The USA’s long-awaited ‘Indo-Pacific Economic Framework for Prosperity’ (IPEF) was released on 23 May at the Tokyo meeting of the Quadrilateral Dialogue (Quad). The IPEF complements the ‘The Indo-Pacific Strategy of the United States’ (Executive Office of the President 2022) launched on 11 February and the two documents have much in common, which reflects the USA’s increasing linking of economic and security issues. In both, the aim is an increased USA presence in the region and a broad counter to growing Chinese influence. In essence, US Indo-Pacific policy centres on the creation of a regional economic and security system that excludes China.
However, unlike the Strategy proposal, the IPEF does not specifically mention concerns over Chinese policy, ‘shared values’ and threats to the international order. Which may well reflect a realisation that these are not necessarily top of the agenda for the I-P (Indo-Pacific) countries and were certainly not well received when the Strategy proposal was launched. Though all these issues were included in the joint statement by the USA and Japan (White House 2022c) issued on the day of the IPEF launch.
The emphasis of the IPEF is on standards, the re-establishment of the USA as the regional ‘rule giver’ and related mutual ‘benefits’. Though this boils down to a very thin and highly aspirational set of proposals for negotiation organised under four ‘pillars’:
- Fair and resilient trade which will centre on the digital economy
- Supply chain resilience
- Clean energy, de-carbonisation and infrastructure
- Taxation and anti-corruption
All of this is well short of an FTA – to which the USA appears to have become increasingly allergic – and as such lacks the sort of tariff reductions and increased market access that many of the I-P countries are looking for. This absence of clear economic advantages for participants, particularly compared to existing regional arrangements, notably RCEP (see below), which IPEF is very clearly aimed at ‘killing’ (Tan 2022), is likely to prove a major factor in limiting the effectiveness of the IPEF. In addition, trust in the USA remains low, with concern that the next US administration may well move in a very different set of directions.
Despite these omissions and doubts, the IPEF was more warmly, if by no means enthusiastically, received than the earlier Strategy proposal, or indeed the Quad and AUKUS initiatives. In the event, 13 countries signed up to a continuing set of discussions, rather more than was expected and undoubtedly a reflection of some very significant diplomate activity on the part of the USA (Cutler and Wester 2022). However, while it is clear that there is a general wish to keep the USA engaged in the region, there is little in the four pillars to object to and signing involved little real commitment.
While the IPEF rather more than the Strategy outline, does acknowledge the importance to regional members of existing trading, institutional and modes of operation, it avoids any detailed examination of the regional production system, institutional structure and the economic and institutional role of China. This is particularly evident with respect to Supply Chain Resilience which seems to be aimed at bolstering linkages that by-pass China, with which the signatory countries tend to have very much closer links than they do with one another (Atlantic Council 2022). There is here another version of the US ‘friend-shoring’ / ‘on-friending’ of supply chains that has been proposed more generally – see for example Stanley (2022) citing recent speeches by Treasury Secretary Janet Yellen (US Department of the Treasury 2022) and ECB Director Christine Lagarde (2022). Both the I-P and broader proposals lack consideration of the present reality of supply chains, the potential cost to the USA and the other countries involved (Rajan 2022), and the limited extent to which chains have shifted during the four years of the US-China trade war. During this period there is little evidence of on-shoring and even in Japan where subsidies were offered, there has been only limited long-term shifts, and these principally in the low tech areas (Economist 2021; Menon 2022; Todo 2022).
It is notable that outside of East Asia, while the signing of the IPEF by 13 countries was widely lauded as a major US achievement, there was little reporting of the meeting the following week of RCEP at Haikou (Tan 2022). At this meeting China set out a six-point blueprint for the development of RCEP, which it must be remembered had from its launch at the beginning of the year a high degree of functionality. This followed from the carry-over of the institutions and modes of operation from ASEAN, ASEAN+3 and well-established major FTAs, notably China-ASEAN and Japan-ASEAN. The Chinese RCEP proposals when combined with the focus on joining the CPTPP (Comprehensive and Progressive Trans-Pacific Partnership) and DEPA (Digital Economy Partnership Agreement), is consistent with a broad commitment to globalisation and multilateralism.
The Chinese position contrasts sharply with the emergent USA’s much narrower focus on an American-led subset of the global system. This is reflected in the Yellen speech noted above, in which the concept of ‘free and secure trade’ was outlined, essentially involving the USA largely confining its international economic activity to a narrow range of ‘like-minded’ and ‘friendly’ countries and groupings.
As was noted with respect to the earlier I-P Strategy proposal (Dixon 2022), a regional order that excludes the region’s largest economy, market and military power, which is already deeply embedded in the regional production and institutional systems, would be far from compatible with long-term regional security, economic stability and prosperity. Which raises the broader question of the USA’s commitment to international economic integration and stability. These seem to be becoming secondary to the maintenance of the USA’s hegemonic position. Behind which lies the USA’s rapidly emerging value-based Cold War with China, that is both becoming a focus for the Western group of countries and their close allies, and increasingly militarised. As witness by the statements made at the 28-30 June 2022 meeting of NATO in Madrid (NATO 2022;White House 2022d).
