INDO-PACIFIC ECONOMIC FRAMEWORK FOR PROSPERITY (IPEF)
– INTERNATIONAL
News: This
strategic-economic bloc will only tighten the leash
What's in the news?
● The
U.S.-driven Indo-Pacific Economic Framework
for Prosperity would result in a complete stranglehold over the economic
systems of the participating countries.
Indo-Pacific Economic Framework for Prosperity (IPEF):
● The
Indo-Pacific Economic Framework for Prosperity (IPEF) is an economic initiative
that was launched by United States President Joe Biden on May 23, 2022.
Member states:
● IPEF
has fourteen member states,
including Australia, Brunei, Fiji, India, Indonesia, Japan, South Korea,
Malaysia, New Zealand, Philippines, Singapore, Thailand, United States, and
Vietnam.
Pillars: The IPEF has four pillars that form the basis of its
economic framework. These are
Aim:
● To
bring together its allies in the Indo-Pacific region to enhance economic cooperation.
● The
IPEF reignites the twin ambitions of the U.S. to provide economic leadership
and challenge China’s hegemony in the
region.
● To
develop high-standard, worker-centered
commitments covering labour rights, the environment and climate, the
digital economy, agriculture, transparency and good regulatory practices,
competition policy and trade facilitation.
● To
ensure a high degree of regulatory coherence
and to make market access contingent
upon the realization of regulatory standards.
Significance of IPEF:
1. Strategic blueprint:
● The
Indo-Pacific Economic Framework (IPEF) is a strategic blueprint aimed at promoting economic integration, connectivity,
and cooperation among countries in the Indo-Pacific region.
2. Inclusive approach:
● It
envisions a comprehensive and inclusive approach to harness the region’s
economic potential, while fostering
stability, development, and shared prosperity.
3. Interdependence:
● The
IPEF recognizes the growing interdependence of economies in the Indo-Pacific
and the need for collaboration to address
common challenges and seize opportunities.
4. Economic interlinkages:
● It
seeks to strengthen regional economic linkages through various initiatives,
including infrastructure development,
trade facilitation, financial connectivity, digital cooperation, and
people-to-people exchanges.
5. Promote openness in Indo-Pacific:
● At
its core, the IPEF emphasizes the principles of openness, transparency, inclusiveness, and respect for international law.
6. Infrastructure development:
● It
aims to enhance connectivity by improving physical infrastructure, such as ports, roads, railways, and energy networks,
to facilitate the seamless movement of goods, services, and capital within the
region.
● It
also encourages digital connectivity and innovation to leverage the potential
of emerging technologies.
7. Collaboration approach:
● The
IPEF also emphasizes the importance of multilateral
and bilateral cooperation frameworks to facilitate economic integration.
● It
encourages countries to collaborate on regional initiatives and engage in
dialogue to address issues related to trade barriers, investment regulations,
and intellectual property rights.
India and IPEF:
● India
had agreed to three out of four pillars
of trade relating to supply chains - tax, anti-corruption and clean energy.
Significance of IPEF:
1. Strategic:
● The
US-led Indo-Pacific Economic Framework for Prosperity (IPEF) is strategically
important for India.
2. Economic engagement:
● It
will enhance India’s economic engagement in the region, which was dented after
India’s withdrawal from the Regional Comprehensive Economic Partnership (RCEP)
agreement.
● The
IPEF will help control the damage caused by the RCEP withdrawal as all the IPEF
members save India and the US are signatories to the RCEP.
3. Supply chain management:
● Building
resilient supply chains is one of the motives of the IPEF.
● India
can consider members as alternative
sources for its raw materials requirements.
● This
could reduce India’s overdependence on China for these inputs.
4. Trade engagement:
● The
IPEF can also support India’s renewed aspire for free trade agreements.
● IPEF
membership is a testimony to India’s aggressive stance on bilateral and
regional trade engagements.
Concerns in IPEF:
1. Financial burden:
● Though
it's stated to be beneficial for the countries in the region it would require huge investments and active
participation in the implementation phase.
2. Lack of consensus:
● Unlike
traditional trade blocks where the agreements are the results of arduous
negotiations by the members, the IPEF is driven
primarily by the USA.
3. Binding trade rules:
● It
might fail to bring all countries in the region on board as it comes with
binding trade rules but no guarantees on market access.
4. Issue of data localization:
● India’s
main concern is on the issue of data localization, on which it has locked horns
with the US over the last two or three years.
● In
2019, the government has introduced a bill in Lok Sabha that envisages a
framework for localizing Indian data and the establishment of a Data Protection
Authority.
5. Trade-offs and Market Access:
● The
framework may require India to make trade-offs in various areas, such as
agriculture, intellectual property, labor and environment standards, and the
digital economy.
India
is committed to a free, open, and inclusive Indo-Pacific region. It is
important to establish connectivity in
the Indo-Pacific region based on respect for sovereignty and territorial
integrity, consultation, good governance, transparency, viability and
sustainability.