Prime Minister Narendra Modi has called for creating an inclusive and flexible Indo-Pacific Economic Framework for Prosperity with resilient supply chains based on the 3T’s of trust, transparency, and timeliness to tackle economic challenges of the Indo-Pacific region.
“The Framework is a declaration of our collective will to make this region an engine of global economic growth. I am confident that this framework will be helpful in strengthening these three pillars and pave the way for development, peace and prosperity in the Indo-Pacific region,” Modi said at the launch of the IPEF alongwith United States President Joe Biden, Prime Minister of Japan Fumio Kishida and attended virtually by leaders of the initial IPEF partner countries -- Australia, Brunei, Indonesia, Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam.
The cohort represents an interesting mix of major and emerging economies as well as those with which the US has free trade agreements and others for which this will be the USA’s first economic negotiation.
Of course, for India, the collective desire of all partners to see the Indo-Pacific region as an engine of global economic growth is not a new idea since - as Modi pointed out - the country has historically been at the centre of trade flows in the Indo-Pacific region, having the world’s oldest commercial port in Lothal, Gujarat. It is in sync with and continuity to India’s interests in finding shared solutions to the developmental challenges of the region and creating creative arrangements.
While an assembly of nations with such varying economic dispensations may look like an unmanageable proposition, what overrides the concern is their coming on board the IPEF amidst the huge challenges of COVID-19 pandemic, geopolitical tensions, supply disruptions in energy and rising costs which underscore the urgency to work closely together for economic recovery which is sustainable and inclusive.
The US has its own imperatives. According to National Security Advisor Jake Sullivan, trade with the Indo-Pacific supports more than three million American jobs, as well as being the source of nearly $900 billion in foreign direct investment in the US. Foreign direct investment in the region from the US totalled more than $969 billion in 2020 and has nearly doubled in the last decade and as primary exporter of services to the region, the US contributes not just to regional growth, prosperity and greater security, but also supports American jobs at home.
In short, as Sullivan points out, “expanding US economic leadership in the Indo-Pacific through vehicles like IPEF is good for American workers, businesses as well as for the people in the region”.
The larger appeal of the IPEF is the economic and business potential of the 13-member bloc, which represents around 40 per cent of global GDP, and with 60 per cent of the world’s population, the Indo-Pacific is projected to be the largest contributor to global growth over the next 30 years.
At a broader level, the Indo-Pacific region is the hub of manufacturing, economic activity, global trade and investment, and since economic policy interests in the region are intertwined, IPEF members no doubt recognise that deeper economic engagement among partners will bring continued growth and prosperity and thus ensure that the region remains free and inclusive. Moreover, the four-pronged structure that the IPEF builds on, would allow diverse strengths to be mobilised or the lack of capacities to be addressed.
In this context, Modi’s mantra of trust, transparency, and timeliness as the basis of supply chains finds resonance in the joint statement of the partners, which recognises that the pandemic has emphasised the importance of strengthening economic competitiveness and cooperation and securing critical supply chains.
In the long term, economic competitiveness will be largely defined by the ability of the member states to harness technology, promote innovation, participate in the digital economy, justly transition energy systems and achieve energy security.
To build these capacities, IPEF will focus on making supply chains more resilient and well-integrated through improved transparency, diversity, security, and sustainability. This will require IPEF members to coordinate crisis response measures, expand cooperation to better prepare for and mitigate the effects of disruptions to better ensure business continuity. There will be focus on improving logistical efficiency and ensuring access to key raw and processed materials, semiconductors and critical minerals.
Connectivity as a plank of the IPEF is close to India’s already existing framework of engagement with other groupings like BIMSTEC, ASEAN and initiatives like BBIN and EU-India Connectivity Partnership. Here India has an opportunity to collaborate with partner countries under the IPEF and work towards advancing regional economic connectivity, integration and trade and investment within the region.
Free and fair trade commitments that are high-standard and inclusive is important for the US and its allies in IPEF alongwith resilient supply chains and connectivity to boost trade volumes. The efforts will focus on developing new and creative approaches in trade and technology policy and cooperation in the digital economy, as well as creating conducive environment to boost flows of commerce, trade and investments amongst the economies.
As an important part of the goal of free trade and fair competition, the IPEF will enact and enforce effective tax, anti-money laundering and anti-bribery regimes in line with existing multilateral obligations and standards to curb tax evasion and corruption in the Indo-Pacific region. This will also involve sharing expertise and seeking ways to support capacity building necessary to advance accountable and transparent systems.
Besides creating favourable weather for business and trade, the IPEF agenda includes actions to avoid dangerous climate change by limiting global warming to well below 2°C and pursuing efforts to limit it to 1.5°C in line with the Paris Agreement. The IPEF has decided to focus on accelerating the development and deployment of clean energy technologies and building resilience to climate impacts.
The way ahead is through deepening cooperation on technologies, mobilising finance, including concessional finance, supporting development of sustainable and durable infrastructure and providing technical assistance.
Nivedita Mukherjee is a senior journalist covering economy, business, and trade.
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