Atlantic Council (2022) ‘Experts react: Biden’s new Indo-Pacific Economic Framework’, 1 June, https://www.atlanticcouncil.org/blogs/southasiasource/experts-react-bidens-new-indo-pacific-economic-framework/
Cutler, W. and Shay, W. (2022) ‘Biden’s Blueprint for Economic Engagement in the Indo-Pacific’, ASPI Note, Asia Society Policy Institute, 24 May, https://asiasociety.org/policy-institute/aspi-note-bidens-blueprint-economic-engagement-indo-pacific)
Dixon, C. (2022) ‘The USA Indo-Pacific Strategy 2022’, Global Policy Institute Opinion, 27 April, https://gpilondon.com/publications/the-usa-indo-pacific-strategy-2022
Economist (2021) ‘Japanese companies try to reduce their reliance on Chinese manufacturing: But only a bit’, https://www.economist.com/business/2021/09/18/japanese-companies-try-to-reduce-their-reliance-on-chinese-manufacturing
Executive Office of the President (2022) ‘The Indo-Pacific Strategy of the United States’, The White House, Washington DC, February 2022, accessed on 25 February 2022 from, https://www.whitehouse.gov/wp-content/uploads/2022/02/U.S.-Indo-Pacific-Strategy.pdf
Lagarde, C. (2022) ‘A new global map: European resilience in a changing world’, Keynote speech by Christine Lagarde, President of the ECB, at the Peterson Institute for International Economics, Washington, D.C., 22 April, European Central Bank, https://www.ecb.europa.eu/press/key/date/2022/html/ecb.sp220422~c43af3db20.en.html
Menon, J. (2022) ‘Supply chains are more resilient than they appear’, East Asian Forum, 3 July https://www.eastasiaforum.org/2022/07/03/supply-chains-are-more-resilient-than-they-appear/?utm_source=subscribe2&utm_medium=email&utm_campaign=postnotify&utm_id=996851&utm_title=Supply%20chains%20are%20more%20resilient%20than%20they%20appear
NATO (2022) ‘NATO 2022: Strategic Concept’, Madrid Summit 28-30 June, https://www.nato.int/strategic-concept/
Rajan, R. G. (2022) ‘Just Say No to Friend-Shoring’, Project Syndicate, 3 June, https://www.project-syndicate.org/commentary/friend-shoring-higher-costs-and-more-conflict-without-resilience-by-raghuram-rajan-2022-06?barrier=accesspaylog
Stanley, M. (2022) ‘Did Janet Yellen just signal a new world economic order?’, Responsible Statecraft, 28 April, https://responsiblestatecraft.org/2022/04/28/did-janet-yellen-just-signal-a-new-world-economic-order/
Tan, S. (2022) ‘Left out of the Indo-Pacific deal, China pushes toward the world’s largest trade deal’, CBNC, 5 June, https://www.cnbc.com/2022/06/06/left-out-of-the-indo-pacific-deal-china-pushes-toward-rcep-trade-deal.html
Todo, J. (2022) ‘ Japan’s post-Covid approach to supply chains’, East Asian Forum 3 July, https://www.eastasiaforum.org/2022/07/03/japans-post-covid-19-approach-to-supply-chains/?utm_source=subscribe2&utm_medium=email&utm_campaign=postnotify&utm_id=996730&utm_title=Japan%26rsquo%3Bs%20post-COVID-19%20approach%20to%20supply%20chains
US Department of the Treasury (2022) ‘Remarks by Secretary of the Treasury Janet L. Yellen on Way Forward for the Global Economy’, Press Release, 13 April, https://home.treasury.gov/news/press-releases/jy0714
White House (2022a) ‘Remarks by President Biden at Indo-Pacific Economic Framework for Prosperity Launch Event’, Briefing Room, Speeches and Remarks, 23 May, https://www.whitehouse.gov/briefing-room/speeches-remarks/2022/05/23/remarks-by-president-biden-at-indo-pacific-economic-framework-for-prosperity-launch-event/
White House (2022b) ‘Statement on Indo-Pacific Economic Framework for Prosperity’, Briefing Room, Statements and Releases, 23 May, https://www.whitehouse.gov/briefing-room/statements-releases/2022/05/23/statement-on-indo-pacific-economic-framework-for-prosperity/
White House (2022c) ‘Japan-U.S. Joint Leaders’ Statement: Strengthening the Free and Open International Order’, Briefing Room, Statements and Releases, 23 May, https://www.whitehouse.gov/briefing-room/statements-releases/2022/05/23/japan-u-s-joint-leaders-statement-strengthening-the-free-and-open-international-order/
White House (2022d) ‘Fact Sheet: The 2022 NATO Summit in Madrid’, Statements and Releasees . 29 June, https://www.whitehouse.gov/briefing-room/statements-releases/2022/06/29/fact-sheet-the-2022-nato-summit-in-madrid/
A full text does not seem to be available, only the two White House documents issued on 23 May 2022.
 Though there has been some acceleration of shifts of low-tech activities away from China, not least by Chinese producers as the economy moves up the value chain.