Context

• U.S. President Joseph Biden has launched a new trade initiative for the region, the Indo-Pacific Economic Framework for Prosperity (IPEF), which was witnessed by leaders of 13 countries, including Prime Minister Narendra Modi.
• It is heralded as the start of a new economic bloc in the region, one which could be seen as a counter to China.
• The IPEF, which comprises Australia, Brunei, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, the United States and Vietnam, represents 40% of the world’s GDP. 
• However, the launch of the IPEF has also been accompanied with some scepticism, not least from within the U.S., about just what it can deliver, given that officials made it clear that it is not a traditional trade deal. 

What is the IPEF, if not a trade deal? 

• For the past few months, the Biden administration has been working with countries in the Indo-Pacific region to try and bring them on board with the idea of an alternative trading arrangement led by the U.S. 
• The four pillars that the IPEF framework rests on are ‘Connected Economy’, setting standards on digital trade, cross-border data flows and data localisation; ‘Resilient Economy’, with supply chain commitments and guarding against price spikes; ‘Clean Economy’, with commitments on clean energy, decarbonisation, and infrastructure to cut emissions; and ‘Fair Economy’, in terms of enforcing regimes that cut down on money laundering and corruption, and ensure fair taxation. 
• As a result, the IPEF is more about standard setting and facilitating trade and will not involve more market access for its members. Nor will it negotiate lower tariffs. 
• Officials say as the negotiations proceed, they may incorporate more ideas, but have also stressed that members can take a “pick and choose” attitude towards joining only the pillars that interest them. 
• While this concept has been developed in order to be more inclusive and attract more members, it also has raised questions about the seriousness of the U.S. proposition. 

Why is the U.S. promoting this bloc? 

• The IPEF is part of the U.S.’s more than a decade old “Pivot to Asia” programme, re-imagining the Indo-Pacific as a geographic construct including America. 
• The Quad, consisting India, Australia, Japan and the U.S., is part of the same pitch made originally by the Obama administration, and then re-energised by the Trump administration. 
• The IPEF is also a way for the U.S. to keep its foot in the door on trade in Asia, after the Trump administration walked out of the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in 2017 that includes Canada, Mexico and countries in Asia and South America (China has applied to be a member).
• The U.S. is also not part of the other big trade bloc, the Regional Comprehensive Economic Partnership (RCEP), that includes China, all 10 members of the ASEAN, as well as Australia, Japan, New Zealand and South Korea, a deal India walked out of in 2019. 
• By announcing a new arrangement that includes India, seven of 10 ASEAN members, and a majority of the RCEP members, the Biden administration is seeking to signal that it has not been cut out of trade in the region. 
• The IPEF also clearly has a geopolitical edge — as it doesn’t include China, although the Biden administration stopped short of including Taiwan in the launch, as many U.S. Congress members had demanded.
• Finally, the IPEF is part of the Biden administration’s way of showing that despite its current focus on the war in Europe, and hot pursuit of Russia through economic sanctions, it has not lost sight that Asia, and the challenge from China, is prominent in the U.S. agenda.  

What’s in it for India?

• For the Indian government too, which walked out of the RCEP after eight years of negotiations, the membership of IPEF keeps it in the room on Asian trading arrangements, and is a way of blunting criticism that it is overtly protectionist. 
• In the past year, the government has concluded its first-ever trade deal in a long time with the United Arab Emirates, and is in active negotiations to complete deals with the U.K., Australia and Canada.
• The IPEF’s non-specific and flexible nature also suits India, which has held strong views on a range of issues like labour standards, environmental restrictions on fossil fuels, and data localisation.
• India’s inclusion also comes from a geopolitical need to counter China’s virtual control over Asian trade, given that the RCEP seeks to eliminate about 90% of tariffs amongst members, particularly given India’s bilateral issues with China since the 2020 transgressions by the Chinese army at the Line of Actual Control.

Criticisms of the arrangement

• China has been deeply critical of all U.S. initiatives in the region, as a part of a strategy to “contain China”. 
• The biggest criticism of IPEF in other capitals in Asia is that it is still too vague and lacks enough substance. 

Reference:

https://www.thehindu.com/news/international/explained-is-indo-pacific-economic-bloc-limited-in-scope/article65469927.ece