa.eu/doceo/
document/TA-9-2022-0276_EN.html

208

The EU, the Indo-Pacific and the US-led IPEF: Which Way Forward?

About the author
Dr Francoise NICOLAS has been with the French Institute of International Relations (IFRI) since1990. She also teaches at Langues’ O, Sciences Po Paris (Europe-Asia programme, Le Havre campus)
and Sciences Po (Lyon) and is a consultant to the Directorate for Financial, Fiscal and Enterprise
Affairs of the Organization for Economic Cooperation and Development focusing on Southeast
Asian non-member countries. In the past, Dr Nicolas was an assistant Professor in international
economics at the University of Paris-Est (Marne-la-Vallée) from 1993 to 2016 and taught at theGraduate Institute of International Studies (GIIS, Geneva – 1987-1990), at the Ecole Nationale desPonts et Chaussées (1991-1995), as well as at the HEC School of Management (2000-2002).
Dr Nicolas holds a PhD in international economics (1991) and an MA in political science (1985)
from the Graduate Institute of International Studies (Geneva, Switzerland), as well as a diploma intranslation from the University of Geneva (1980). She has also studied at the University of Sussex(1980-81) and has spent some time as a visiting fellow at the Institute of Southeast Asian Studies
in Singapore (1999) and at the Korea Institute for International Economic Policy in Seoul (2004).

209

Impact of regional trade agreements on the IPEF

Impact of regional trade agreements on
the IPEF
Priyanka KISHORE

The Indo-Pacific Economic Framework (IPEF) seeks to establish the United States (US) as the primaryrule-setter in the Asia Pacific (APAC), a position it has ceded to China in recent years. The reciprocal
benefits for the APAC are not so evident. Many in the region are not keen to choose sides and as
a trade pact, it compares poorly with the Regional Comprehensive Economic Partnership (RCEP)
and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). On its
side, the IPEF has reminded detractors that it is not a traditional Free-Trade Agreement (FTA), but
a new generation economic agreement. This has some appeal and the APAC allies have signed onquickly. But the IPEF’s flexible approach means that having signed on, there is no compulsion tofollow through. Importantly, for now, there are no clear incentives for the private sector to partwith the sensitive supply chain information that is central to the IPEF’s success. Future negotiations
will benefit from the US’s willingness to sweeten the terms and position IPEF as an economic
arrangement complementing existing trade pacts rather than upending those.

211

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Introduction
Trade has been the driving force of the Asia Pacific (APAC)1 region’s economic development overthe last couple of decades. The region’s rising share in global goods and services trade, from 27 percent in 2005 to 33.4 per cent in 2022,2 has boosted domestic manufacturing, created employment,
and raised household incomes. Several studies corroborate its important, if not leading, role inlifting millions out of poverty, especially in East Asia.3
Sixty two per cent of APAC’s trade is now within the region,4 which buffers it from the rising global
headwinds of economic fragmentation and makes it resilient. Still, the APAC cannot afford to turnits back on globalisation and trade liberalisation. By 2030, the APAC’s share in the global Gross
Domestic Product (GDP) is expected to increase to 40 per cent from 34 per cent currently,5 andtrade will play an important role in achieving this as the region charts its path to recovery fromthe COVID-19 pandemic’s economic and social scars. That the governments in East Asia feel thesame way is evident from their support of free-trade agreements (FTAs). But even India, that has
shied away from multilateral agreements, has signed bilateral FTAs6 with Mauritius, United ArabEmirates (UAE) and Australia in the last couple of years and is in talks with the United Kingdom(UK), the European Union (EU) and Canada to conclude trade deals, underlining the importance oftrade as an engine of growth.

