India accepts three out of four pillars of US-led IPEF, So why has it stopped short of a total agreement?

So far, India has agreed to three supply chain pillars of IPEF: tax, anti-corruption, and clean energy, but the fourth, data, and privacy, is still being negotiated.

Minister of Commerce and Industry Piyush Goyal stated at a press conference following the Indo-Pacific Economic Framework (IPEF) Ministerial meeting in Los Angeles, California, that India had agreed to three of four trade pillars related to supply chains: tax, anti-corruption, and clean energy. The minister stated that India had approved of the declaration and was pleased with the outcome and text.

The Indian government told in a press release on September 10 that it is waiting for “contours to emerge” on one pillar, which primarily deals with trade and commitments to the environment, labor, digital trade, and public procurement.

What is the history of the IPEF?

With the emergence of multi-country trade agreements such as the China-led Regional Comprehensive Economic Partnership (RCEP) among east Asian countries and the Trans-Pacific Partnership (TTP), from which former US President Donald Trump withdrew, the United States has sought to establish its own framework.

US President Joe Biden stated at the East Asia Summit in October 2021 that In order to define our shared goals in relation to trade facilitation, standards for the digital economy and technology, supply chain resiliency, decarbonization and clean energy, infrastructure, worker standards, and other areas of shared interest, the United States will investigate with partners the development of an Indo-Pacific economic framework.

According to US officials, IPEF is not a free trade agreement and does not adhere to the “same old, same old” trade agreement model but rather allows members to negotiate the parts they desire. The talks will be organized around four major “pillars.”

The current members include Australia, Brunei, Fiji, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, the United States, and Vietnam.

What does India think of the IPEF?

While some countries expressed interest in participating in the talks, India remained deafeningly silent for quite some time. In the March 2022 research paper ‘Deciphering the IPEF,’ Prabir De of the MEA’s Research and Information System for Developing Countries wrote that India” might also feel uneasy about the high standards in the US and want to take no chances.”

He also stated that some of the IPEF proposals might be counter-productive for the interest of India. The IPEF, for example, discusses digital governance, but the IPEF formulation includes issues that are directly contradictory to India’s stated position. Piyush Goyal said during the press conference that India was finalizing its digital framework and laws, particularly regarding privacy and data, and that it would wait for more details. 

The Indian government withdrew the Personal Data Protection Bill from Parliament in August of this year, stating that it would consider a “comprehensive legal framework” to regulate the online space, data privacy and data localization laws, the overall Internet ecosystem, cybersecurity, and so on.

What are some of the issues raised?

The United States has previously uneased the concern about the possibility of the Indian side demanding data localization or the storage and processing of data belonging to US-based companies on servers in India rather than the United States.

According to the National Trade Report on Foreign Trade Barriers, India’s policy “will serve as significant barriers to digital trade” as well as “market access barriers, particularly for smaller firms.”

What are the ‘Partners in the Blue Pacific’ initiative launched by the United States to counter China?

To counter China’s aggressive push to expand its Pacific sphere of influence, the United States and its allies — Australia, New Zealand, Japan, and the United Kingdom — have launched “Partners in the Blue Pacific,” a new initiative to promote “effective and efficient cooperation” with the region’s small island nations.

China recently pushed for a broad, multilateral cooperation agreement with ten Pacific nations, revealing the anticipated scope of its expanding footprint.

What exactly are the Partners in the Blue Pacific initiative (PBP)?

The Pacific Islands Forum is a five-nation “informal mechanism” for assisting Pacific islands while also strengthening regional diplomatic and economic ties. It was announced on June 24 and calls for increased cooperation to improve “prosperity, resilience, and security” in the Pacific. Simply put, these countries will direct more resources here through the PBP in order to counter China’s aggressive outreach.

Members of the initiative have also expressed a desire to “elevate Pacific regionalism” and strengthen ties with the Pacific Islands Forum.

The five member nations said in a joint statement announcing the initiative that the forum is open to working with other partners and that “at every stage, we will be led and guided by the Pacific Islands,” adding that “we will seek Pacific advice on the PBP’s choice of lines of effort and flagship projects.”

In areas like “climate crisis, connectivity and transportation, maritime security and protection, health, prosperity, and education,” the Partnership for Better Partnership seeks to improve cooperation.

How is China changing its Pacific relations?

In April, China signed a security treaty with the Solomon Islands, raising serious concerns about the Chinese military establishing a base in the southern Pacific, near the US island territory of Guam and close to Australia and New Zealand.

The agreement, which strengthened Beijing’s bid to control key shipping lanes crisscrossing the region, alarmed the United States and its allies. It also prompted swift action to counter China’s growing Pacific ambitions in the midst of a power vacuum fueled by an apparent lack of US attention.

Following that victory, Beijing sent Foreign Minister Wang Yi on a multi-nation tour to convince ten Pacific nations to support the “Common Development Vision,” a “game-changing” agreement.

According to the draft agreement, China wishes to work with “traditional and non-traditional security” and expand law enforcement cooperation with these countries.

Wang Yi video conferenced with the Cook Islands, Niue, and the Federated States of Micronesia, as well as the Solomon Islands, Kiribati, Samoa, Fiji, Tonga, Vanuatu, and Papua New Guinea.

By the time he finished his tour, the deal had stalled, despite warnings that the Pacific states were falling into “Beijing’s orbit.” Regardless of the setback, China has stated that it will continue to pursue this goal indefinitely.

