A Reaction to the IPEF: Shrinking US competitiveness?
The US is on the brink of formally announcing its long awaited Indo-Pacific Economic Framework (IPEF), but swirling around the grand announcements is a worrying lack of clarity. The framework comes five years after the US pulled out of the Trans Pacific Partnership (TPP), which subsequently left their economic strategy in limbo, and gave the nations of Indo-Pacific a degree of scepticism towards the US’s economic return to the region. Beyond the scars of the TPP, there are now several competing frameworks that have filled the void, with some analysts suggesting the US missed a prime opportunity in 2017. Moreover, while the IPEF has struggled to get off the ground due to domestic political issues, analysts are still firmly suggesting, if it hopes to be successful, the US will need to go further into ‘give and take’ negotiations. The IPEF will likely be joined by the US’s closest allies such as Japan, but beyond these staple partners, it is unclear how far the agreement will be able to attract smaller neutral or China-aligned powers. Questions over its attractiveness, credibility, and viability have therefore characterised initial regional responses, all of which this article seeks to put under the spotlight.
The problems associated with the IPEF are both numerous and interlinked. The primary issue is that, following the Trump administration's sudden exit from the Obama era’s TPP, the nations of the Indo-Pacific have not simply waited for the US to propose a new framework to fill the gap. After their exit, the TPP was relaunched without them just a year later as the Comprehensive and Progressive Transpacific Partnership (CPTPP), which already includes around 13% of world GDP and has several major applicants, including China. Alternatively, as of 2020 the Regional Comprehensive Economic Partnership (RCEP) was launched, primarily by ASEAN, and has been coined a multilateral success by members from across the region, including China, Australia, and Japan. The US is, therefore, no longer pushing out into uncharted waters, and must prove the IPEF is both economic and political value added.
The IPEF has four pillars that centre on a). promoting fair and resilient trade, b). supply chain resilience, c). infrastructure, clean energy and decarbonisation, and finally d). tax and anti-corruption measures. While the US-led framework has been praised in some areas as both progressive and innovative, particularly in the promotion of a ‘free’ digital regime in comparison to the European and Chinese outlines, it offers no reduction to US tariffs. This would have been particularly attractive for Indo-Pacific nations, though the reduction of tariffs was the original reason for the Trump administration's exit from the TPP, and the electoral significance of the manufacturing industry in the US is still strong. The IPEF therefore faces considerable domestic constraints to its competitiveness. Even as it stands, the Biden Administration intends to pursue the IPEF through executive action, instead of through the Senate as is the norm. This is likely to avoid drawn out sparring in the politically tied chamber, which is tipped to fall to the Republicans this November.
Furthermore, while the US has been sitting on the sidelines, the region has evolved, to a large degree, around the Sino-American strategic rivalry. The RCEP and CPTPP have both notably been inclusive agreements, and analysts suggest unless the US is willing to change tack and make major concessions over tariffs, it will need to boost the IPEF’s inclusivity. What this means is that membership, or a lack thereof, should be de-politicised and not representative of a nation’s choice between the two great powers. In October 2021 Vice-President Kamala Harris announced to Southeast Asian leaders that the IPEF would not force any nation to align with either the US or China, which is a particularly critical issue for the region at present. Despite this, it is still unclear how far the agreement will be able to break free from the political connotations of working with the US, leaving its future membership unknown.
Southeast Asia has been one of the areas of the Indo-Pacific in which the Biden administration has focused its efforts. The 10 nations of Southeast Asia met with the President on the 15th of May 2022 in the first US-ASEAN Special Summit, and while the IPEF was not discussed, diplomats and heads of states have been highly vocal on the US’s re-entrance into the region. As it stands, only the Philippines and Singapore are expected to join at launch, with other countries cautiously allowing details to emerge. With ASEAN having a high involvement rate in both the RCEP and the CPTPP, and the fact that China is ready and willing to negotiate tariff reductions, it can be asserted that the US has come up short. While not uncompetitive, the US is clearly no longer ‘too big to ignore’ for the Indo-Pacific nations, and will have to listen to regional voices and adapt to their demands if the IPEF is to be both a durable and attractive long term option.