Economic development of the Indo-Pacific? Pass the IPEF
The eyes of the U.S. business community were on Los Angeles last week as trade officials from 14 countries gathered for the first in-person Indo-Pacific Economic Framework (IPEF) ministerial meeting. The stakes are high: The Indo-Pacific is the largest and most dynamic economic region in the world, and American workers, farmers and businesses find its vast opportunities attractive.
At the same time, it has been a decade since the United States added to the list of 20 countries with which it has concluded comprehensive trade agreements. Even though other countries have signed dozens of preferential trade pacts that benefit their domestic producers, the United States has stood still – and we risk falling behind.
In addition, China’s burgeoning trade ties across the Indo-Pacific and around the world, the challenge posed by its model of state capitalism, and the disruptions to the global economy caused by the unprovoked invasion of Ukraine by Russia underscore the need for the United States to return to the offensive. Trade.
All of this generates strong support for IPEF, in principle – but questions remain:
What exactly will IPEF do? The administration says the IPEF is a new kind of trade deal it hopes to negotiate in just a year or two. It is organized around four pillars:
- Connected economy: Led by the Office of the United States Trade Representative, this pillar will address trade, the digital economy and emerging technologies, labor commitments, trade facilitation, transparency and good regulatory practices;
- Resilient economy: Led by the Department of Commerce (like the two remaining pillars), this effort will involve commitments related to supply chain security, including early warning systems, mapping of critical mineral supply chains , improving traceability in key sectors and coordinating diversification efforts to prevent supply chain disruptions;
- Clean economy: This pillar will address climate and energy transition with commitments to renewable energy, carbon removal and additional climate-related initiatives; and
- Fair economy: This pillar will focus on the promulgation and application of tax, anti-money laundering and anti-corruption laws and standards.
Who participates ? Fourteen Indo-Pacific countries are participating: Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, United States and Viet Nam.
All 14 countries participate in all four pillars, with one exception: India declined to join the trade pillar. India’s Trade and Industry Minister Piyush Goyal has expressed concern that potential trade pillar rules on environment, labor and digital trade could “discriminate against developing countries”, but he left the door open for possible further participation.
What about tariffs and market access? US officials argue that some IPEF rules will create new access to foreign markets for US exporters, for example by eliminating technical or non-scientific barriers to trade. However, the administration refused to consider the reciprocal elimination of tariffs in the IPEF.
The reasons for this refusal seem to include: the opposition of the unions; the fact that a tariff-waiver trade pact would require congressional approval (which they say their IPEF vision won’t do); and public servants’ sense that “we actually live in a fairly liberalized world as it is,” as US Trade Representative Katherine Tai told a Senate committee earlier this year.
What is the cost of exclusion from market access? For many American workers, farmers and businesses, ending foreign tariffs and locking in access to foreign markets is critical to their business competitiveness. Many Indo-Pacific countries maintain high tariffs on major US exports. Especially with other countries signing dozens of new trade pacts, U.S. agriculture and manufacturing could find themselves at a serious disadvantage compared to their foreign competitors. For these reasons, dozens of Democrats and Republicans in Congress have urged the administration to change its position.
Closing the door on traditional market access presents other challenges. After all, foreign governments in the past have only pledged to abide by the high-level trade rules the United States stands for when enticed by the prospect of new market access. Moreover, it is the threat of revoking access to the US market that makes our trade agreements binding.
What is the United States Chamber looking for? The United States Chamber presented its recommendations for IPEF in April, with specific contributions on customs administration and trade facilitation, good regulatory practices, anti-corruption, health systems, medical products, infrastructure, sustainability, transition energy, etc. Meaningful support for these initiatives will benefit from strong stakeholder engagement, which we believe will continue.
One area high on the list for the US Chamber and many others is digital commerce. As explained in the recent U.S. House report, The digital trade revolution: How American workers and businesses can benefit from a digital trade deal, digital business opportunities are supporting vibrant growth and good jobs in all 50 states, and businesses of all sizes and in all industries are poised to benefit. However, these opportunities are threatened by the spread of digital protectionism and the accumulation of discriminatory digital rules that often target American companies. To prevent these threats, including strong digital trade rules in the IPEF can secure these opportunities for American workers, small businesses, service industries and others.
About the authors
John G. Murphy
Senior Vice President for International Policy
John Murphy leads the United States Chamber’s advocacy on international trade and investment policy.