Value proposition

Can the U.S. Indo-Pacific Economic Framework Meet the Value Proposition Challenge? – The Diplomat

Even before its official launch in May 2022, the Indo-Pacific Economic Framework (IPEF) proposed by US President Joe Biden’s administration has faced questions about the additional value it will bring to the region. As IPEF evolves in the coming months, managing what might be called a value proposition challenge will require calibration between meeting the needs of countries in the region; define the characteristics of the framework in relation to other existing devices; and define exactly what Washington itself will bring to the table in terms of engagement with the Indo-Pacific region.

As I have observed before, US policymakers have set a positive economic agenda for a changing region in several administrations with differing outlooks and mixed results over the past few decades. President Bill Clinton’s administration brought the United States deeper into the multilateral architecture through its engagement in the Asia-Pacific Economic Cooperation (APEC) forum, while the George W. Bush years saw some successes in choice in signing bilateral pacts with countries such as Singapore and South Korea. , as well as the conclusion of a United States-ASEAN Trade and Investment Framework Agreement. During the Barack Obama years, the United States managed to set the stage for a high-level minilateral pact in the form of the Trans-Pacific Partnership (later renamed CPTPP), only for Washington then withdraw under Donald Trump in 2017.

Seen from this angle, IPEF, which was first announced by Biden during the East Asia Summit in October 2021 and initially encountered some delays, represents the signature economic arrangement developed by the Biden team so far based on the national and regional environment in which it perceives its operations. While the administration may believe that options like gaining congressional support to join the CPTPP would be too costly politically at this time, it also undoubtedly recognizes that there is a regional need for an affirmative U.S. economic program. of a certain kind, especially in a context where China reported late last year its willingness to join both the CPTPP and sectoral agreements such as the Digital Economic Partnership Agreement (DEPA) between Chile, New Zealand and Singapore.

The larger issue for IPEF, which was officially launched in May with 13 initial countries in Biden’s first in-person trip to Asia since taking office, as a four-pillar framework led by the Department of Commerce and the Office of the United States Trade Representative (USTR), focused on issues such as as the digital economy, supply chains and clean energy, is the extent to which it adds value. This so-called value proposition challenge can be understood as a calibration between three main components: the set of opportunities and challenges facing countries in the region; the existing set of arrangements available to countries facing these realities outside of IPEF itself; and what the United States itself will bring to the table against the backdrop of an increasingly crowded and competitive Indo-Pacific economic landscape.

The first element of the value proposition challenge is whether IPEF is relevant to the needs of countries in the region. Broadly speaking, this would both maximize IPEF’s potential traction and reinforce that it is designed first and foremost to meet regional needs, as outlined in the Biden team’s report. Indo-Pacific Strategy released in February, rather than simply better positioning Washington in ongoing US-China competition. Specifically, as U.S. officials, including U.S. Trade Representative Katherine Tai have themselves recognizedthe question of needs is important given the particularly difficult geopolitical context in the Indo-Pacific, where governments are managing a confluence of issues, including the intensification of US-China competition, COVID-19, the Russian invasion of Ukraine and climate change, which are affecting everything from food and energy prices to the political stability of some governments.

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In general, IPEF connects to existing regional needs. Besides the fact that the four pillars of IPEF as currently designed speak of a shared recognition by Indo-Pacific economies of the importance of a digitalized, resilient and greener future, Biden officials have also built building blocks during months of consultations with regional partners, whether this is the new U.S.-Japan Trade Partnership which includes environmental issues such as the circular economy or the launch of supply chain mechanisms such as the US-Malaysia Memorandum of Cooperation on Supply Chains. Yet at the same time, it is still in its infancy, the extent of the link between IPEF and regional needs will only become much clearer once current countries deepen consultations and potentially announce some early wins, including a potential early warning system for critical cases. supply chains.

The second component of the value proposition challenge is what IPEF brings beyond what existing economic agreements already offer. This is an important consideration as there have already been a range of options for countries in the region among what has emerged in recent years, whether it be broader trade pacts like the CPTPP and more inclusive and lower standard Regional Comprehensive Economic Partnership (RCEP), or even sectoral agreements such as the DEPA. Indeed, American partners abroad like Singapore and even some members of Congress at home have explicitly encouraged the Biden administration to possibly join the CPTPP or the DEPA or even perhaps enter into a separate digital pact.

American decision makers have been clear so far that the IPEF is a new framework designed to meet the challenges of the 21st century, rather than a traditional trade agreement with market access provisions. While this may confer benefits, including additional flexibility, and address newer aspects of issues such as supply chain resilience, regional interlocutors also privately note the lack of market access provisions, l increased emphasis on labor and environmental standards, and the suggestion that countries must adhere to all components of a single pillar within IPEF to join – including the multi-faceted ‘connected’ pillar under the USTR which understands the digital economy, where there is a range of approaches around cross-border data flows and issues such as data localization – can change the cost-benefit analysis as well so that countries are part of the agreement.

U.S. officials have shown signs of acknowledgment of these concerns, and U.S. public messaging around the launch as well as IPEF launch statement suggested greater flexibility in areas such as non-market access incentives, content of individual pillars and even criteria for including additional members. It will be important to monitor developments as countries move forward in the negotiations.

The third element of the value proposition challenge is what the United States itself brings to the region. As I noted earlier, it is an aspect of American engagement that policymakers sometimes face an uphill task in defining because of certain aspects of the United States’ economic role, whether it be the importance of nongovernmental actors such as the private sector in promoting U.S. economic ties with the region, the dispersed nature of U.S. economic policymaking, or Washington’s status as an advanced Indo-Pacific economy relatively remote geographically, which can make it difficult to work with a wide range of countries by increasingly forging cross-border links between them. This component of the challenge has also arguably become even more difficult of late, as more major powers have sought to engage more deeply in the Indo-Pacific and offered a clearer sense of what they are able to provide, with for example Europe’s attempt to shape the Indo-Pacific landscape around digital and environmental issues.

Given the uncertainties surrounding US economic engagement in recent years, the very articulation of an affirmative regional economic initiative like the IPEF can arguably be interpreted as contributing. IPEF may also exhibit some of Washington’s attributes, such as its convening power, its ability to further catalyze a race to the top on standards, and its leverage across its range of alignments to facilitate cross-pollination. between the institutions, as we have seen in recent months with the development of the Quad, the eventual holding of the special United States-ASEAN summit and the development of the agenda for the hosting of APEC by the States States in 2023. Yet, at the same time, countries in the region will also seek what is specific to the incentives that Washington itself can provide on the IPEF and what it provides itself rather than through allies and partners who themselves define their own added value. While there are promising signs in this regard, whether it be public messages by officials about securing early victories and mention of “technical assistance and capacity building” in IPEF’s launching statement, the devil will be in the details.

Admittedly, it is still too early in the development of IPEF to provide a definitive assessment of its value. At the regional level, further consultation will be needed among the initial IPEF members to get a better sense of how certain aspects will be handled, including specificity and inclusiveness, and this will take place as countries come together. engage with the mechanisms of others and manage a range of broader opportunities and challenges. . And domestically in the United States, the experience of TPP withdrawal means that close attention will be given to changing dynamics leading up to the midterm elections later this year, and then to the upcoming presidential elections in 2024. Nonetheless, how U.S. decision makers work at home and abroad to manage the challenge of the evolving value proposition in the months and years ahead will be an important storyline in the development of IPEF. .