Published 16 July 2024
Washington had high hopes that the IPEF would re-ignite its engagement with Asia-Pacific partners. But so far, the results are mixed at best. Its trade pillar is torpid, and its supply chain pillar is still shaky, in contrast to the relatively more promising clean energy pillar. Much more work remains to be done, in particular on the digital trade front.
Created in 2022, the US-led Indo-Pacific Economic Framework for Prosperity, or IPEF, was the Biden administration’s response to the Trump Administration’s withdrawal from the Trans-Pacific Partnership. By taking market access off the table and opting out of promoting digital trade governance, the US has no leverage to shape the IPEF trade agenda, and IPEF partners have no interest in giving concessions on US priority items, such as labor and environmental norms.
The IPEF is non-binding and fails to deliver any market access, such as lowering tariffs and non-tariff barriers like subsidies and import quotas. It also does not meaningfully address digital trade rules. In October 2023, on the eve of the November APEC Summit in San Francisco, the US withdrew its support from the WTO e-commerce talks on key digital trade issues such as data transfer and source code protection. As such, IPEF stands in contrast to other mega-regional deals that do not include the US, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the China-led Regional Comprehensive Economic Partnership (RCEP).
To be sure, the IPEF is broader than a conventional trade agreement: it aims to promote digital trade, secure supply chains, and facilitate investment in green projects and technologies. The framework, as envisioned, would ultimately bring these diverse goals into an inclusive economic development agenda for the region. It could also serve as a tool for countering China’s influence, if its Asian members see it in their interests to participate that way.
Download The scorecard for IPEF by Kati Suominen:
Two years into its launch, Kati Suominen, Research Fellow of the Hinrich Foundation and Founder and CEO of Nextrade Group, assesses what the IPEF has accomplished. This paper also proposes ideas for IPEF’s future, in light of the upcoming US presidential election. Assuming that the framework survives, it should focus on setting common standards on free data transfer, AI, and cybersecurity, says Suominen. IPEF members and watchdogs should continue to monitor progress on its initiatives and identify gaps that can be targeted with co-investments and capacity-building.
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Author
Kati Suominen
Kati Suominen is a Research Fellow at the Hinrich Foundation. She is the Founder and CEO of Nextrade Group that helps governments, multilateral development banks, and Fortune 500 technology companies enable trade through technology.
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