Indo-Pacific Economic Framework Adds Visibility to U.S. Indo-Pacific Engagement

The United States launched the Indo-Pacific Economic Framework for Prosperity (IPEF) on May 23, 2022, in Tokyo, Japan. The announcement came almost 15 years to the day after the creation of the “Quad” in the Indo-Pacific. The IPEF – Indo-Pacific in name – appears to be part of a flood of initiatives taken by like-minded states to support the Indo-Pacific order in the face of an assertive China. With 14 members representing around 40 percent of global trade, the framework is neither a free trade agreement nor is it an answer to China’s Belt and Road Initiative (BRI). How then does it “fit” within the broader Indo-Pacific geography of strategies and what is its purpose? To answer these questions, this article first defines and catalogs what the IPEF is not and what it is. Second, it explores the role of the IPEF. Third, it looks at the framework’s likely direction of travel. Finally, it situates the IPEF within the context of geo-economic and geopolitical competition across the Indo-Pacific.

What It Is Not Tells Us What It Is

Despite its grandiose name, the IPEF is clearly not a free trade agreement (FTA). Second, it is neither a Johnny-come-lately American answer to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), nor is it something akin to U.S. President Obama’s (2009-2016) Trans-Pacific Partnership Agreement (TPP), which was rubbished by his successor, President Trump (2017-2021). Third, despite current U.S. President Joe Biden’s unveiling of the IPEF just prior to the Quad Leaders’ Summit in Tokyo in May 2022, the IPEF is not meant to be U.S.-led, in theory. Fourth, the framework is not an initiative of the Quad – an informal minilateral of Australia, India, Japan, and the U.S. – even though all four states are IPEF members. Last, it is not designed to contain America’s great power rival, China, but bypass it completely.

Knowing what the IPEF is not tells us much about what it is supposed to be. What we do know is that the framework consists of four main pillars: fair and resilient trade; supply chain resiliency; clean energy, decarbonization and infrastructure; and taxation and anti-corruption. The IPEF’s pillars broadly conform to the “free and open Indo-Pacific” concept first voiced by Japanese Prime Minister Shinzo Abe in 2016, as well as various initiatives undertaken by the Quad. Further, the IPEF is not a Quad initiative, but a U.S. one. Nevertheless, Washington plans to lead with a light touch and clearly hopes that the IPEF partners will share its approach and contribute ideas, responsibilities, and resources to get the framework up and running.

Visibility and Role

Washington sees the IPEF as the step-change it needs in terms of the visibility of America’s engagement with the Indo-Pacific. For nearly a decade, a revisionist China has stolen the limelight from the U.S. in terms of economic and development engagement under the guise of Chinese President Xi Jinping’s signature BRI. In short, America has failed to keep up with the times in terms of global public relations. The Biden administration, which has continued and expanded Trump’s Indo-Pacific-related policies and strategies, thus wishes to shine that same spotlight on the U.S.’s ongoing economic and especially financial initiatives, particularly in the Asia-Pacific. These remain strangely hidden despite their significance in terms of size and effect. “While it is true that China’s trade with Southeast Asia ($685 billion in 2020) [was] twice as large as America’s, the [U.S.] has been far more competitive on the investment front, with U.S. investment in the region amounting to $328.5 billion in [2020].” The IPEF, therefore, should give Washington the soapbox it needs to showcase its geo-economic initiatives such as fair and inclusive trade, sustainability, and digital sovereignty, particularly in terms of the digital economy. Indeed, in a White House press briefing on the IPEF, the term “digital economy” was mentioned no less than seven times. The “foundational” nature of the IPEF to overall U.S. strategy in the Indo-Pacific was also stressed.

By aiming to reassert U.S. economic and financial engagement and make it more visible, Washington hopes to again become not just an alternative to China, but the partner of choice. Importantly, it also gives the U.S. and other interested members another platform with which to engage Taiwan, which is not formally a member. This was clear from the White House press briefing with its emphasis on stronger US-Taiwan bilateral relations as well as broadly shared supply chain concerns among IPEF member-states related to global shortages of semiconductors.

Direction of Travel

IPEF member-states have already met three times since Biden’s announcement in May; twice virtually and once in-person in Los Angeles. Specifics remain woefully lacking, however, and India has signaled its unwillingness to go further with the IPEF on issues related to the first pillar – fair and resilient trade. This demonstrates Delhi’s continuing emphasis on non-alignment as well as protectionism when it comes to trade-related issues. Yet India did join the IPEF – a big step in the first place – and it clearly shows its favor of U.S. attempts at inclusive multilateralism in the Indo-Pacific, which form India’s unique Indo-Pacific prism. In addition, the fact that India joined with all other IPEF members in all three meetings shows that momentum is building for the IPEF. This is based on the desire of many countries across the Indo-Pacific to see the U.S. more fully engaged geo-economically.

Some have argued that the IPEF cannot compete with FTAs like the CPTPP or the much larger, China-led Regional Comprehensive Economic Partnership (RCEP), which represents over 2.2 billion people and accounts for circa 30 percent of global GDP. Yet it is worth pointing out that China’s BRI is nothing like an FTA either, but it is far more successful than either the CPTPP or the RCEP in terms of global impact and, despite all-too-apparent detractions, China’s global image.

Since the IPEF is one more in a series of U.S. reactions, specifically, and Indo-Pacific-wide responses, more broadly, to China’s aggressive geo-economic and geopolitical actions, it should not be understood as an FTA or even an answer to China’s BRI in terms of substance. That would be far too grandiose and far too politically controversial for the U.S. and, I would add, unnecessary as well. Instead, the IPEF is meant to be nothing less than the geo-economic “Quad” of the Indo-Pacific.

Like the Quad, the IPEF is informal with few obligations for members. It is more than an economic and financial “talk shop” but less than an FTA. It is a halfway house that sends reassuring signals to its members about the political economy and direction of travel of an Indo-Pacific that is being engulfed in great power competition. Those signals – working meetings, leaders’ summits, supply chain initiatives and rules-setting – all strengthen existing linkages between the U.S. and its fellow IPEF members and have the potential to strengthen that same geo-economic engagement between members with or without the U.S.

Rules-setting or Outright Control?

The IPEF already holds a place of importance for its members because it is one more in an increasingly long list of strategic and policy solutions for a polarized Indo-Pacific. It lends visibility to ongoing U.S. financial and economic engagement that never stopped but failed to attract the limelight – not on account of substance, but because it had become humdrum. The IPEF is meant to dust off and provide a coat of shiny new paint to America’s geo-economic engagement in the Indo-Pacific. While the framework, at first glance, seems to lack substantial differences from previous efforts, it will almost certainly capitalize and expand on them.

It seems to be working. Despite India’s misgivings about one pillar, the IPEF has attracted 14 members off the bat because it is all about China – but it can be about a lot more than China, too. It is, therefore, little surprise that China has noticed the IPEF. In late June, a professor at the Chinese Academy of Social Sciences analyzed the IPEF as a serious risk to China. The U.S. was again rudely seizing the initiative for supply chain rules-setting from China. It can do so, according to the professor, because of its alliances, i.e., “It [the U.S.] can control its allies’ supply chains.” This fundamental misreading of U.S. alliances as well as its geopolitical and geo-economic partnerships right across the Indo-Pacific tells us less about the IPEF and speaks volumes about China’s view of a future Indo-Pacific – one in which control matters more than anything else.