IPEF: Much Ado about Nothing Ong Kar Jin and Jomo Kwame Sundaram

After 2.5 years, US President Joe Biden’s Indo-Pacific Framework for Prosperity (IPEF) is increasingly irrelevant due to its own limitations and broader US foreign policy shifts.

IPEF pillars

Unlike free trade agreements (FTAs), IPEF does not offer better market access by reducing tariff or non-tariff barriers. Instead, it has been styled as a standards agreement involving four ‘pillars’:

• Fair and resilient trade: This imposes ‘high standard’ rules, particularly for the digital economy, labour and the environment. Enforcing such standards is now widely seen as protectionist.
• Supply chain resilience: This seeks to establish reliable supply chains bypassing China. Many countries hope to benefit from such ‘friend-shoring’. However, most recent inflationary supply disruptions have been due to the new Cold War, pandemic, and sanctions.
• Infrastructure, clean energy, and decarbonisation will supposedly enhance mitigation efforts, ignoring the adaptation priorities of developing countries.
• Tax and anti-corruption: IPEF promises to improve tax information exchange and curb money laundering and bribery. But most developing countries have retrieved little from such efforts. Their recent experience with the OECD-led Inclusive Framework for taxation has deepened such suspicions.

Each IPEF pillar involved separate negotiations, allowing partners to opt in or out. While this accommodates diverse interests, the resulting fragmentation undermines likely effectiveness. Worse, IPEF is a White House initiative lacking Congressional support, raising doubts about its longevity.

Great Expectations, Humble Reality

Yet, Asia-Pacific interest in better US market access remains after Trump’s withdrawal from the Trans-Pacific Partnership (TPP) and Regional Cooperative Economic Partnership (RCEP) agreements.

IPEF’s advent over half a decade after Trump withdrew from the TPP suggests it was never a Biden priority. The US caricatures and dismisses the RCEP as a ‘low-standards’ China-led agreement, but East Asia does not seem to agree.

Instead, the Biden administration touted IPEF as a strong US-led response to the RCEP, but its modest offer has further undermined Washington’s reputation, fuelling caution and scepticism.

Taiwan is part of the US-led Asia-Pacific Economic Cooperation (APEC), and Washington is believed to be surreptitiously promoting its independence. But the island province has been excluded from IPEF, perhaps due to deliberate ‘strategic ambiguity’.

America First

The upcoming US presidential election compounds the uncertainty. If re-elected, former President Donald Trump has promised to ‘knock out’ IPEF, describing it as worse than the TPP!

Presidential candidate Kamala Harris has long been sceptical of international trade agreements, including the TPP. She is expected to replace Deputy Secretary of State Kurt Campbell, architect of Obama’s ‘pivot to Asia’ via the TPP and Biden’s IPEF.

The past decade has seen US domestic politics increasingly shaping foreign economic and trade policies, regardless of party affiliation, with protectionist sentiments surging in both parties.

Scepticism about FTAs and retreats from earlier US foreign policy ‘activism’ have become bipartisan rather than only associated with Trump.

Bretton Woods Exception?

Historically, the doctrine of Manifest Destiny drove territorial acquisitions in the American hemisphere, the US ‘backyard’ since the Monroe Doctrine. At the same time, protectionist trade policies accelerated US industrialisation after the North won the Civil War.

Domestic politics favoured the US Neutrality Acts of the 1930s. The 1929 Crash led to the 1930 Smoot-Hawley Tariff Act, raising import duties on thousands of goods.

The US’s international role significantly grew after World War Two, creating postwar multilateral institutions like the United Nations, the International Monetary Fund, the World Bank, and the General Agreement on Tariffs and Trade (GATT).

Creating regional blocs soon superseded Roosevelt’s multilateral legacy as the Cold War changed perceptions of security threats and economic priorities. After the Cold War, the US briefly remained globally engaged as a unipolar power.

However, growing domestic discontent over economic globalisation and interventionist conflicts eroded support for earlier policies. Trump’s ‘America First’ mantra has driven this shift, even challenging plurilateral trade agreements.

While ‘re-engaging’ multilaterally to reassert dominance, protectionism has not retreated under the Biden administration, even increasing some Trump-era tariffs on Chinese imports.

More actions against Chinese tech firms like Huawei reflect the bipartisan belief that previous free trade policies had inadvertently benefited China without securing promised gains. With more rhetoric of ‘safeguarding’ critical industries and technologies, bipartisan scepticism toward FTAs has grown.

Geopolitics, not Geoeconomics

Neoliberals claimed economic liberalisation would lead to political liberalisation and strengthen the rule of law. Thomas Friedman even claimed countries with McDonalds’ franchises would not go to war with one another.

China has not adopted the political reforms many in the West wanted. Instead, it looms larger on the world stage, pursuing policies at odds with US interests.

Likewise, integrating post-Soviet Russia into the world economy via World Trade Organization and G8 membership was expected to align it with the West. But such efforts ended before Russia’s forcible entry into Crimea and, later, Ukraine.

Southeast Asian governments quickly realised IPEF was not a US political priority. Negotiating was intended not to offend the US. IPEF was supposed to reassert US leadership to counter China’s growing influence. But content-wise it appears to be about setting standards serving US corporate interests.

US reluctance to offer tangible benefits, such as improved market access, made IPEF less attractive, especially compared to China. IPEF’s limited ambition and commitments reflect the deeper malaise of US foreign policy.

As US domestic politics increasingly drive foreign policy, initiatives like IPEF seem less viable. Hence, IPEF seems like the last gasp of a fast-fading approach to engagement rather than a blueprint for future cooperation.

(This article was originally published in Inter Press service (IPS) news on October 22, 2024)