Indo-Pacific Economic Framework
President Joe Biden launched the Indo-Pacific Economic Framework (IPEF) negotiations with 12 other countries on Monday, May 23.
Those countries are Australia, Brunei Darussalam, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam.
The IPEF is not a traditional trade agreement in that it seeks to improve trade relations by reducing “behind-the-border” trade barriers; leaves enforceability intentionally vague; and does not guarantee that the agreement won’t be voided if a new administration takes over in 2024.
The official statement states this framework is intended to advance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness and aims to contribute to cooperation, stability, prosperity, development, and peace within the region.
Previous Agreements
Prior trade agreements in the Indo-Pacific were designed to ensure the United States’ involvement in the region. The California Chamber of Commerce-supported Trans-Pacific Partnership (TPP) was signed in 2016 after five years of negotiations by ministers representing Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam, who signed the TPP in Auckland, New Zealand.
The new IPEF excludes Canada, Mexico, Chile and Peru, and has brought India, Indonesia, and the Philippines to the negotiating table.
Observers are aware that the lame duck Congress in 2016 did not approve the TPP as hoped, allowing the next administration to pull out of the agreement.
After the United States left the TPP, the remaining countries formed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in 2018. The CPTPP entered into force in December 2018, creating the third largest free trade area in the world by gross domestic product (GDP) and reducing tariffs in countries that amount to more than 13% of the global economy, spanning a market of 500 million people.
Indo-Pacific Framework
The IPEF was formulated to once again bring the Indo-Pacific to the forefront of the United States’ international trade agenda. Coupled with President Biden’s first visits to South Korea and Japan, it has done just that.
Trade ministers are scheduled to meet for the first time in the coming weeks with a goal of finishing negotiations in the next 18 to 24 months. This end date coincides with U.S. plans to host the annual leaders’ summit for the Asia-Pacific Economic Cooperation (APEC), of which India is not a member, at the end of 2023.
Many stakeholders, including the CalChamber, have recommended prioritizing the Indo-Pacific as China’s influence grows in the region.
The Biden administration’s Department of Commerce will base negotiations on three “pillars”:
• a “resilient economy” regarding supply chain and infrastructure;
• a “clean economy” with energy and decarbonization; and
• a “fair economy” with tax and anticorruption elements.
The U.S. Trade Representative (USTR) will lead negotiations on a fourth “pillar” focused on a “connected economy” or fair and resilient trade, which includes digital trade, labor, environment, agriculture, and other areas.
It is also expected that the USTR will “pursue an accelerated implementation” of the World Trade Organization’s trade facilitation agreement.
The Indo-Pacific is the most populous, fastest-growing and most economically dynamic part of the world. By 2030, it will represent 66% of the world’s middle class, and 59% of all goods and services sold to middle class consumers will be sold in the Indo-Pacific. Developing nations in the region will need about $1.5 trillion in investment every year for the next decade to develop the infrastructure necessary to sustain their growth.
Despite the Indo-Pacific region’s growth, over the last decade, growth in U.S. exports to Asia has trailed overall U.S. export growth. The United States is gradually losing market share in trade with Asian countries.
Meanwhile, Indo-Pacific countries have signed more than 150 bilateral or regional trade agreements, while the United States has just four trade deals in the Indo-Pacific region — with Australia, Singapore, South Korea and Japan.
CalChamber Position
The CalChamber, in keeping with longstanding policy, enthusiastically supports free trade worldwide, expansion of international trade and investment, fair and equitable market access for California products abroad and elimination of disincentives that impede the international competitiveness of California business.
New multilateral, sectoral and regional trade agreements ensure that the United States may continue to gain access to world markets, resulting in an improved economy and additional employment of Americans.
The CalChamber supports free trade agreements with participants that comply with current international norms and obligations and commit to high standards negotiated for trade and investment, as well as intellectual property protection and enforcement. Such agreements ensure that the United States may continue to gain access to world markets, which will result in an improved economy and additional employment of Americans.
Recent News:
United States and Indo-Pacific Economic Framework Partners Announce Negotiation Objectives
U.S. Trade Representative, September 9, 2022
United States to Host Indo-Pacific Economic Framework Ministerial
U.S. Trade Representative, August 23, 2022
Ambassador Katherine Tai and Secretary of Commerce Gina Raimondo Virtual Indo-Pacific Economic Framework Ministerial Readout
U.S. Trade Representative, July 27, 2022
Senior Officials for the Indo-Pacific Economic Framework Meet in Singapore
U.S. Trade Representative, July 14, 2022
Readout of Ambassador Katherine Tai’s Informal Meeting with Indo-Pacific Economic Framework Partners
U.S. Trade Representative, June 11, 2022
Biden Administration Turns to Indo-Pacific with Launch of Economic Framework
CalChamber, May 27, 2022
Statement on Indo-Pacific Economic Framework for Prosperity
White House, May 23, 2022
FACT SHEET: In Asia, President Biden and a Dozen Indo-Pacific Partners Launch the Indo-Pacific Economic Framework for Prosperity
White House, May 23, 2022
FACT SHEET: Indo-Pacific Strategy of the United States
White House, February 11, 2022
The Trump Administration’s Indo-Pacific Initiative
Advancing a Shared Vision of Economic Prosperity
• The U.S. announced $113.5 million to seed new strategic initiatives in the region.
