What IPEF offers India: Opportunities, tough negotiations

News: Recently, the US Administration launched the Indo-Pacific Economic Framework (IPEF) as its de facto foreign economic policy for Asia


It empowers the US administration to shape rules across several critical pillars that will condition America’s economic engagement in the Indo-Pacific amid competing with the Chinese BRI.

What is the importance of the IPEF?


It aims to address constraints that have been caused by Covid-19, inflation and supply chain shocks, and devise new standards.

It is the first multilateral attempt to boost supply chain resilience, to ease global inflationary pressures and mitigate effects of future disruptions in key raw materials, critical minerals, and semiconductors.

It will negotiate “high-standard” rules to govern the digital economy, climate mitigation, workers empowerment, equitable global tax, anti-money laundering and anti-bribery provisions.

It is the economic agenda of the US, to protect and prolong America’s economic leadership across Asia.

For the US

It will service the domestic economic agenda of the US through 21st century economic arrangement. It is aimed to retain America’s technological primacy.

It will deal with issues like climate change, tax evasion, worker rights, labour rights, productivity. This will be done using market incentives and fiscal spending. It will be aimed to reduce inequality, deter environmental damage, foster digital openness and connectivity, and expand tax compliance.

Importance for India

It is flexible and is open in nature. The US and India can jointly shape the rules governing the Indo-Pacific’s economic future.

It can counter China which is spreading its economic footprint across Asia. It is proposed as an alternative economic paradigm that emphasises openness, flexibility, and integration.

What are the challenges for other member countries, including India?

There are doubts over whether the US administration could sustain its focus in Asia as war broke out in Europe.

The IPEF is not a trade or investment agreement. It’s a framework to regulate trade and commerce across four key pillars: Digital economy, supply chains, clean energy, and governance.

It can impact the signatories on how they will regulate their domestic economies. For example, the signatory will have to internalize the standards domestically.

It will facilitate US MNCs’ access to Asian economies at the expense of domestic preferences.

The IPEF’s pillars could clash with and supersede the member countries’ policy preferences on such issues. For example,

(1) Proposed free and open data flows will impact India’s interest to regulate data for domestic purposes. India has been working on data protection legislation in the last few years.

(2) The Indian government is not open to sync its tax policies with the US Proposal of global tax standard to mitigate tax avoidance and evasion.

The IPEF does not grant market access to the United States or include tariff reduction provisions.

Way Forward

The IPEF modalities has to be negotiated amongst partners that share interests and some values.

Source: The post is based on an article “What IPEF offers India: Opportunities, tough negotiations” published in the Indian Express on 11th June 2022.

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