Multilateral trade agreements in the APAC
The Economic and Social Commission for Asia and the Pacific (ESCAP) finds that the APAC accounts
for almost half of the global preferential trade agreements (PTAs)7 and that more than 300 APAC
PTAs include at least one party from the region. This includes the two largest multilateral trade
agreements currently in existence, the Regional Comprehensive Economic Partnership (RCEP) andthe Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

1

2
3

4
5

6

7

212

There is no one definitive description of the APAC region. This chapter uses the IMF’s definition that
includes greater China, ASEAN, South Asia, Korea, Japan and Oceania. See “About the Office for Asia andthe Pacific (OAP)”, International Monetary Fund, https://www.imf.org/en/Countries/ResRep/OAP-Home/
oap-about. ASEAN comprises of Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic
Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. Further, ASEAN, greater
China, Japan and the Republic of Korea, are referred to as East Asia.
“WTO issues 2023 edition of the World Trade Statistical Review”, World Trade Organization, 31 July 2023,
https://www.wto.org/english/news_e/news23_e/stat_31jul23_e.htm; Author’s calculations.
Jayant Menon and Anna Cassandra Melendez, “When Does Trade Reduce Poverty? Revisiting the
Evidence for East Asia”, ISEAS-Yusof Ishak Institute, June 2020, https://www.iseas.edu.sg/wp-content/
uploads/2020/05/ISEAS_EWP_2020-4_Menon_and_Melendez.pdf
UNCTAD STAT, https://unctadstat.unctad.org/wds/ReportFolders/reportFolders.aspx
Author’s calculations based on national accounts statistics and the “World Economic Outlook Database”,
International Monetary Fund, April 2023, https://www.imf.org/en/Publications/WEO/weo-database/2023/
April“India has signed 13 Regional Trade Agreements (RTAs)/Free Trade Agreements (FTAs) with various
countries/regions”, Press Information Bureau, Government of India, Ministry of Commerce and Industry,
20 July 2022, https://pib.gov.in/Pressreleaseshare.aspx?PRID=1843902“Trade Agreements in Asia and the Pacific: Bigger, Deeper, Digital and More Supportive of Sustainable
Development?”, Asia-Pacific Trade and Investment Trends, ESCAP, 10 November 2022, https://www.
unescap.org/kp/2022/trade-agreements-asia-and-pacific-bigger-deeper-digital-and-more-supportivesustainable-20222023

Impact of regional trade agreements on the IPEF

The CPTPP is a modified version of the Trans-Pacific Partnership (TPP), which was announced by
the United States (US) President Barack Obama in 2016. The US exited the TPP under President
Donald Trump on 23 January 2017, but this did not deter the remaining members from continuing
their talks. Eventually, under Japan’s leadership, the CPTPP was signed in March 2018 by 11 nations– Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore andVietnam.8 With the last original signatory, Brunei, ratifying the deal on 13 May 2023, the agreement
is now in force.
The door has been left open for the US to re-join the CPTPP. But that is not likely. Meanwhile, anumber of other economies have lined up for membership. The UK became the first non-founding
member on 16 July 2023.9 China’s membership application is pending since 16 September 2021.10
Taiwan, Uruguay, Costa Rica are also in waiting, and Ukraine has expressed an interest. The
probability of China gaining admission appears low, given the rising disunity within the APAC onalignment with Beijing. There are also concerns about whether China will be able to implement thenecessary reforms to comply with the CPTPP’s trade and policy standards, which are much more
stringent than China’s. Nonetheless, the CPTPP is already a substantial trade bloc with 13 per centof the global GDP, 16 per cent of the global population, and 15 per cent of its trade. Its economic
prowess will only increase with the addition of more nations.
Seven signatories of the CPTPP are also part of the RCEP, which is the first major APAC multilateral
trade agreement with members from only the west side of the Pacific Rim.11 After eight years of
discussions that saw India quit the deal, Brunei, Cambodia, Indonesia, Lao People’s Democratic
Republic (Lao PDR), Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, Australia,
China, Japan, South Korea, and New Zealand signed the Agreement on 15 November 2020.12
The RCEP is the world’s largest trade bloc, accounting for around 30 per cent of the world’s GDP
and population, and 28 per cent of global goods trade. India’s inclusion would have boosted the
RCEP’s market size to 33 per cent, population size to 47 per cent and global trade share to 30 per
cent.13 But despite strong efforts by its ally Japan and the Association of Southeast Asian Nations(ASEAN) countries to accommodate its demands, India cited issues around labour mobility andlimited services trade liberalisation as reasons for opting out. It was also worried about being
flooded with cheap Chinese imports. This suggests that the return of India to the RCEP is unlikely.

