Good not yet great indo pacific economic forum is useful but countering china requires deep multilateral trade tries

Good not yet great indo pacific economic forum is useful but countering china requires deep multilateral trade tries

Thirteen countries, including India and the US, launched a process to establish the Indo-Pacific Economic Framework for Prosperity (IPEF). It’s a platform for economic negotiations among members who contribute about 40% of global GDP. The common thread running through them is anxiety about China’s aggressive positioning. Therefore, it’s a measure to complement a security-oriented platform like the Quad. IPEF currently is amorphous. The US has stated that it’s not a traditional free trade agreement. Yet, it’s the “foundational element” of their overall Indo-Pacific strategy. How is IPEF to be gauged?

IPEF needs to be juxtaposed to two critical FTAs many of its members have joined, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Regional Comprehensive Economic Partnership (RCEP). RCEP, which came into force in January, includes China and is the world’s largest FTA spanning 30% of global GDP. China has also formally applied to join CPTPP, which is the gold standard for deep trade agreements that aim to dismantle barriers hindering freer movement of goods, services, capital, people and ideas. Therefore, the evidence shows many IPEF members chose tighter trade integration with China despite security concerns.

This challenges IPEF’s latent potential. Barring the US and India, other key members have moved towards greater harmonisation of their respective trade regimes with China. To that extent, China will remain a part of the supply value chains which run through these economies. The US till 2016 was the catalyst for an ambitious FTA such as the original TPP, which sought to set standards that would keep China out. However, American domestic politics makes it unlikely that the US will soon opt for a deep trade agreement with East Asian economies.

True, IPEF does represent a useful platform for India as it’s chosen to opt out of RCEP. But it also brings out the limitations of India’s current approach to trade policy. Opening the door to bilateral FTAs is a positive sign but it cannot match the potential of broader agreements in linking up with global supply chains. India should not shy away from real trade agreements spreading across the Indo-Pacific. The costs of keeping away are too high.