• Region has seen an average annual economic growth rate of around 6% over the last 5 years.
• The U.S. has made investments of nearly $2 trillion into the region.
• In 2018, cumulative U.S. investment in ASEAN was $271 billion, more than U.S. foreign direct investment in China and Japan combined.
Background
The Indo-Pacific region stretches from the United States’ west coast on the Pacific Ocean to the west coast of India in the Indian Ocean, connecting the two oceans through Southeast Asia. The region is made up of 14 countries: Australia, Bangladesh, Burma, India, Indonesia, Japan, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan, Thailand, and Vietnam. The Indo-Pacific region is one of the greatest current and future engines of the global economy.
The Indo-Pacific is the most populous, fastest growing and most economically dynamic part of the world. By 2030, it will represent 66% of the world’s middle class, and 59% of all goods and services sold to middle class consumers will be sold in the Indo-Pacific. Developing nations in the region will need about $1.5 trillion in investment every year for the next decade in order to develop the infrastructure necessary to sustain their growth.
Despite the Indo-Pacific region’s growth, over the last decade growth in U.S. exports to Asia have lagged behind overall U.S. export growth. The United States is gradually losing market share in trade with Asian countries. Meanwhile, Indo-Pacific countries have signed more than 150 bilateral or regional trade agreements, while the United States has just four free trade deals in the Indo-Pacific region—with Australia, Singapore, South Korea, and the newly negotiated deal with Japan.
Impact
Two-way investment and trade in the Indo-Pacific region has grown by almost 6% to a record of nearly $2 trillion, supporting more than 3 million jobs in the United States and 5.1 million jobs in the Indo-Pacific in 2018. The region contains seven of the world’s 30 freest economies—Singapore, Australia, New Zealand, Taiwan, Malaysia, South Korea and Japan. The sea routes of the Indo-Pacific facilitate 50% of world trade.
The U.S. has made foreign direct investments of $1.4 trillion into the Indo-Pacific region. The U.S. doubled the amount of security assistance it provided to the Indo-Pacific nations, totaling more than $500 million. The BUILD Act, which President Donald J. Trump signed in October 2018, provides for development finance capacity up to $60 billion. The Indo-Pacific Transparency Initiative received an additional $68 million for new programs to support allies, partners and regional institutions in advancing shared principles of combating corruption and promoting good governance.
Past Activity
President Trump in 2017 outlined his vision for a free and open Indo-Pacific at the Asia Pacific Economic Cooperation (APEC) CEO Summit in Vietnam. President Trump has aimed to reinvigorate private business interest in the region. Since the beginning of the Trump administration, the U.S. government has invested more than $2.9 billion to support the economic portion of the Indo-Pacific Initiative.
From its launch in July 2018, the initiative has invested nearly $600 million to date to support digital connectivity and cybersecurity, promote sustainable infrastructure development, and strengthen energy security and access.
The Trilateral Partnership for Infrastructure Investment in the Indo-Pacific, formed by the United States, Australia and Japan in July 2018, announced its inaugural joint projects, which included projects collectively worth $400 million. The first ministerial meeting of “The Quad”—the U.S., Australia, India and Japan—took place in September 2019. Ministers affirmed commitments to cooperating on maritime security, quality infrastructure, and regional connectivity, and discussed priorities in counter-terrorism and cyber security with the goal of advancing a free, open market and including Indo-Pacific.
Anticipated Action
The California Chamber of Commerce is hopeful that the Trump administration will continue to develop the Indo-Pacific Initiative in 2020 and strengthen partnerships within the region.
The U.S. Department of Commerce, through its Access Asia Program, plans to dedicate many events to the region, including continuing its flagship trade mission to connect U.S. firms with the Indo-Pacific market in 2020.
Recent News:
Blue Dot Network: The Belt and Road Alternative
The Diplomat, April 7, 2020
The U.S. Vision for the Indo-Pacific Region
U.S. Department of State, January 30, 2020
Indo-Pacific Transparency Initiative
U.S. Department of State, November 3, 2019
A Free and Open Indo-Pacific: Advancing a Shared Vision
U.S. Department of State, November 3, 2019
America’s Indo-Pacific Economic Vision
U.S. Department of State, July 30, 2018
CalChamber Position
The CalChamber supports expansion of international trade and investment, fair and equitable market access for California products abroad, and elimination of disincentives that impede the international competitiveness of California business.
The Indo-Pacific region represents nearly half of the Earth’s population, one-third of global gross domestic product (GDP) and roughly 50% of international trade. The large and growing markets of the Indo-Pacific already are key destinations for U.S. manufactured goods, agricultural products, and services suppliers.
Following the U.S. withdrawal from the Trans-Pacific Partnership, a highlighted Indo-Pacific Vision is welcomed, as this is a key area in geopolitical, strategic, and commercial terms.