8

9

10
11

12

13

“Comprehensive and Progressive Agreement for Trans-Pacific Partnership Ministerial Statement”, New
Zealand Ministry of Foreign Affairs and Trade, 8 March 2018, https://www.mfat.govt.nz/assets/Tradeagreements/CPTPP/CPTPP-Ministerial-Statement-Santiago.pdf“UK signs Comprehensive and Progressive Agreement for Trans-Pacific Partnership”, GOV.UK, 17 July
2023, https://www.gov.uk/government/news/uk-signs-comprehensive-and-progressive-agreement-fortrans-pacific-partnership“China officially applies to join CPTPP”, Xinhua, 16 September 2021, http://www.news.cn/english/202109/17/c_1310192180.htm
The 21 member Asia-Pacific Economic Cooperation (APEC) includes the US, Canada, Chile, Mexico andPeru, but leaves out Cambodia, Lao and Myanmar. See “Asia-Pacific Economic Cooperation (APEC)”,
Australian Government – Department of Foreign Affairs and Trade, https://www.dfat.gov.au/trade/
organisations/apec/asia-pacific-economic-cooperation-apec“Joint Leaders’ Statement on the Regional Comprehensive Economic Partnership (RCEP)”, Association ofSoutheast Asian Nations, 15 November 2020, https://asean.org/joint-leaders-statement-on-the-regionalcomprehensive-economic-partnership-rcep-2/
Author’s calculations and UNCTAD STAT

213

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Into this mix, the US President Joe Biden added the Indo-Pacific Economic Framework for
Prosperity (IPEF) on 23 May 2022. The IPEF is a first-of-its-kind agreement and departs from thenorms of usual trade agreements in many ways, starting with its very coverage. It attempts tolay the first rules-based economic framework for the Indo-Pacific, which includes the Asia-Pacificand Indian Ocean regions. This has traditionally been a domain of security issues. But perhaps
its most distinguishing feature is that it does not follow the pattern of a traditional market-accessbased trade agreement, which has also led many to question its goals and benefits for the APAC
members.
To be sure, the diversity of the APAC region makes it difficult to present a unified view on the IPEF.
The perspectives shared in this chapter lean towards those of the ASEAN nations, as currently
they account for half of the membership. The ASEAN’s strong economic ties with China and thedesire to remain politically neutral have a significant bearing on how it perceives the IPEF. The
drivers likely differ for the other members. For the traditional security allies of the US that have an
increasingly fractious relationship with the mainland – Japan, South Korea and Australia – the IPEF
represents an opportunity to check China’s rising economic dominance in the region.

The motivation for the IPEF
In its defence, the IPEF aims to fill an important gap in the US-APAC relationship. The US is asignificant trading partner for many in the region, not just China; 23.4 per cent of US’ trade waswith the APAC (excluding China) in 2022.14 Also, the US businesses are heavily reliant on Asian
supply chains. Yet, its recent overtures towards the region have focused on security partnerships
and mini-laterals such as the Quad (the Quadrilateral Security Dialogue comprising the US, India,
Japan and Australia) and the AUKUS (trilateral security pact between Australia, the UK and the US).
Initially perceived as the Asian version of the North Atlantic Treaty Organisation (NATO), the Quadhas broadened its mandate to supply chain security, climate and other economic issues.15 Still, it is
not a trade alliance. Neither is the AUKUS, which is akin to a defence pact.16
A concrete trade policy is the missing link in the US’ engagement with the APAC. It has bilateral
trade agreements with a handful of APAC nations – Australia, South Korea, Singapore, Japan (onlyfor critical minerals), but none with the emerging Asian economies. Meanwhile, its growing rivalry
with China limits the utility of its Asia-Pacific Economic Cooperation (APEC) membership. Hence,
the US is keen to establish a multilateral APAC framework that excludes China, and will facilitate
trade, investment and other flows with the rest of the region.
The TPP, which was signed by 12 Pacific Rim economies – Australia, Brunei, Canada, Chile, Japan,
Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the US – in 2016, was expectedto achieve this. President Obama saw it as key to countering China’s rising influence in the APAC
region and securing the US’ leading position in global trade. However, it did not survive theturn in domestic US sentiment against free trade. Trade was seen as the primary cause of deindustrialisation and job losses by a majority of the Americans and President Trump withdrew the

