INDO-PACIFIC ECONOMIC FRAMEWORK (IPEF)
WHY IN NEWS ?
- Recent visit of PM Modi to USA holds strong arena for the future of the Indo-Pacific Economic Framework (IPEF).
WHAT IS IPEF ?
- The IPEF is a 14 member alliance launched by US President Joe Biden in Tokyo in May 2022, ahead of a Quad Summit.
- The US-led group initially comprised countries of the Indo Pacific region including India, Australia, Brunei, Fiji, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam.
- The IPEF seeks to come up with a common set of rules and standards centred around four pillars:
- connectivity and digital trade;
- resilient supply chains;
- clean energy;
- Corruption free fair trade.
- Negotiations are on between members on all the four proposed pillars.
OBJECTIVE OF IPEF :
- The IPEF is commonly seen as the Biden regime’s attempt to challenge China’s rising influence over South and South East Asian countries.
- Through the IPEF, the US wants to expand its economic leadership in the region and promote its economic and foreign policy interests.
- By forming alliances with member countries towards building supply chains and regional connectivity, the US wants to strengthen its status as an Indo-Pacific economic power.
DIFFERENCE BETWEEN IPEF AND OTHER FREE TRADE AGREEMENTS:
- The biggest difference between the IPEF and traditional FTAs is the absence of market access concessions between members in the form of reduced import tariffs on goods.
- IPEF will try to shape rules on the four focus areas of digital economy, trusted supply chains, clean energy, and fair economy (enforcement of effective tax, anti money laundering, and anti bribery regimes).
- The second difference is that the IPEF negotiations are taking place under different modules represented by the four specified pillars.
- Unlike in FTAs, where everything is negotiated under a single umbrella , the IPEF negotiations are on in silos, independent of each other.
- While countries have to agree to all the components within a module, they need not participate in every module.
WHY INDIA OPTED OUT OF IPEF’s TRADE PILLAR ?
- India is not in a position to join the trade pillar as its components, such as framing of high standard rules on digital economy, including crossborder data flows and data localisation, and labour and environment issues, are highly sensitive for it.
- India is in the process of consolidating its domestic policies on digital economy and focused on data protection.
- As far as stronger labour and environment legislation goes, India has always maintained that there are separate forums for these issues, such as the ILO and the UN.
INDIA’S STAND ON OTHER PILLARS OF IPEF :
- In the talks under the IPEF pillars related to supply chains, clean energy, and fair economy, India is participating with an open mind.
- However, while it is willing to help build trusted supply chains and promote clean energy and check corruption, it intends to oppose any mandatory commitments on labour and environment standards.
- India also has to weigh what it is getting out of the IPEF.
WAY FORWARD:
- The IPEF Supply Chain Pillar offers an important opportunity for the United States and its partners to reshape regional supply chain networks to their mutual benefit.
- IPEF has the opportunity to be the first initiative of its kind to address supply chain challenges through a new economic agreement, complementing existing traditional trade agreements.
SYLLABUS: MAINS, GS-3, MULTILATERAL ORGANISATIONS
SOURCE: BUSINESSLINE
