Importance of Indo-Pacific Economic Framewaork for Prosperity (IPEF) for India

In News 

 India agreed to be a part of the Indo-Pacific Economic Framework for Prosperity (IPEF).

About Indo-Pacific Economic Framework for Prosperity (IPEF) 

• The U.S.-led economic grouping of a dozen countries representing 40 per cent of the global GDP proposes to advance resilience, economic growth, competitiveness and fairness in member countries. 
• However, some analysts view it as a move to counter China’s growing influence in the region.
• Partner Countries: Australia, Brunei, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, Vietnam and the United States. 
  • Within days of its launch, IPEF expanded its membership to the Pacific Island states, with Fiji joining the initiative.
• Pillars
  •  It was proposed as an elaborate framework of rules covering four pillars, namely, fair and resilient trade, supply chain resiliency, clean energy decarbonisation, and tax and anti-corruption. 
• Aims : 
  • To bring together its allies in the Indo-Pacific region to enhance economic cooperation is bound to lead to comparisons with one of former U.S. President Barack Obama’s pet projects, the Trans-Pacific Partnership (TPP), which was spiked by Donald Trump immediately after he took over the reins in Washington.
    • The IPEF reignites the twin ambitions of the U.S. to provide economic leadership and challenge China’s hegemony in the region.

• To develop high-standard, worker-centred commitments” covering labour rights, the environment and climate, the digital economy, agriculture, transparency and good regulatory practices, competition policy and trade facilitation.
• To ensure a high degree of regulatory coherence and to make market access contingent upon the realisation of regulatory standards. 

What could India expect from the IPEF? 

• The US-led Indo-Pacific Economic Framework for Prosperity (IPEF) is strategically important for India. 
  • It will enhance India’s economic engagement in the region, which was dented after India’s withdrawal from the Regional Comprehensive Economic Partnership (RCEP) agreement.
    • The IPEF will help control the damage caused by the RCEP withdrawal as all the IPEF members save India and the US are signatories to the RCEP.

• Building resilient supply chains is one of the motives of the IPEF. 
  • India can consider members as alternative sources for its raw materials requirements.
    •  This could reduce India’s overdependence on China for these inputs. 

• The IPEF can also support India’s renewed love for free trade agreements.
  • IPEF membership is a testimony to India’s aggressive stance on bilateral and regional trade engagements. 
  • However, India needs to be cautious of what is achieved through this framework.
  •  There may be some slips that may affect India’s economic interests.

Issues 

• Though it’s stated to be beneficial for the countries in the region it would require huge investments and active participation in the implementation phase.
• More unilateral and not consensus-based: Unlike traditional trade blocks where the agreements are the results of arduous negotiations by the members, the IPEF is driven primarily by the USA.
• Binding trade rules: It might fail to bring all countries in the region on board as it comes with binding trade rules but no guarantees on market access.
• India’s main concern is on the issue of data localisation, on which it has locked horns with the US over the last two or three years. 
  • In 2019, the government has introduced a bill in Lok Sabha that envisages a framework for localising Indian data and the establishment of a Data Protection Authority

Way Forward

• The unilateral character of the arrangement should be tweaked to give way to more plural and multilateral arrangement.

There is a need for an organisation or secretariat to drive and oversee the arrangement which houses representatives from all the member states, in the absence of which, the arrangement would lose its relevance.