14 “Table 2.3. U.S. International Trade in Goods by Area and Country, Not Seasonally Adjusted Detail”, US
Bureau of Economic Analysis, 22 June 2023, https://apps.bea.gov/iTable/?ReqID=62&step=2#eyJhcHBpZCI6NjIsInN0ZXBzIjpbMiw2XSwiZGF0YSI6W1siVGFibGVMaXN0IiwiMzEwMDIiXV19
15 “Quad Leaders’ Joint Statement”, The White House, 20 May 2023, https://www.whitehouse.gov/briefingroom/statements-releases/2023/05/20/quad-leaders-joint-statement/
16 “Joint Leaders Statement on AUKUS”, The White House, 13 March 2013, https://www.whitehouse.gov/
briefing-room/statements-releases/2023/03/13/joint-leaders-statement-on-aukus-2/

214Impact of regional trade agreements on the IPEF

US from the TPP on his first day of office. But this is not all he did. Under Trump, the US grew more
and more estranged from Asia. He paid little attention to Southeast Asia, imposed tariffs that did
not just hit China but also traditional US allies (South Korea, Australia), and threatened to withdraw
US military support from South Korea and Japan. Trump’s actions led to a serious setback in the
US-APAC relationship and triggered an erosion of the US influence in the region, while China used
the opportunity to increase its heft, particularly in Southeast Asia.
The Biden Administration has stayed with the Trumpian decision to not join the TPP (or the CPTPP
now). But it sees the geopolitical and economic risks of being absent from Asia. These have beenmagnified by the RCEP, which includes China. It also does not want to completely close the door
on trade. So, it has come up with the middle path of a ‘worker-centric’ trade policy17 that aims tokeep the US trade agenda alive without angering the domestic voters.
The IPEF is an outcome of this. It marks a renewed effort on the part of the US to regain lost
ground in the APAC region and engage with regional allies on key trade, supply chain, climate, andeconomic security issues.

Comparison to the CPTPP and the RCEPThe addition of another large multilateral agreement to the already crowded Asian trade policy
space has understandably raised doubts about its value-add, especially when it does not seem
to provide any direct benefits to the members.18 In his influential 1995 paper on trade policy,
Jagdish Bhagwati famously referred to overlapping and ever-increasing trade arrangements as a‘spaghetti bowl’ phenomenon.19 The idea being that increasing number of trade treaties between
nations makes it difficult for participating countries to disentangle their benefits and could evenimpact businesses negatively by thwarting trade creation and resulting in trade diversion. This has
become a topic of intense debate in the APAC region, although there is no clear empirical evidence
that too many trade agreements are hurting businesses operating in the region.
The effectiveness concerns extend to the RCEP and the CPTPP. But their provisions to lower
barriers and facilitate trade and investment overtime make it possible to reasonably assess theireconomic contributions.
The CPTPP is a high-quality agreement and represents a new generation of trade deals that expands
the scope of the talks beyond just a negotiation on tariffs and rules of origin (ROOs). It includes
30 chapters that encompass physical and digital trade of goods and services, investment andintellectual property rights, labour and environment standards, e-commerce, regulation of stateowned enterprises (SOEs), transparency and anti-corruption measures, and a chapter specifically17 “2021 Trade Policy Agenda and 2020 Annual Report”, Office of the United States Trade Representative,
1 Mar 2021, 1-6, https://ustr.gov/sites/default/files/files/reports/2021/2021%20Trade%20Agenda/
Online%20PDF%202021%20Trade%20Policy%20Agenda%20and%202020%20Annual%20Report.pdf
18 Aidan Arasasingham and Emily Benson, “The IPEF gains momentum but lacks market access”, East Asia
Forum, 30 June 2022, https://www.eastasiaforum.org/2022/06/30/the-ipef-gains-momentum-but-lacksmarket-access/19 Jagdish N. Bhagwati, “US Trade Policy: The Infatuation with FTAs”, Columbia University, Discussion Paper
Series no. 726 (April 1995), 5-10, https://academiccommons.columbia.edu/doi/10.7916/D8CN7BFM

