The "Indo-Pacific Economic Framework for Prosperity" announced by US President Joe Biden on May 23 is progressing on its negotiations. After the meeting of senior officials from the IPEF member countries in Singapore in mid-July, and the first virtual ministerial meeting in end-July, US Secretary of Commerce Gina Raimondo and US Trade Representative Katherine Tai will host the first in-person ministerial meeting in California on Thursday and Friday.
The IPEF comprises 13 economies from across the Asia-Pacific region: Australia, Brunei, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, Vietnam and the US. Fiji joined the group soon after its formation.
Together, the economies account for more than 40 percent of the global GDP. And according to the United States, they will work under the IPEF framework to establish common rules based on four pillars: fair trade; resilient supply chains; digital connectivity infrastructure and clean energy; effective and robust taxation and fighting corruption.
That means the IPEF is not proposing to work as standard free trade agreements (FTAs) usually do, by exchanging concession offers on tariffs and other trade barriers. Rather, the idea is to involve member states in discussions on establishing business processes and rules to enable the grouping to engage in cross-cutting areas of global trade and finance on common platforms. In this respect, the IPEF is following an experimental approach, whose success will be determined over time.
One of the important points to note about the IPEF is that several of its members are also part of other major regional FTAs. The most obvious in this regard is the Regional Comprehensive Economic Partnership, which has 15 members and has been operational from the beginning of this year.
It includes all ASEAN economies (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) and five of the ASEAN's FTA partners－China, Australia, New Zealand, Japan and the ROK. This means all IPEF members, except the US, India and Fiji, are part of the RCEP. Several IPEF members, Australia, Brunei, Japan, Malaysia, New Zealand, Singapore and Vietnam, are also members of another significant regional FTA: the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
However, the launch of the IPEF has sparked discussions on its likely impact on the RCEP, in which China is the largest member economy. With the IPEF being led by the US, there are also concerns over whether the IPEF will intensify the strategic rivalry between the US and China, especially because the RCEP is already operating under a given framework and with functional rules.
Although China is the largest member economy in the RCEP, the structure of the bloc follows that of other FTAs of the Association of Southeast Asian Nations. In this respect, the RCEP resembles all existing FTAs that ASEAN has signed with other economies, including China, and specifies market access concessions over and above these FTAs. As such, the existing knowledge about the RCEP and its framework could help the IPEF avoid possible overlaps with the RCEP.
Also, the IPEF's four pillars are not specific areas that the RCEP emphasizes. The RCEP, for example, devotes little attention to specific rules on cross-border digital trade and digital connectivity, and even though there are some digital trade provisions in the RCEP, the ambitions of the IPEF are likely to be much higher. This would entail getting into more complex regulatory issues such as devising rules for cross-border data transfer and managing privacy.
Similarly, on clean energy, the IPEF is expected to focus on building environmental standards that would be common for the members in areas such as energy efficiency and cross-border movement of green technologies. On taxes and anti-corruption practices again, the IPEF's work is not expected to contradict or come into conflict with the RCEP. Rather, the IPEF's standards could help complement those of the RCEP.
Yet tensions between the US and China will further intensify if the IPEF and the RCEP are seen as specific blocs of strategic influence for the US and China respectively. To a large extent though, this is a matter of perspective. The large number of common members between the IPEF and the RCEP, particularly from Southeast Asia, shows that those economies are eager to benefit from both frameworks.
Indeed, members common to both trade blocs may find it opportune to proceed simultaneously with the market access gains offered by the RCEP, along with the growth of new standards in cutting-edge areas proposed by the IPEF.
The author is a senior research fellow and research lead (trade and economic policy) at the Institute of South Asian Studies, National University of Singapore.
The views don't necessarily reflect those of China Daily.