INDO PACIFIC ECONOMIC FRAMEWORK

2. Background

• The U.S.-led economic grouping of a dozen countries representing 40 per cent of the global GDP proposes to advance resilience, economic growth, competitiveness and fairness in member countries. 
• However, some analysts view it as a move to counter China’s growing influence in the region.
• The stated objectives of the IPEF are to promote trade, clean energy, and infrastructure and to strengthen supply chains. 
• For reasons relating to substantial economic dependence on China, three smaller economies among ASEAN member countries — namely, Laos, Cambodia and Myanmar — have stayed out of the IPEF.

3. Significance of Indo-Pacific Economic Framework

• Indo-Pacific Economic Framework for Prosperity (IPEF) aims to strengthen economic partnership among participating countries to enhance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness in the Indo-Pacific region.
• The IPEF was launched with a dozen initial partners who together represent 40% of the world GDP.
• It is a declaration of a collective desire to make the Indo-Pacific region an engine of global economic growth.
• The Indo-Pacific covers half the population of the world and more than 60% of the global GDP and the nations who will join this framework in the future, are signing up to work toward an economic vision that will deliver for all people.

4. Domains of cooperation in Indo Pacific Economic Framework

• The economic framework broadly rests on four pillars: trade, supply chain resilience, clean energy and decarbonisation, and taxes and anti-corruption measures. 
• Trade: We seek to build high-standard, inclusive, free, and fair trade commitments and develop new and creative approaches in trade and technology policy that advance a broad set of objectives that fuel economic activity and investment, and promote sustainable and inclusive economic growth, and benefits workers and consumers. Our efforts include, but are not limited to, cooperation in the digital economy.
• Supply Chains: We are committed to improving transparency, diversity, security, and sustainability in our supply chains to make them more resilient and well-integrated. We seek to coordinate crisis response measures; expand cooperation to better prepare for and mitigate the effects of disruptions to better ensure business continuity; improve logistical efficiency and support; and ensure access to key raw and processed materials, semiconductors, critical minerals, and clean energy technology.
• Clean Energy, Decarbonization, and Infrastructure: In line with our Paris Agreement goals and efforts to support the livelihood of our peoples and workers, we plan to accelerate the development and deployment of clean energy technologies to decarbonize our economies and build resilience to climate impacts. This involves deepening cooperation on technologies, mobilizing finance, including concessional finance, and seeking ways to improve competitiveness and enhance connectivity by supporting the development of sustainable and durable infrastructure and by providing technical assistance.
• Tax and Anti-Corruption: We are committed to promoting fair competition by enacting and enforcing the effective and robust tax, anti-money laundering, and anti-bribery regimes in line with existing multilateral obligations, standards, and agreements to curb tax evasion and corruption in the Indo-Pacific region. This involves sharing expertise and seeking ways to support capacity building necessary to advance accountable and transparent systems.

5. Significance and Prominence of the Framework

• It's a salient attempt to allow countries to decouple from Chinese over-dependence. The framework will strengthen the existing free and open rules-based global order, which China has been targeting to upend.
• It will help the U.S regain its dominant position in geopolitics that it has been losing to China and Russia. The aim is to reclaim economic leadership in East Asia and the ASEAN region without giving away concessions that would anger domestic lobbies.
• It will help in setting the rules of the road for the digital economy, ensuring secure and resilient supply chains. It will also play a pivotal role in raising standards for transparency, fair taxation, and anti-corruption.
• It complements the “Quad Plus” process. It brings together seven critical countries of the Association of Southeast Asian Nations (ASEAN), all Quad states, and dialogue partners. This grouping solidifies a case for the “plus” characterisation of the Quad process.
• It will counter the other regional groupings; the TTP, the CPTPP and the RCEP. None of them had India or the U.S as participants.
• It will also improve mitigation and adaptation efforts towards climate change by helping in inducing major investments necessary in clean energy infrastructure and the clean energy transition. 

6. India's interest in Indo-Pacific

• India’s trade in this region is growing rapidly, with overseas investments being directed towards the East.
• For Instance, the Comprehensive Economic Partnership Agreements with Japan, South Korea, and Singapore, and the Free Trade Agreements with ASEAN (Association of Southeast Asian Nations) and Thailand.
• Nearly 50% of India’s trade is centred in the Indo-Pacific Region and the Indian Ocean carries 90% of India’s trade and its energy sources.
• India wants to assure freedom of navigation, secure choke points, resolve conflicts peacefully and address non-traditional security threats in the Indian Ocean Region (IOR).
• India has been active in championing a Free and Open Indo-Pacific. The US, Australia, and the members of the ASEAN have all expressed a common view that India plays a greater role in the region.
• Strong naval capabilities, multilateral diplomacy, and economic integration in the region are the need of the hour
• The countries in the region should have equal access as a right under international law to the use of common spaces on sea and in the air that would require freedom of navigation, unimpeded commerce and peaceful settlement of disputes by international law.

7. Associated Challenges

• 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.
• More unilateral and not consensus-based: Unlike traditional trade blocks where the agreements are the results of arduous negotiations by the members, the IPEF is driven primarily by the USA.
• 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.

• India’s main concern is on the issue of data localisation, 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

8. Current Developments

• With the creation of the IPEF, the US intention appears to be to dilute China’s economic heft in the Indo-Pacific region. 
• China’s influence in Asia and Oceania has grown hugely over time due to its sub- stantial-to-overwhelming trade and investment ties with ASEAN nations as well as Japan, South Korea, Australia and New Zealand.

9. Need of the Hour

• Establishing Common Standards: Such standards will cover labour rights, environmental standards, and the protection of intellectual property rights.
• Addressing Tech-related Issues: Clear framework on Data flow
• Balancing Self-Reliance and Globalization: India has always expressed its desire to attract foreign investment and become part of global supply chains, it is time to utilize the opportunities provided under IPEF with carefully framed policies.
• It is important to establish connectivity in the region based on respect for sovereignty and territorial integrity, consultation, good governance, transparency, viability and sustainability.
• Appropriate diplomatic manoeuvring and economic and military assertion are vital for the implementation of India’s interests in the region along with leveraging the space as a building block for multipolar world order.
• Shortcomings on the ground have often afflicted India and that needs to change.