Indo-Pacific Economic Framework- A surrogate NATO for South and East Asian Countries?

To understand the driver of the Indo-Pacific Economic Framework(IPEF) that has been launched on 24 May by 13 countries of South-East Asia including 4 members of the QUAD group and most of the ASEAN countries, we need to understand the interplay of regional and global aspirations of and challenges faced by these countries. 

The first quarter of the present century has seen a quantum leap in humanity’s progress in science and technology creating the possibility of bringing an end to the childhood of humanity. A possibility but not a certainty. On the contrary, a more than even chance is emerging about a nuclear armageddon bringing an end to human civilization as we know it now. The 9/11 terror attack, the financial crisis of 2007-08, America’s war on terror and its exit from Afghanistan, the disproportionate impact of the COVID-19 pandemic on developed countries and now the Ukraine war -all are pointers to an irreconcilable conflict of interests among nations states of today which can be resolved only in a theater of war and destruction. Globally, there are two conflicting intertwined players- a declining but still globally dominant power, both economically and technologically, and a rising power with the ability to challenge the dominant one on both these fronts.

The genesis of IPEF can be traced back to a 2018 document – declassified in January 2021- on Indo-Pacific Strategic Framework prepared by the United States National Security Council(USNSC). The foremost security challenge faced by the USA, as identified by the USNSS is: “How to maintain US strategic primacy in the Indo-Pacific region and promote a liberal economic order while preventing China from establishing new, illiberal spheres of influence, and cultivating areas of cooperation to promote regional peace and prosperity?”.

The document emphasizes the threat posed by China’s rise as a technology superpower. “China seeks to dominate cutting-edge technologies, including Artificial Intelligence and Bio-genetics, and harness them in the service of authoritarianism. Chinese dominance in these technologies would pose profound challenges to free societies.”

This 2018 strategy document also underpins India’s pivotal role in containing as well as counterbalancing China’s aggressive posture in the Indo-Pacific region. The document is quite candid about USA’s objective in regard to India- 

“Accelerate India’s rise and capacity to serve as a net provider of security and Major Defense Partner; solidify an enduring strategic partnership with India, underpinned by a strong Indian military able to effectively collaborate with the United States”.

The Indo-Pacific Strategy document issued in February 2022 by the US government espouses the same line of thought articulated by the 2018 document. The word “economic” is added to provide a veneer of creating a trading block like it was envisaged in the Trans-Pacific Partnership Agreement(TPP).  TPP did not take off as US Senate failed to ratify it.  Being a trade agreement, ratification by congress was a necessity. By making IPEF a framework document, a kind of declaration of intent, it should be possible to avoid the requirement of any legislative approval by all signatories. The word Economic is also slightly problematic since there are already two agreements for facilitating trade among countries of this region. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a free trade agreement (FTA) among 11 countries including Canada, Chile, Mexico, and Peru. The CPTPP was concluded on 23 January 2018 in Tokyo, Japan, and signed on 8 March 2018 in Santiago, Chile. Regional Comprehensive Economic Partnership Agreement (RCEP) is another free trade agreement between ASEAN countries and Australia, China, Japan, Korea, and New Zealand. India was a member of the drafting committee of RCEP but eventually did not join it because it would put India in a disadvantageous situation vis-à-vis China in a free trade regime. It is interesting to note that 3 ASEAN countries having close relationships with China, namely Cambodia, Laos and Myanmar kept them away from IPEF.

Four areas of cooperation have been identified in the joint statement issued by the 11 signatory countries to IPEF. In each of them, it is difficult to see a convergence of interest of all signatory countries. For example, let us consider the Clean Energy, Decarbonization, and Infrastructure component of IPEF. Although India is a signatory to the Paris agreement that requires all countries to achieve net-zero carbon emission by 2050, the Indian prime minister promised to cut its emissions to net-zero by 2070 only.  China has committed to reaching net-zero status by 2060 while US and EU have committed to reaching the target by 2050.  India’s overriding national interest of poverty eradication by maintaining its growth momentum over a longer time will not allow it to toe its de-carbonization policies to that of developed countries who are already enjoying a lifestyle that has led to a much higher per capita carbon emission than is the case with India.

As regards the Trade component of the framework, the declarative statements are as general as possible. Out of 13 participating countries in the IPEF framework, only USA and India are not part of another regional free trade agreement, Regional Comprehensive Economic Partnership or RCEP. China is a member of the RCEP trade block. India was a member of the RCEP drafting committee since the committee began its work in 2011 and just before the signing date of the agreement, in November 2019, it opted out. As a result, India would be out of two existing trade blocks that cover almost all important counties of the region- RCEP and CPPTP. So it is difficult to envisage what new terms and conditions can IPEF will bring in to assuage India’s concerns.

As regards the Supply Chain component of IPEF, the statement says:” ensure access to key raw and processed materials, semiconductors, critical minerals, and clean energy technology”. Among the manufactured products only “semiconductors” is mentioned. The most important omission is Artificial Intelligence related products which represent the cutting-edge technologies of today.

To conclude, on the high table of the 13 signatory countries of IPEF, the USA is bringing nothing substantial to offer. It is more of a taker than a giver. IPEF may turn out to be more of a hubris of a declining power.