GS Paper 2
Syllabus: International Relations
Source: The Business standards
Context: In recent months, The US announced the formation of the Indo-Pacific Economic Framework (IPEF) at the Quadrilateral Security Dialogue (QUAD) Summit meeting in Tokyo.
About the IPEF
- Members: Four QUAD countries, South Korea, New Zealand, Fiji and seven out of the 10 members of the Association of South-East Asian Nations (ASEAN)
- The IPEF framework has four pillars: Supply-chain resilience, Clean energy, decarbonisation & infrastructure, Taxation & anti-corruption, and Fair & resilient trade.
Regional Comprehensive Economic Partnership (RCEP)
It is a trade deal between the 10-member Association of Southeast Asian Nations (ASEAN) and China, Japan, South Korea, Australia and New Zealand. India participated in multiple rounds of RCEP discussions but chose to opt-out of this grouping.
Significance of IPEF
- Countering China:Since China is not a member of the group.
- Economic Cooperation & Integration: India may try to get trade deals which it lost out on while opting out of RCEP
- Opportunity for India: It will bolster the case for Indo-Pacific goals of solidarity and maintaining rule of law.
Issues with the IPEF
- Dependence on China: The major ASEAN economies may continue to maintain close economic ties with China while simultaneously establishing ties with the US, as they have done in the past.
- Centrality of SEA: The major ASEAN economies may be averse to the IPEF because it can dilute the centrality in South-East Asia.
- May become a non-starter: Similar to U.S.’s previous initiatives (the Blue Dot Network and the Build Back Better World (B3W) Initiative) have made little headway) there is fear the IPEF may also become a non-starter.
- Issues with the Taxation: Obtaining a common taxation framework may be an issue.
- Lack of common Grounds for Countries: As IPEF is not a Free Trade Agreement; nor will it discuss tariff reductions or increasing market access, raising questions about its utility. Also, the four pillars are somewhat confusing.
Why India joined IPEF:
- Being part of a multi-lateral forum to present India’s case: Especially since global organizations like the G20 may not achieve anything of systemic significance for India. Ukraine war has already created a rift between the US and West-Europe with both Russia-China.
- Advantages over China: India is facing an ongoing military stalemate with China on the Indo-Sino Border.
What should be done?
- Learn from Japan: Japan has taken practical steps. It has become a member of RCEP and IPEF, keeping its trading interests in mind. India too should have been a member of RCEP.
- Establish Common Standards:Such as cover labour rights, environmental standards, protection of intellectual property rights and rules covering the digital economy.
- Streamline Taxation Issue between different countries: This would add to India’s attractiveness as a trading partner and as a destination for investment, especially in new supply chains.
- Addressing Tech-related Issues: Solving issues of transparency, requirements of fair competition and the ownership & localization of personal data.
- Simplifying Trade Negotiations: Considering the complex trade negotiation process.
Insta Links
Mains Link
Q. The formation of the Indo-Pacific Economic Framework for Prosperity (IPEF) holds good potential for India with respect to economic growth and integration but India must be careful of the pitfalls it may pose in the future. Analyse. (15M)