215

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

for how small and medium-sized enterprises (SMEs) can benefit from the agreement20. The CPTPP
has broader ambitions than the RCEP, but that also makes it more challenging to implement. Withno dedicated Secretariat, progress has been slow.
The RCEP is a shallower agreement in comparison. It comprises 20 chapters21 and as an ASEAN-led
FTA, is much more accommodating on special safeguards depending upon individual conditionsof members. This is in sharp contrast to the more binding nature of the US-style FTAs that the
CPTPP mirrors. Notwithstanding the long timeline of 20 years that the RCEP proposes to eliminate
tariffs and restrictions within the bloc, member countries have already lobbied to delay the
implementation of certain provisions, according to their individual requirements. Its services tradeliberalisation commitments are much weaker than the CPTPP. Of the 15 members, eight havecurrently agreed to a positive list for services liberalisation and will transition to a negative list in
six years. The CPTPP does not follow this mixed approach, and all countries have to adhere to thenegative list. There are also no provisions for digital trade, labour and environmental regulations
or support for SOEs and SMEs in the RCEP. It has a Dispute Settlement Mechanism (DSM) thatreflects its overall cooperation approach and is simpler than the CPTPP’s more legalised investorstate dispute settlement (ISDS) approach. With the establishment of an interim bureau in February
2023,22 which will eventually transition to a full-fledged Secretariat, the RCEP implementation isready to gather force.
The less stringent standards of the RCEP have their own advantages and have allowed it tohave a wider regional membership than the CPTPP. At the same time, the built-in agenda forrenegotiations creates scope for the agreement to upgrade itself as it evolves. The distinguishingfeature of the RCEP is the unified set of ROOs criteria, that qualifies products manufactured in
any RCEP member country for tariff-free treatment across the bloc. This creates opportunities formore global production hubs in the region, at a time when the US and allies are actively looking
to diversify their China-centric supply chains. Altogether, the RCEP paves the path for greater
regional economic integration and is likely to give a positive boost to the APAC and the global GDP
growth over the long-term.23
Viewed from this lens, the IPEF indeed falls short of the mark. Here is how it compares with the
RCEP and the CPTPP on key parameters:
1. Coverage and scope: The IPEF currently includes 13 Indo-Pacific nations and the US. Together
they comprise 40 per cent of the world’s GDP, around 30 per cent of its population and 28
per cent of the global trade. This makes it larger in market size than both the RCEP and the
CPTPP and comparable in population size to the RCEP. In scope, it rivals the CPTPP. Although
it comes with just the four Pillars of Trade, Supply Chains, Clean Economy and Fair Economy, itaims to cover considerable ground under each of these Pillars, including digital trade, labourand environment protection, establishing critical minerals supply chains, and regulations for
20 “Comprehensive and Progressive Agreement for Trans-Pacific Partnership text and resources”, Ministryof Foreign Affairs and Trade, New Zealand, https://www.mfat.govt.nz/en/trade/free-trade-agreements/
free-trade-agreements-in-force/cptpp/comprehensive-and-progressive-agreement-for-trans-pacificpartnership-text-and-resources/
21 “RCEP text”, Australian Government – Department of Foreign Affairs and Trade, 15 November 2020,
https://www.dfat.gov.au/trade/agreements/in-force/rcep/rcep-text
22 Paul Rujopakarn and Paphamon Arayasukawat, “RCEP Interim Bureau Opens at ASEAN HQ”, National News
Bureau of Thailand, 6 February 2023, https://thainews.prd.go.th/en/news/detail/TCATG230206104625448
23 Priyanka Kishore, “RCEP sends a strong message, just when needed”, Unravel, 24 November 2020, https://
unravel.ink/rcep-sends-a-strong-message-just-when-needed/216