According to the ABC, China was attempting to arrange a virtual meeting between Wang Yi and the leaders of ten Pacific Island countries on the sidelines of the Pacific Islands Forum meeting in Fiji in mid-July.

Despite the fact that China and the United States are among the PIF’s 21 dialogue partners, the regional forum decided not to meet with them in person during this year’s Fiji meeting.

What steps are being taken by the United States and its allies to counter China?

Prior to the PBP, the US and its partners launched the Indo-Pacific Economic Framework for Prosperity (IPEF), a 13-country regional trade-boosting initiative involving Australia, Brunei, India, Indonesia, Japan, Malaysia, Vietnam, Thailand, Singapore and many more.

Away from the Pacific, the G7 announced the Partnership for Global Infrastructure and Investment (PGII) on Monday (June 27), promising to raise $600 billion in order to compete with China’s Belt and Road Initiative.

What strategic significance does the Pacific region have?

The US Department of Defense described the Indo-Pacific as the “single most consequential region for America’s future” in its 2019 strategy report.

This region, which reportedly spans across a sizable portion of the globe from the west coast of the United States to the western shores of India, is home to the three most populous states in the world: the most populous democracy (India), the largest Muslim-majority state (Indonesia), and China, which has the highest population overall.

“The Indo-Pacific region is home to seven of the world’s ten largest standing armies, and six of the region’s countries have nuclear weapons.” The region is home to nine of the world’s ten busiest seaports, and 60% of global maritime trade transits through Asia, with roughly one-third of global shipping passing through the South China Sea alone.”

The United States has long maintained a regional balance of power through a hub-and-spoke system in which America is the hub, and its allies are spokes whose security is guaranteed by US military power.

Analysts believe China is attempting to build its own version of the same system, despite its claim that the US policy of overwhelming influence in the region is solely intended to limit Beijing’s rise.

The Indo-Pacific Economic Framework is also significant in another way.

US President Joe Biden is expected to launch his Administration’s much-debated Indo-Pacific Economic Framework (IPEF) alongside Prime Minister Kishida Fumio in Tokyo on Sunday, ahead of the May 24 Quad Summit.

In October 2021, Biden stated that “the United States will assess the success of an Indo-Pacific economic framework with partners and set our shared objectives around trade facilitation, standards for infrastructure, worker standards, supply chain resilience, decarbonization and clean energy, the digital economy and technology, and other areas of common interest.

The IPEF is not a standard trade agreement, according to a Congressional Research Service “insight” paper published in February. Instead, it would be broken down into modules covering “fair and resilient trade, supply chain resilience, infrastructure and decarbonization, and tax and anticorruption.” Countries would be required to sign up for all module components but not all modules.

The United States Trade Representative will give rise to the module on “fair and resilient trade,” which will cover digital, labor, and environmental issues as well as some binding commitments. Because the IPEF is a “more administrative arrangement,” it will not include market access commitments such as tariff reductions, and it will not require Congressional approval, which is required for trade agreements.

The IPEF is also seen as a way for the United States to reestablish its credibility in the region in the aftermath of former President Donald Trump’s withdrawal from the Trans Pacific Partnership (TPP). There has been concern since then about the lack of a credible US economic and trade strategy to counter China’s economic influence in the region.

China is a key TPP member and has expressed interest in the TPP’s successor agreement, the Comprehensive and Progressive Agreement on Trans Pacific Partnership. It is also a member of the Regional Comprehensive Economic Partnership, of which the United States is not a member (India withdrew from RCEP). IPEF is envisioned as the new US vehicle for re-engagement with East and Southeast Asia by the Biden Administration.

US National Security Adviser Jake Sullivan described it as a “21st-century economic arrangement” earlier this week. IPEF, on the other hand, may not excite all Indo-Pacific countries equally because it includes binding trade rules but no guarantees of market access. Japan has greeted the IPEF with open arms, and Thailand announced its participation in the talks earlier this week. Australia and New Zealand may also be invited. Concern has been expressed in South Korea, the Philippines, and Singapore.

According to the Nikkei, it is “a more tailored mechanism [than a free trade agreement] that seeks the benefits of trade partnerships while shielding Americans from the drawbacks of trade liberalization.”

When Biden meets with Prime Minister Narendra Modi on the sidelines of the Quad Summit, he is expected to invite India to join the IPEF negotiations. The only country that has not commented is India.

On Thursday, in response to a question about India’s participation in the IPEF, MEA spokesman Arindam Bagchi stated, “This is a US initiative.” We now have more information about it. “We’re looking into it.”

In a March paper titled ‘Deciphering the IPEF,’ Prabir De of the MEA’s Research and Information System for Developing Countries wrote that India “may also be uncomfortable with the US high standards, and would like to avoid risks” and that India “may take time to consider joining, should an invitation to join the IPEF be extended by the Biden Administration.”

He also said that some of the areas are not capable of fulfilling India’s interests. The IPEF, for example, discusses digital governance, but the IPEF formulation includes issues that are directly contradictory to India’s stated position. These include prohibitions or restrictions on cross-border data flows and data localization requirements, including for financial services; prohibitions on imposing customs duties on digital products distributed electronically; and promotion of privacy regulations and associated legal frameworks, such as the APEC Cross-Border Privacy Rule, while taking into account U.S. while respecting U.S. federal and state privacy laws and regulations.”