Focus on the Indo-Pacific: Better Understanding the Indo-Pacific Economic Framework for Prosperity

Brownstein Hyatt Farber Schreck

Executive Summary

President Biden officially launched The Indo-Pacific Economic Framework for Prosperity (IPEF) (“Framework”), the administration’s economic initiative for the region, during his visit to Tokyo on May 23. The Framework, largely viewed as a mechanism to counter China’s outsized influence in the region and aimed at shoring up commercial cooperation, has been a key focus of the administration. Thirteen countries (India, Indonesia, Thailand, Vietnam, Brunei, the Philippines Japan, South Korea, Australia, New Zealand, Singapore, Malaysia and Fiji) have publicly announced their intent to continue IPEF negotiations, signaling that the initiative is far from final. Countries have not yet indicated which pillars they will join, and a timeline for negotiations has yet to be revealed. While many in the region welcome the regional focus from the administration, the lack of an enforcement mechanism and market access have many lamenting the U.S. absence in more formal mechanisms. The U.S. government, likely in an effort to bolster the credibility and focus on the IPEF, sent several high-level officials, including Secretary of Defense Lloyd Austin, Deputy Secretary of State Wendy Sherman and other senior State Department officials to the region in early June following the president’s May 20‒24 visit and the official launch of the Framework.

The Framework

The administration, through the newly launched Indo-Pacific Economic Framework for Prosperity, aims to increase trade links in the Indo-Pacific region through four pillars:

  • Connected Economy: Largely focused on the digital economy and standards on cross-border data flows and data localization. This pillar aims to ensure small- and medium-sized enterprises can benefit from the region’s rapidly growing e-commerce sector, while addressing issues such as online privacy and discriminatory and unethical use of artificial intelligence.
  • Resilient Economy: Focused on strengthening global supply chains, this pillar will aim to establish an early warning system, map critical mineral supply chains, improve traceability in key sectors and coordinate on diversification efforts.
  • Clean Economy: Emphasizes promoting infrastructure investment and decarbonization as well as seeking commitments on clean energy and energy efficiency to achieve ambitious climate targets.
  • Fair Economy: Aims to establish new rules on tax and anti-corruption to promote a fair economy.

A fact sheet released by the White House adds that the IPEF will “enable the United States and our allies to decide on rules of the road that ensure American workers, small businesses, and ranchers can compete in the Indo-Pacific.” The fact sheet does not directly mention China despite strong implications conveyed by the administration that the initiative is geared toward countering its influence. Indo-Pacific nations welcome this signal of renewed focus on the importance of the region in U.S. policy, but there remain doubts as to whether it will deliver any real results. Many in the region have intimated that they would prefer that the United States rejoin TPP or its successor deal, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which are viewed to be more impactful mechanisms for regional trade and cooperation.

There is still significant uncertainty around the IPEF and how effective it will be as a mechanism for trade and engagement. The launch noticeably lacked details on which pillars countries have agreed to participate. There is some speculation that the original Framework was significantly softened in the lead up to the launch in order to attract countries who had previously expressed doubt or disinterest in the IPEF. Notably, the Indo-Pacific Economic Framework does not make any promises of greater U.S. market access and does not include any enforcement mechanisms. Some trade issues will likely prove difficult in areas like digital regulation, corporate accountability, labor standards and environmental protections.

There has yet to be any formal announcement of when negotiators will hold the first official round of discussions, but a high-level meeting of participant countries at the launch is expected by mid-summer. Negotiations within the four pillars of the Framework will be ongoing, but many view the U.S.-hosted November 2023 Asia Pacific Economic Cooperation Leaders’ Meeting as the target for finalizing agreements under the IPEF. Some advances are expected to be announced in key areas along the way like supply chains and clean energy.

Focus on the Indo-Pacific as a key strategic priority for the administration continued in the weeks following President Biden’s visit to the region. Secretary of Defense Lloyd Austin, Deputy Secretary of State Wendy Sherman and State Department Counselor Derek Chollet all made visits to the region. Defense Secretary Austin’s remarks at the Shangri-La Dialogue in Singapore on June 11 added another dimension to the recent Indo-Pacific talks and emphasized the importance of security and prosperity in the region as a core organizing principle of American national security policy.

Hill Response to the IPEF

On Capitol Hill, the Biden administration received some criticism over not including Taiwan in the Framework. Prior to its reveal, a bipartisan group of over 50 senators sent a letter to Biden calling for Taiwan’s inclusion in order demonstrate American support for the country as it faces continued threats from China. Taiwan discontent aside, congressional Democrats’ initial reactions were largely supportive of the Framework with House Foreign Affairs Committee (HFAC) ), Gregory Meeks (D-NY), and HFAC Asia Subcommittee Chair, Ami Bera (D-CA), applauding it. The Senate Foreign Relations Committee and Senate Finance Committee Chair, Ron Wyden (D-OR), also offered some praise. Others expressed some apprehension that the IPEF wasn’t ambitious enough, lacking Republican priorities including the elimination of barriers to digital and agricultural trade and demanding the strategy obtain congressional approval.

Future for U.S. Engagement

The Biden administration, shown through the launch of the IPEF and subsequent high-level remarks and travel to the region, is committed to engagement with the Indo-Pacific region. Biden’s first trip to Asia, almost 18 months after taking office, was successful for what it was, but leaves Asia analysts questioning the commitment to the region, particularly given the lack of a clear China strategy. Further, the ASEAN Leaders Summit held in Washington, D.C., a few weeks ago also lacked any real deliverables to deepen policy engagement in the region and serve as a foil to China’s ever-growing influence in Asia.

Senior U.S. government officials maintained engagement with the Indo-Pacific despite the president’s and administration’s pivot toward the June 6‒10 Summit of the Americas and launch of the Americas Partnership for Economic Prosperity (similar in content and structure to the IPEF). We fully expect U.S. engagement in the region to continue, even if the IPEF negotiations lose steam. The Quad will continue to be an important touch point for the administration, with the United States, Australia, India and Japan committed to deepening ties through a number of initiatives across global health, infrastructure, climate, people-to-people ties, critical and emerging technologies, cybersecurity, space and the newly announced Quad maritime security initiative.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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