Impact of regional trade agreements on the IPEF

transparency and criminalisation of corruption. However, unlike the CPTPP, it is more flexible.
Members have the option to choose which Pillars they want to engage in.
2. Market access: There are no direct provisions to expand market access between members or
reduce tariff or non-tariff barriers, which has led to protests even from some US businesses.24
3. Setting standards and rule-making: Through the IPEF, the US aims to become the chief rulesetter in the Indo-Pacific region. Like the CPTPP, which kept many of the provisions of the USled TPP, the IPEF aims to elevate labour, environment and regulatory standards in the region
to that of the US. But its goal of setting similar operating standards across a diverse set of
economies at different stages of development is problematic and will not be achieved easily. A
case example is India opting out of the Trade Pillar.
4. Private sector participation: The utilisation of FTAs, especially by the micro, small and mediumsized enterprises (MSMEs), can be a challenge. In the ASEAN, companies have cited lack of
information and privacy issues as top reasons for not using FTAs. This poses a big hurdle for the
IPEF. A key requirement for achieving the goal of resilient supply chains is information-sharing
between governments and the private sector to develop early warning signals of supply chain
disruptions. To this end, the substantial conclusion of the negotiations of the Supply Chain
Pillar on 27 May 202325 proposed the establishment of two bodies – the IPEF Supply Chain
Council and the IPEF Supply Chain Crisis Response Network – to facilitate the developmentof sector-specific action plans during normal times and emergency communication in caseof crisis. While this is a step forward, it is not clear whether the bodies will act largely as
facilitators or will have a stronger role in implementing the supply chain provisions. In the end,
the success of the Supply Chain Pillar depends on a large commitment from the businesses toshare private data. So far, the IPEF has failed to outline a strong motivation for doing so.
5. Enforcement and dispute settlement: Unlike the CPTPP, the IPEF does not come with arobust enforcement mechanism. The RCEP too does not have a binding enforcement clause.
However, it incorporates a DSM that allows for the establishment of a panel to resolve disputesthat cannot be resolved by consultations. No such built-in provisions exist in the IPEF. While
the Fair Economy Pillar talks about anti-corruption measures and tax transparency, these are
to be monitored and resolved by members within their domestic legal frameworks, as per theapplicable IPEF standards. This leaves the outcome of the IPEF very much dependent on the
motivations of the members to cooperate.
6. Motivation and impact: Both the CPTPP and the RCEP include tangible measures that makeit possible to assess and quantify the economic benefits they might deliver. They are largely
seen as liberalising trade and boosting the region’s economic prospects in the long run. But
the IPEF’s architecture makes it difficult to make such predictions. This focuses more attention
on its political motives. By keeping the Mainland and its allies out of the agreement,26 the US

24 “Business and Agriculture Community Letter to the Administration on the Indo-Pacific Economic
Framework (IPEF)”, US Chamber of Commerce, 26 May 2023, https://www.uschamber.com/international/
business-and-agriculture-community-letter-to-the-administration-on-the-indo-pacific-economicframework-ipef
25 “Press Statement on the Substantial Conclusion of IPEF Supply Chain Agreement Negotiations”, US
Department of Commerce, 27 May 2023, https://www.commerce.gov/news/press-releases/2023/05/
press-statement-substantial-conclusion-ipef-supply-chain-agreement
26 Charles Dunst, “Spotlight - Cambodia and Laos”, Center for Strategic and International Studies, 1 August
2022, https://www.csis.org/blogs/latest-southeast-asia/spotlight-cambodia-and-laos-august-1-2022

217

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

has positioned the IPEF as an alternative to the China-led economic order. This could resultin lower cooperation from some members, such as the ASEAN nations, that seek to maintaina balanced relationship with the dominant external powers. Such a development would be asetback for the IPEF’s economic goals.

