IPEF - ECONOMY

News: India weighs better market access to join IPEF trade pillar

 

What's in the news?

       India is learnt to have asked for better market access in order to be a part of the trade pillar of the Indo-Pacific Economic Framework for Prosperity (IPEF), a 14-nation trade bloc.

 

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

  1. Trade
  2. Supply Chains
  3. Clean Economy
  4. Fair Economy (Taxation & Anticorruption)

 

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-centred 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.