The Biden administration has launched a new economic bloc in the Asia Pacific, aimed at countering Chinese influence in the region. Termed the ‘Indo-Pacific Economic Framework’ (IPEF), the group will aim to establish new rules of commercial conduct. However, critics are sceptic of its effectiveness given the lack of market access provisions.
Who and What is IPEF?
IPEF was launched by Biden on the 23rd of May. At the time, the list of members totalled 13 nations. Major powerhouses like Japan, South Korea, and India sat alongside Brunei and Singapore. A significant Southeast Asian faction was also present, with Indonesia, Malaysia, Thailand, Vietnam and the Philippines. Australia and New Zealand rounded out the list, and China is excluded.
Yesterday Washington announced Fiji would become IPEF’s 14th member, signalling a positive shift towards closer ties with Pacific Island nations. Together, the IPEF countries make up approximately 40% of the world economy.
At IPEF’s launch in Tokyo, Biden said the bloc was “writing the new rules for the 21st century economy…We’re going to help all of our countries’ grow faster and fairer.” The initiative has four focus areas: increasing security and resilience of supply chains, investing in clean energy, anti-corruption efforts, and greater digital trade.
Each member will be allowed to choose which of these goals they’ll pursue deals in, without committing to all of them.
However, IPEF is a loosely-defined bloc, not a binding agreement. The initiative does not include market access measures, such as reduced tariffs. IPEF is not a free trade agreement, like RCEP or the CPTPP.
A lack of concrete assurances in the network may diminish its scope – there seems to be little to entice other nations to sign on. Aaron Connelly of the International Institute for Strategic Studies, says “it is going to be difficult to convince Asian governments to change rules in ways that may be disruptive to their political economies without the promise of increased access to the American market.”
China’s Foreign Minister Wang Yi was also critical, “The framework claims to create a new order of freedom, openness and inclusiveness, but how can an economic framework be free without lowering tariffs? Without market access, how can we talk about opening-up?”
America has already tested the concept of countering Chinese influence through setting standards and principles. Trump’s Blue Dot Network of 2019 and Biden’s Build Back Better World last year both had similar goals and a similar lack of tangible measures.
Unfortunately, neither has produced much success or momentum so far.
Why was IPEF created?
The US was previously part of the Trans-Pacific Partnership (TPP) – in fact, the Obama administration was responsible for creating the TPP. However, Trump pulled America out of the TPP on his first full day in office. It’s since been rebranded the CPTPP, under Japan’s leadership.
Furthermore, the void of America’s absence in the Pacific has been eagerly filled by China. In fact, RCEP (the Regional Comprehensive Economic Partnership) came into force less than five months ago, and includes China. Many have called RCEP ‘China-led’, though others dispute this title as dismissive.
RCEP is now the world’s largest trade bloc, with 15 countries, and constitutes a traditional FTA. Most of the countries that signed up for Biden’s IPEF are already members of RCEP.
It remains to be seen whether Washington’s loosely-organised response to Beijing’s influence in the Pacific will morph into something more concrete.
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