Reconciling the IPEF with existing trade agreements
Despite these issues, the APAC countries that have been invited to join the IPEF have embraced
it quickly. There are also no overwhelming dissents against the pact amongst commentators andobservers. Most see the presence of the US in the region as an important check to rising Chinese
dominance and observe no downside in joining the IPEF, including in the ASEAN, as highlighted by
the 2023 State of Southeast Asia report.27 46.5 per cent of the respondents see a positive impactof the IPEF on the region while 41.8 per cent are unsure of the impact. Only 11.7 per cent consider
it negative. This coincides with a decline in the perception of China as the key economic, politicaland strategic influence in the ASEAN, while the view on the position of the US in the region has
improved.
The positive reception of the IPEF can partly be attributed to the Biden Administration’s foresightto emphasise that it is not a trade but an economic agreement. It is difficult to fully come to termswith this description as it has many aspects of a trade policy, and the US is leveraging it to set rules
across a gamut of trade, digital economy, labour and environment-related issues.
However, if we look at the IPEF as not being mutually exclusive to existing trade agreements, someadvantages become visible:
1. Large reach: The barrier to joining the IPEF is low. Prospective members just have to decide
whether they want to join one of the Pillars and they can sign up to others later. In an increasingly
nationalistic and fragmented world, this gives governments much more power and space todrive negotiations at home to join a multilateral agreement. Because of its flexible approach,the IPEF has the potential to become a much larger bloc than the RCEP and the CPTPP. This
would mean that the countries participating in all three agreements (seven currently) will haveaccess to a very wide set of markets spanning three continents. This could encourage morenations to make efforts to join all of them, leading to more improved and uniform standards
across a multitude of trade and economic areas.
2. An inroad to India: In addition to bringing the US back to the table in Asia, the IPEF also
provides its members a segue into India, which has shunned multilateral agreements so far
and has also stayed out of the Trade Pillar of the IPEF. This is especially a welcome development
for New Zealand, which currently does not have a bilateral FTA with India.
3. The incentive of more US foreign direct investment (FDI): While the IPEF lacks direct market
access measures, it brings prospects of more US FDI into the APAC region and the benefits ofknowledge-sharing in niche technologies like advanced biofuels, green hydrogen, and carbon

27 “The State of Southeast Asia 2023 Survey Report”, ASEAN Studies Centre at the ISEAS-Yusof Ishak Institute,
9 February 2023, 21-23, https://www.iseas.edu.sg/wp-content/uploads/2025/07/The-State-of-SEA-2023Final-Digital-V4-09-Feb-2023.pdf

218Impact of regional trade agreements on the IPEF

capture and storage. This is already happening as ‘China+1’28 is pushing not only US companies,
but also firms in Japan and South Korea, to look elsewhere to de-risk and diversify their supply
chains. US FDI in the APAC stood at nearly a trillion in 2021, double of that at the start of thedecade. The IPEF could give this an added push by creating a bridge between the US and the
APAC companies. The RCEP’s common ROOs will be an added advantage and will magnify thetrade benefits for the US firms.
4. A shared rule-setting approach: The IPEF includes areas such as digital economy andoversight on corruption, which are not necessarily included in traditional FTAs. This positions
it well to set common rules for cross-border data flows and create a framework of digitalinteroperability within the bloc. However, these rules might not necessarily be set by the US.
India, Indonesia and Thailand have relatively strict existing digital economy rules and it willserve the IPEF well to take these into consideration. This is true for other Pillars as well. For
instance, the Singapore Australia Green Economy Agreement29 could become a template for
the Clean Economy Pillar.
5. Lifting the standards of members: Like the CPTPP, a well-designed and meaningful IPEF will
motivate less developed countries on the roster to speed up the implementation of importantreforms to tap into opportunities from the Agreement. Countries could use the RCEP as a
stepping stone to upgrade to the IPEF’s more stringent standards. Overtime, this will also aid
the RCEP to raise its standards and shed its tag of a low-quality agreement.

Conclusion
With the Supply Chain Pillar already finalised in June 2023, the IPEF is on its way to become thefastest trade treaty negotiated in history. Its simple framework and flexible participation approachis serving it well in attracting members and closing negotiations. However, this also makes it aweaker proposition as compared to traditional multilateral trade agreements like the RCEP and
the CPTPP. With no direct measures to increase the APAC’s market access to the US and a weak
enforcement mechanism for its ambitious agenda, it is not clear how the IPEF will generate thenecessary interest in the private sector, which is critical for its success.
Its chances will be much better if it does not position itself as an arbiter of the economic order inthe region and more as an economic agreement complementing the existing trade agreements.
A good way to start this will be by extending invites to Cambodia and Lao PDR to join the groupas well as by sharing rule-setting responsibilities with other members within the IPEF. The latter
will allow it to adopt appropriate templates of existing agreements that match its standards andobjectives. The APAC businesses will likely then be more willing to view the IPEF as a conduit for
US FDI in the region and knowledge transfer, which will make it a more appealing proposition
for them. The IPEF can facilitate the US goal of developing an alternate set of value chains in
critical industries like chips and semiconductors. But it must do so without upsetting the current
relationships and equilibrium in the APAC. For the ASEAN, which is inclined to maintain a balanced
relationship with the US and China, this is of paramount importance.
28 China+1 refers to the strategy of companies diversifying their operations away from China. Initially,
prompted by rising labour costs in China, it has gathered more steam in recent years due to risinggeopolitical tensions between the US and China that has also spilled over to other regions, such as the
EU and UK.
29 “Singapore-Australia Green Economy Agreement”, Australian Government – Department of Foreign
Affairs and Trade, 18 October 2022, https://www.dfat.gov.au/geo/singapore/singapore-australia-greeneconomy-agreement

