Two visions of multilateralism are competing in the Indo-Pacific

The Indo Pacific Economic Framework (IPEF), signed by a total of 13 countries on May 23, 2022, in Tokyo, is being dubbed by many as a means of checking China’s economic clout in Asia and sending out a message that the US is keen to bolster economic ties with its allies and partners in the Indo-Pacific.

Many Chinese analysts themselves have referred to the IPEF as an “Economic NATO.” China has also been uncomfortable with the Quadrilateral Security Dialogue (Quad), which consists of the US, Australia, Japan, and India, and has even referred to Quad as an “Asian NATO” – though members of the grouping have categorically denied this assertion.  

The countries which joined the US-led IPEF are: Australia, Brunei, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam.

IPEF

These countries together account for 40% of global GDP. The four key pillars of the IPEF framework are:

  1. supply-chain resilience;
  2. clean energy, decarbonisation and infrastructure;
  3. taxation and anti-corruption;
  4. and fair and resilient trade.

While launching the plan, US President Joe Biden said

We’re here today for one simple purpose: the future of the 21st Century economy is going to be largely written in the Indo-Pacific. Our region.

US Commerce Secretary Gina Raimondo, while commenting on the IPEF, said that it was important because it provided Asian countries an alternative to China’s economic model.

A few points need to be borne in mind. First, many of the countries — Australia, Brunei, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam – which have signed the IPEF are also part of the 15-nation Region Comprehensive Economic Partnership (RCEP) trade agreement of which China is a key driver (Indonesia, the Philippines and Myanmar have not ratified RCEP). RCEP accounts for 30% of the world’s GDP. Trade between China and other member countries has witnessed a significant rise, year on year in Q1 of 2022.

RCEP

Second, many of the countries which are part of the IPEF have repeatedly said that they don’t want to choose between China and the US. Singapore’s Prime Minister Lee Hsien Loong, who was amongst the first to hail the IPEF, has emphatically stated this point on a number of occasions. In an interview to Nikkei Asian Review on May 20, 2022, Mr Lee reiterated this point. In fact, he even pitched for making China a part of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). (The precursor to the CPTPP, the TPP, was a brain child of the US).

Here it would be pertinent to point out that China had submitted an application for joining the CPTPP in September 2021. In the interview, Lee stated that countries in Asia needed to have good relations with the US, Japan, and Europe.

Indonesia’s Trade Minister, Muhammad Lutfi, who attended the signing of the IPEF on behalf of the archipelagic country’s president, stated that he did not want to see IPEF used as a tool to contain other countries.

One of the reasons why many countries are skeptical about the IPEF is the fact that it does not have any trade components. A number of ASEAN member states have pointed out that the IPEF makes no mention of tariffs and market access, a major drawback. At the US-ASEAN Summit held earlier this month, Malaysian Foreign Minister Ismail Sabri Yaakob had explicitly referred to this point. Like many other countries, Malaysia has welcomed the IPEF, but in the immediate future sees RCEP as a far greater opportunity.

US President Joe Biden has not deviated significantly from the policies of his predecessor, Donald Trump, with regard to trade and the US is unlikely to return to the CPTPP, at least in the immediate future. Biden and senior officials in his administration have spoken about the need to check China’s growing economic influence, specifically in Asia, and to provide an alternative model. The US, though, along with some of its Indo-Pacific partners, has only recently begun taking some steps in this direction. Leaders of the Quad countries, for example, during their meeting at Tokyo, announced that they would spend $50 billion in infrastructural aid and investment in the Indo Pacific.

Given Biden’s low approval ratings and diminishing political capital, it is unlikely that he is likely to change his approach towards trade significantly. US Trade Representative Katherine Tai said the TPP was “fragile,” and that there was no domestic support for the same. 

In conclusion, while the IPEF does have symbolic importance, bear in mind that many signatories themselves have close economic relations with China and would not like to get trapped in competition between the US and China. Unless the US re-examines its approach towards trade, which is highly unlikely, and unless countries which are part of the Indo-Pacific vision are able to strengthen economic cooperation, China is likely to dominate Asia’s economic landscape – even though there is growing skepticism with regard to the same.

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