Indo-Pacific Economic Framework unveiled; Asia-Pacific nations represent world's 40% GDP

US on May 23 announced that the new economic grouping for the Indo-Pacific, labelled as the Indo-Pacific Economic Framework (IPEF) will involve at least 13 Asia-Pacific countries that account for 40% of the world's gross domestic product. United States, India, Japan and South Korea, and the 13 members of the framework will include Australia, Brunei, Indonesia, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam that represent an estimated 40% of the world’s economy.

The new trade pact is aimed at countering China’s dominance, and affirming American economic influence in the Indo-Pacific region. It comes less than five months after China signed Regional Comprehensive Economic Partnership (RCEP), an agreement between the member states of the Association of Southeast Asian Nations (Asean) and its free trade agreement (FTA) partners. Beijing first introduced the free trade pact at the 19th ASEAN meeting held in November 2011.

US President Joe Biden, left, talks to Japanese Prime Minister Fumio Kishida during a bilateral meeting at Akasaka Palace, on May 23, 2022, in Tokyo. Image: AP

Member states of ASEAN and their FTA partners are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, China, Japan, India, South Korea, Australia and New Zealand. Together, they account for a third of the world's gross domestic product (GDP). 

Resurgence of Trans-Pacific Partnership that Trump administration scrapped in 2014

Washington’s Indo-Pacific Economic Framework designed by sitting American President Joe Biden’s administration is a resurgence of the Trans-Pacific Partnership that the former Trump administration unilaterally withdrew from in 2017. TPP [Trans-Pacific Partnership], signed by 12 Pacific Rim countries, was the centrepiece of ex-US President Barack Obama’s Asia Pacific trade & foreign policies. China designed RCEP in 2012 to counter US’ Free Trade Agreement (FTA), the Trans-Pacific Partnership (TPP). 

Former President Barack Obama, with Biden as his vice president had negotiated the 12-nation TPP which Republican leader President Trump abandoned on his first full weekday in office under his “America First” policy. Biden’s predecessor maintained that the global trade pact benefitted “the world and not the Americans.” 

Biden’s revival of the Asia Pacific trade alliance is one of the most significant international economic engagement that aims to strengthen cooperation between United States and its Asia-Pacific regional partners —Japan, South Korea and India. President Biden also launched the Indo-Pacific Economic Framework for Prosperity (IPEF) in Tokyo with partner countries— Australia, Brunei, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam.

The arrangements are a significant “turning point” in restoring US economic leadership and will establish “rules of the road” where the global businesses and ranchers will compete in the Indo-Pacific. 

“Tackling inflation is a top economic priority, and this framework will help lower costs by making our supply chains more resilient in the long term, protecting us against costly disruptions that lead to higher prices for consumers,” US President Joe Biden said.

While the US foreign direct investment in the Asia Pacific region totalled more than $969 billion over the last couple of years, the new trade pact will fuel regional growth. Washington’s trade investment nearly doubled in the last decade, making it a leading exporter of services to the region. Of the estimated 60% of the world’s population, the Indo‑Pacific is projected to be “the largest contributor” to global growth over the next 30 years—particularly with respect to transformations afoot in the clean energy, digital, and technology sectors. 

Biden’s Indo-Pacific Economic Framework, or IPEF, is a part of America’s commitment to putting the Americans at the centre of economic and foreign policy, to strengthen ties with Asian allies and partners to boost growth in the coming decades for technological innovation in the global economy. IPEF will address global economic challenges such as the recent early warnings for critical supply chains disruption due to the ongoing Russia-Ukraine war. The foundational element of the overall strategy is towards the Indo-Pacific, Biden administration clarified.

“IPEF brings shape and coherence to the economic pillar of our Indo-Pacific strategy,” it iterated in a press document. The pact presents the Indo-Pacific countries with an alternative to China’s approach to critical regional trade and commerce issues, US Secretary of Commerce Gina Raimondo said. It will restore and “re-exert” economic leadership of the United States in the Asia Pacific region.

Image: AP/ANI/Fumio_Kishida/Albomp_Instagram