219

The Making of the Indo-Pacific Economic Framework for Prosperity (IPEF)

Overtime, the US should consider other options to increase the attractiveness of the IPEF if it is tostay meaningful alongside the RCEP and the CPTPP. These can include easing non-tariff barriers totrade, indirect trade benefits such as concessions under the Inflation Reduction30 and the CHIPS
and Science Acts,31 ensuring meaningful progress on technology transfer, and aiding research anddevelopment.
In the end, it is in the US interest to make the IPEF attractive to the other negotiators. If the US
government goes missing again in the APAC, the US businesses will increasingly be forced to rely
more on their Asian subsidiaries to get trade benefits via the CPTPP or the RCEP. This will mean
shifting more production to the APAC region.32 Currently, only 40 per cent of RCEP value-added
content is required to avail of the trade benefits in many categories, but this could be raised going
forward. This will not only be a setback for the Biden Administration’s new worker-centric trade
policy but also the overall re-industrialisation ambitions of the US.

30 “U.S. Secretary of Commerce Gina Raimondo Statement on Signing of Inflation Reduction Act”, US
Department of Commerce, 16 August 2022, https://www.commerce.gov/news/press-releases/2022/08/
us-secretary-commerce-gina-raimondo-statement-signing-inflation
31 “The Passage of the CHIPS and Science Act of 2022”, US Department of State, 9 August 2022, https://www.
state.gov/the-passage-of-the-chips-and-science-act-of-2022/
32 Dr. Deborah Elms, “Testimony before the U.S.-China Economic and Security Review Commission Hearing
on ‘Challenging China’s Trade Practices: Promoting Interests of U.S. Workers, Farmers, Producers, andInnovators’”, Asian Trade Centre, Panel III: Regional Economic and Trade Engagement, 14 April 2022,
https://www.uscc.gov/sites/default/files/2022-04/Deborah_Elms_Testimony.pdf

220Impact of regional trade agreements on the IPEF

About the author
Ms Priyanka KISHORE has more than a decade’s experience in macroeconomic research andforecasting across Asia. Her expertise lies in analysing and forecasting macro fundamentals overthe short and long-term, with a special focus on trade, debt sustainability and macro policy. In
addition, she specialises in macro-modelling and scenario analysis, aimed at quantifying theimpact of exogenous shocks on economies.
Ms Kishore is an independent economic advisor for corporates, central banks, governments
and institutional investors. Previously she was the Economic and Forum Director for a CEO peergroup forum, IMA Asia. Prior to this, she led Oxford Economics’ Singapore Global Macro Services
team and was responsible for overseeing the firm’s South and Southeast Asia research. She is anaccomplished speaker and conducts regular economic briefings for corporate boards, industry
associations and policymakers. Ms Kishore makes regular appearances on Bloomberg, CNBC,
BBC, CNA and other business channels. She is also frequently quoted by major global and Asianpublications such as FT, WSJ, NYT, The Straits Times, NAR and SCMP, and often pens op-eds ineconomic magazines and business journals.
Ms Kishore has worked as a strategist and economist in the banking sector. She was in charge ofSouth Asia FX views and trading strategies at Standard Chartered Bank. Prior to that, she was Headof Emerging Asia Research and Senior Economist at ICICI Bank, India’s largest private bank. She
holds a Master’s degree in Economics from the Delhi School of Economics, India.

221

Scan the QR Code toshare your feedback!