How will IPEF affect Bangladesh?
Bangladesh is not a member of the Indo-Pacific Economic Framework for Prosperity (IPEF). US officials, however, informed their Bangladeshi counterparts of IPEF.
This suggests that Washington DC believes the IPEF will have an impact on Bangladesh’s economy and sees Bangladesh as a country that could participate in the future.
Moreover, many uncertainties remain as to the future evolution of IPEF.
US President Joe Biden’s administration has crafted a framework for multilateral dialogue based on what the president could reasonably achieve with a deeply divided Congress.
But each participating government has its own economic interests and political constraints.
Larger IPEF economies – such as Australia and Japan – have laws similar to those in effect in the United States, while smaller IPEF economies – such as Indonesia and Vietnam – have just begun to adopt some.
There are also special cases within IPEF, such as India, which has resisted multilateralism as part of its non-alignment, and Fiji, a microstate that has little in common with the others. IPEF members.
IPEF will then produce a wide range of results supported by different groups of countries within IPEF, depending on their interests in each initiative.
Given Bangladesh’s limited participation at present and the variety of variables that will emerge, it is only fair that Bangladeshis take a wait-and-see approach to IPEF.
At the same time, the IPEF is substantial enough to draw firm conclusions about its trajectory.
IPEF will establish new regulatory foundations for Bangladesh
An overlooked aspect of IPEF is that some of the initiatives are not innovative.
Many IPEF participants have adopted new labor, environmental and corporate responsibility standards over the past decade. Corporate accountability, in particular, has proven popular and has contributed to tax collection, anti-money laundering and anti-corruption regimes globally.
Although there is great diversity in the legislation of each IPEF participant, as well as in their ability and willingness to enforce the standards, harmonization of these standards is not beyond the ability of the IPEF. Many countries already have, for example, tax treaties or shared accounting standards.
Any IPEF agreement to further align labor, environmental and corporate responsibility standards will raise the expectations of Bangladeshi businesses, whether Dhaka joins IPEF or not.
Bangladeshi companies doing business with or in IPEF countries will likely need to meet new compliance standards in the coming years.
Meanwhile, companies in IPEF countries may be reluctant to contract, trade or invest in Bangladeshi companies if they are unable to adhere to commonly accepted best practices.
New regulations in IPEF countries could also affect Dhaka’s economic aspirations.
Dhaka is currently studying a number of preferential trade agreements, free trade and comprehensive economic agreements in Asia – it said it would like to sign at least 10 in the coming years.
If IPEF members were to tighten trade regulations, it would have a direct impact on the feasibility of trade and economic agreements that Dhaka is currently considering.
Major economy governments and trade groupings already seem concerned about Dhaka’s ability to implement needed reforms to trade and economic agreements.
Meanwhile, governments in smaller economies may not be able or willing to negotiate Dhaka’s specific concerns as they deepen their engagement with IPEF.
Dhaka may then need to accelerate its timetable for trade and economic agreements with IPEF countries, and the reforms they require, to salvage the work it has already done.
Alternatively, the government should re-examine and negotiate the proposals with IPEF countries.
IPEF will alter trade and investment flows in Asia
Other IPEF initiatives go well beyond strengthening and harmonizing regulatory standards.
IPEF’s focus on supply chain engagements, for example, is a new feature of multilateral economic dialogue in Asia. It appears to reflect lessons learned from unforeseen events over the past five years, namely the US-China trade war, the Covid-19 pandemic and Russia’s invasion of Ukraine.
Biden described the initiative as “establishing an early warning system, mapping critical mineral supply chains, improving traceability in key sectors, and coordinating diversification efforts.”
It is unclear whether this engagement would take the form of a new centralized institution or a less structured intergovernmental working group among participating IPEF governments.
Larger, more developed IPEF countries—like South Korea, Japan, or the United States—likely have an interest in pursuing a more centralized institution that could give their businesses a competitive edge and protect their consumers from a chain of abuse. costly and politically damaging procurement. disturbances.
Smaller, less developed IPEF countries – such as Brunei, Malaysia or Thailand – would benefit from such an institution, but might resist the effort if they integrated or tracked regulatory compliance and enforcement, especially for labor, environment, and corporate responsibility standards.
The final incarnation of this initiative will then depend on whether or not its champions adopt a big-tent approach.
IPEF’s interest in establishing regulation of the digital economy is even more ambitious. It’s an initiative the Biden administration has discussed over the past year that would mirror IPEF’s flagship achievement, should a combination of its participants reach consensus.
Biden described the initiative as setting the “rules of the road in the digital economy, including standards on cross-border data flows and data localization” and “addressing issues such as online privacy and the use discriminatory and unethical artificial intelligence”.
This initiative is a political minefield.
It is possible that a few IPEF countries — Singapore or the Philippines — with services sectors that export to the United States are interested in continuing negotiations on the digital economy. This could reduce the cost of doing business and increase trade and investment.
However, the majority of IPEF countries do not share U.S. interests in cross-border data flows and data localization and values in online privacy and discrimination.
IPEF’s focus on clean energy and decarbonization is a simpler proposition. This initiative will produce a split between developed and developing countries, while the United States itself will struggle to gain the domestic political support it needs for binding terms.
The impact of supply chain, digital economy and clean energy initiatives is then less certain.
What is clear, however, is that these ambitions reflect a wide range of interests in IPEF countries. And they are committed to working on agreements wherever possible.
And when they reach agreements, they will change the way many companies work in Asia, redirecting trade and investment flows in the region.
Questions about the feasibility or strategic impact of IPEF obscure these more relevant concerns.
Adam Pitman is an American writer and analyst in South Asia.