Industry News

Indo-Pacific Economic Framework for Prosperity Launched

May 31, 2022
By: Chaney A. Finn

The Indo-Pacific Economic Framework for Prosperity (IPEF) is intended to advance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness and to contribute to cooperation, stability, prosperity, development, and peace within the region. It is an arrangement consisting of the United States, Australia, Brunei, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam, together representing 40% of the global GDP.

The U.S. intends to use the IPEF to strengthen and expand economic influence in the region to create a more competitive environment to protect American workers and small businesses while establishing labor and environmental standards. The IPEF is also aimed at improving supply chain resiliency that anticipates market conditions to protect against costly disruptions that have been highlighted through the pandemic. Additionally, participating countries will be aligned on strategy for addressing China’s non-market economy, trade practices, and human rights abuses. Other provisions of the framework pertain to digital and technology sectors, corruption, and taxes.

The framework foundation consists of four policy pillars consisting of connected economy focused on labor, environment, and competition; resilient economy covering supply chain resilience; clean economy for infrastructure and decarbonization; and fair economy to address tax and anti-corruption topics. Participating countries are not required to commit to every pillar as they can select which pillars to adhere to. However, countries are expected to commit to all aspects of the selected pillars.

The first meeting was hosted virtually by U.S. Secretary of Commerce Gina Raimondo and U.S. Trade Representative Katherine Tai on May 23rd. Raimondo stated, “In our first meeting, Ambassador Tai and I engaged in positive and productive discussions with our counterparts on concrete steps that the United States and its IPEF partners will undertake quickly going forward to craft a framework that benefits our workers and businesses and allows them to better compete in the region.” The IPEF builds on the Trans-Pacific Partnership (TPP) that is managed by the Japanese and has adopted the new name Comprehensive and Progressive Agreement for TPP. The United States withdrew from the TPP in 2017 when the agreement stalled in Congress.

The IPEF has drawn criticism as the U.S. Chamber of Commerce Vice President Myron Brilliant who said “It’s disappointing that the IPEF does not currently provide new access to foreign markets for American workers, farmers and companies, and it’s hard to see how it can be enforceable without such a provision. In some instances, the administration is trying to use trade policy tools to achieve goals that would be better addressed by domestic policy reforms.” Representatives Kevin Brady (R-TX) and Adrian Smith (R-NE) echoed Brilliant, adding that the current plan is not ambitious enough to expand U.S. market access, calling to eliminate trade barriers for the digital and agricultural sectors, things the TPP would generally have accomplished. However, weaker language is being used to attract more participants to the framework.

Despite the criticism, the framework is considered a positive act for the U.S. to strengthen economic ties in the region. Raimondo and Tai are collaborating with Congress as the IPEF is subject to Congressional approval, required by the Constitution.

If you have any questions about global trade developments, trade in the Indo-Pacific region, or utilizing trade agreements do not hesitate to contact any attorney at Barnes, Richardson & Colburn, LLP.