The slow global economic recovery post-COVID-19, the ongoing Russia’s war in Ukraine and geopolitical and geostrategic tensions between the US and China have added pessimism to global economic growth. The OECD Economic Outlook published in June 2022 notes that “global GDP growth is now projected to slow sharply this year, to around 3%, and remain at a similar pace in 2023. This is well below the pace of recovery projected last December”.

Amid this pessimism, also shared by International Monetary Fund (IMF) and World Bank, the Members of the Indo-Pacific Economic Framework (IPEF) for Prosperity, a group of 14 countries (Australia, Brunei, Fiji, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand, the United States and Vietnam), held their first-in-person ministerial summit in Los Angeles. US Secretary of Commerce Gina M Raimondo, the host, called it an undeniably a great success and observed that it was an “opportunity to show that we can deliver concrete and tangible economic benefits for partner countries while pursuing an inclusive and high standard framework at the same time."

Likewise, Piyush Goyal, the Indian Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution and Textiles is upbeat and has “expressed confidence that together this group of 14 countries will define the rules of trade among countries which believe in fair play, transparency and rules-based trading in the future”. India was comfortable with the joint declaration; however, New Delhi decided to sign “three out of four pillars related to supply chains, tax and anti-corruption and clean energy” particularly in the context of “commitments required on environment, labour, digital trade and public procurement” given that these are “still emerging” issues. Significantly, Indian decision has not attracted sharp reactions from the grouping members.

It does not come as a surprise that China is apprehensive of the IPEF given that the Partnership is being construed as ‘counter-RCEP’. However, a senior US official has noted that the IPEF is not “an alternative to trading with China”; instated, it is about “engaging the economies in the Indo-Pacific region in their own right, this isn't a choice between the US and China,” Notwithstanding the fact, majority of the Members of the IPEF are also signatories to the RCEP.

A Global Times commentary on the IPEF notes that “it is more like member states having to take orders from a menu pre-set by the US - this is not fair. The US is the one that sets the standards while other countries have been put in an inferior position either in the negotiations or under the framework," Furthermore, the IPEF “aims to build supply chains without China, reinforce decoupling with China in technology, and form an alliance of technology and barriers of rules to restrict technologies or innovations from flowing to China” which is a sign of containment of China’s economic development.

The commentary warns that some of the ASEAN countries that the US has “excluded tariff reductions from the IPEF agenda but brought its own standards on labor and working environments” which tantamount to a strategy of “stick plus stick without carrot”. Similarly, the commentary cautions India that the US is “keen on drawing into its small circle of the IPEF and making it play a larger role in the region to serve the US' goal of containing China's development”.  

It merits mention that some members of the IPEF have already begun taking initiatives with regard to supply chains. For instance, Prime Minister Narendra Modi announced that India is committed to an “inclusive and flexible” structure and listed the three pillars of the IPEF i.e. “trust, transparency and timeliness” or the three ‘Ts’. In that context, India has been discussing with Quad Member States on global challenges such as clean energy, resilient infrastructure, supply chains, critical and emerging technologies, cyber security and space.

As far as ‘Energy Transition’ is concerned, it is a major area of cooperation among the Quad members and the Quad Shipping Taskforce is mandated to “invite leading ports, to form a network dedicated to greening and decarbonizing the shipping value chain”. It will establish a Quad Clean-Hydrogen Partnership and focus on shipping corridors.

There is no denying that the Chinese economy is highly globalized and it is difficult for any country to decouple from it. This is notwithstanding the fact many including the IPEF Members countries have several difference at the bilateral front, yet continue to trade with China.

Dr Vijay Sakhuja is Consultant Kalinga International Foundation, New Delhi.