Is IPEF a Precursor for an Indo-Pacific Axis in the Making?

Trump’s strategic retrenchment and inconsistent military agreements have thrown the nations in the Indo-Pacific region into a lurch. Capitalising on this strategic void, China weaponised trade and normalised economic coercion. Pulling out of the Trans-Pacific Partnership (TPP) and by not being part of the China-led world’s largest trade bloc- RCEP (Regional Comprehensive Economic Partnership), the US has squandered its economic dominance. Amid the global uncertainties and health crisis, disrupting the crucial global supply chains, China upended the global economic order.  

To resurrect its relevance in the region and reassert its dominance, the Biden administration launched the Indo-Pacific Economic Forum for Prosperity (IPEF) ahead of the Tokyo Quad summit joined by 12 countries in the region-Australia, Brunei, India, Indonesia, Japan, Malaysia, New Zealand, Thailand, the Philippines, Singapore, South Korea and Vietnam¹. The participating nations represent 40% of the global economy. Aspiring to deepen economic engagement with the region crucial for growth and prosperity, the US has rolled out IPEF. With “resilience, inclusiveness, sustainability, economic growth, fairness and competitiveness of economies” as the defining features, the IPEF commenced negotiations based on four pillars- fair trade practices that promote inclusive economic growth and cooperation in the digital economy; resilient supply chains; decarbonisation, clean energy and infrastructure; fair competition by enforcing robust tax and anti-money laundering regimes.

As of now, IPEF is a loosely defined economic bloc, which is a lot more than a mere FTA. With Prime Minister Modi and host Japanese Prime Minister Fumio Kishida by his side, President Biden said, “we are rewriting the rules of 21st-century economy. We’re going to help all our economies to grow faster and fairer”². All members of IPEF other than India and the US are part of the TPP and RCEP. Even though the details of the IPEF are still sketchy, the willingness of the Indo-Pacific countries to join the initiative signals their intent for an economic engagement. Shorn of discussions on tariff reductions or market access the utility of the bloc is unclear. Devoid of clarity, it might be too early to speculate its larger implications and conjectures of whether IPEF will compete or coexist with RCEP.

Seeking global dominance, China is believed to have inexorably undermined global norms for trade and investment. The pillars of IPEF are pivoted on the aspects that China is accused of compromising with reckless abandon. Positioning the IPEF as an effort to salvage fair and inclusive trade policies, America has invariably engaged with Indo-Pacific countries that are reeling under large trade deficits with China.

Ostensibly, IPEF is an effort to reduce the over-dependence of countries on China and diversify and stabilise the supply chains. Apparently, while economic cooperation seems to be the defining feature of IPEF, the four pillars of IPEF have a major bearing on the security interests of a country. Monopolisation of raw materials, critical components, and technologies can destabilise production.

Disruption of critical supply chains like semiconductors, pharmaceuticals can pose grave national security implications. Diversification and stabilisation of supply chains through capacity building besides effectively insulating the countries can promote inclusive economic growth. In an effort to reposition and diversify supply chains Quad members India, Japan and Australia have founded Supply Chain Resilience Initiative. IPEF would complement these efforts.

IPEF’s promise of curbing unfair practices, minimising threats of cyber invasions and a clean economy will be hugely welcomed in the region dominated by China’s opaque trade practices. In 21st-century economics and security aspects work in tandem. Economic growth the key to prosperity bestows stability. The region dominated by Tiger Economies certainly understands the implications of better economic practices on the security and stability of the region.

At the height of covid pandemic the Quad engaged extensively with three Indo-Pacific countries- South Korea, Vietnam and New Zealand supposedly to share best practices to combat virus and development of vaccines. This rather unusual extended teleconferencing has raised speculations of a possible Quad plus mechanism. Subsequently, these meetings extended to sharing technologies and discussions on economic recovery. Indeed, these dialogues might have sown the seeds and strengthened a case for evolving a coalition.

China’s belligerent tactics, arm-twisting economic policies, and the need for swift economic recovery amid global uncertainties might have propelled nations to seek alternatives. The collective objective to combat the shared challenges has stirred interest in the nations to join an initiative that promises a comprehensive and integrated approach.

IPEF brought together like-minded countries committed to establishing an inclusive, rules-based order and a conducive environment that can boost trade, commerce and investments. Xi Jinping’s China rejuvenation plan has birthed a coalition of nations willing to embrace the Quad agenda.

IPEF is an effort to shape the rules of trade and investment. With negotiations yet to begin, nations pinning hopes on market access for economic recovery would bargain hard. If America is found dragging its feet, this will be a huge setback and seriously dent its attempts to reclaim its dominant position in the region.

Unleashing an ambitious agenda for the region, the Quad has reignited a new hope of reviving the rules-based order among the Indo-Pacific nations. Demonstrating immense tenacity to expand and engage with agreeable nations, the Quad whose institutional existence was often ridiculed has emerged as a promising platform to lead a coalition. Does this mark genesis of an Indo-Pacific axis to oppose illiberal order? Time alone can answer…

 

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