Relevance: GS-2: Bilateral, regional and global groupings and agreements involving India and/or affecting the Indian interests

Key Phrases: The Indo-Pacific Economic Framework, The Digital Economy, Supply Chains, Clean Energy Infrastructure, Regional Comprehensive Economic Partnership, Chinese Hegemony, Trans-Pacific Partnership

Why in News?

• United States President Joe Biden has recently launched a new Asia-Pacific trade initiative with 13 countries including India and Japan.
• The bloc is intended to offer US allies an alternative to China’s growing commercial presence in the region.

Key Highlights:

• India has signed on to the US initiative of the Indo-Pacific Economic Framework (IPEF) aimed at bolstering the US economic presence in a region where China is a major player.
• With China’s growing economic clout in Asia and around the world, the US is now keen to meet the Chinese dragon at its doorstep.
• The idea is to gradually build an alternative system to compete with China.

What would IPEF do?

1. Integration based on agreed Standards:
   • The programme foresees integrating partners through agreed standards in four main areas: the digital economy, supply chains, clean energy infrastructure, and anti-corruption measures.
   • Instead, the countries tout IPEF as a framework for what will ultimately become a tight-knit group of trading nations.
2. Not a Traditional Trade Bloc:
   • Unlike traditional trade blocs, there is no plan for IPEF members to negotiate tariffs and ease market access – a tool that has become increasingly unappealing to US voters fearful of seeing homegrown manufacturing undermined.
3. Secure and Resilient Supply Chains:
   • IPEF is focused on the further integration of Indo-Pacific economies, setting standards and rules, particularly in new areas like the digital economy, and also trying to ensure that there are secure and resilient supply chains.
4. Peaceful Indo-Pacific Region:
   • IPEF grouping will share a commitment to a free, open, fair, inclusive, interconnected, resilient, secure, and prosperous Indo-Pacific region.
   • For this, deepening economic engagement among partners is crucial for continued growth, peace, and prosperity.
5. Reversing the Pandemic Disruptions in World Trade:
   • The framework would help to reverse the disruptions of the entire supply chains, shuttering factories, delaying cargo ships, and clogging ports causing higher inflation globally.
   • Those vulnerabilities became even clearer after Russian president Vladimir Putin ordered the invasion of Ukraine, causing dangerously high jumps in food and energy costs in parts of the world.
6. Countering Chinese Hegemony:
   • IPEF is intended to offer US allies an alternative to China’s growing commercial presence across the Asia-Pacific.
   • It’s a way for the US to lay down a marker signalling its commitment to remain a leading force in Asia.

Significance for India:

• Trade relations with democracies have been the preference of India after giving up on the Regional Comprehensive Economic Partnership (RCEP) led by China.
• The RCEP was deemed unsuitable by New Delhi, but an IPEF sign-up could acquit us of export pessimism charges in the Asian context.
• For Indo-Pacific security, Quad which currently is just a forum to discuss common concerns rather than a defence alliance, the agenda has steadily expanded over the years.

Challenges:

• The White House has not reversed Washington’s dismissal of free trade logic under the Trump administration in spite of Biden’s declaration that “America is back”, which took a tariff happy turn in reaction to Chinese gains.
• The leaders in the US will probably be reluctant to openly promote a barrier-free world of exchange so long as electoral fortunes in the US depend on voters who blame globalization for their woes.
• Any trade component of Biden’s Asian outreach is thus likely to be tuned by calculations of American jobs.
• In a world being cleaved apart by geopolitics again, this time with a US-versus-China bipolarity in the offing, India’s neutrality will be tested as we seek to retain and build bridges that serve our interests

Way Forward for India:

1. Shift to Multilateralism from Bilateralism:
   • For India to position itself as an option to China for manufacturing networks that span borders, a big opportunity that arose only recently, we must join forces with a multilateral project aimed at frictionless commerce.
   • We need to go beyond bilateral pacts and focus on broad competitiveness instead of two-way particulars.
2. IPEF talks for Free Market Access and Enhanced Exports:
   • The IPEF aims to facilitate fair and shock-proof trade, with e-commerce and supply-chain resilience as major aspects of it.
   • If the proposal reveals US labour protection and non-tariff barriers in the name of “fair trade”, then we may object.
   • However, if it promises to ease market access and enhance our export output overall, then we must not let item-wise shipment specifics stall our participation.
3. Rules Enforcement and Trade Prospects:
   • While the IPEF will also cover cooperation on infrastructure and clean energy, apart from coordination over taxation, rule enforcement and the like, its trade prospects should guide India’s approach.
   • On its part, the US should do well not to insist on any clause that could restrict any Indian advantage.
   • Our restrictions will have to be spelt out with clarity right at the onset of IPEF talks.

Conclusion:

• IPEF aims to work towards an economic vision that will deliver for all people the vision for an Indo-Pacific that is free and open, connected and prosperous, and secure as well as resilient, where our economic growth is sustainable and inclusive.
• For the group to acquire durable influence, talks on how to help one another prosper in the best way must go with convergence on keeping the Indo-Pacific open and free.

Source: Live-Mint

Mains Question:

Q. India recently became part of the Indo-Pacific Economic Framework. Describe the mandate of the grouping and its significance for an open and peaceful Indo-Pacific region.