Explained | What is the Indo-Pacific Economic Framework for Prosperity?

The U.S.-led economic grouping of a dozen countries representing 40 per cent of the global GDP proposes to advance resilience, economic growth, competitiveness and fairness in member countries. However, some analysts view it as a move to counter China’s growing influence in the region.

The story so far: On Monday, India agreed to be a part of the Indo-Pacific Economic Framework for Prosperity (IPEF), a U.S.-led economic grouping comprising 12 countries. Prime Minister Narendra Modi, who was in Japan for the Quad Summit, joined U.S. President Joe Biden, Japanese Prime Minister Fumio Kishida and leaders of ten countries at the launch of the framework in Tokyo, initiating the path for negotiations among the ‘founding members.’ These include Australia, Brunei, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam. Together, these countries account for 40 per cent of the global GDP.  

The economic framework broadly rests on four pillars: trade, supply chain resilience, clean energy and decarbonisation, and taxes and anti-corruption measures. A joint statement suggests the framework intends to “advance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness” in these economies. 

Mr. Modi described the grouping as born from a collective desire to make the Indo-Pacific region an engine of global economic growth, calling for common and creative solutions to tackle economic challenges in the region. “India is keen to collaborate with partner countries under the IPEF and work towards advancing regional economic connectivity, integration and boosting trade and investment within the region,” a government statement read. 

Analysts at the East Asia Forum however suggest it would be security, and not economics, that will drive U.S. trade engagement in the region. “The United States continues to dominate world finance, but China will soon have the world’s largest economy,” it argued in a separate context.  

The U.S. Trade Representative (USTR) will be spearheading the trade pillar, while the others (I.e., supply chain resilience, clean energy and decarbonisation, and taxes and anti-corruption measures) will fall under the purview of the U.S. Department of Commerce.  

On the trade front, the endeavour is to establish “high-standard, inclusive, free, and fair-trade commitments” to fuel economic activity and investments benefitting both workers and consumers. What stands out, however, is U.S’s willingness to extend cooperation for enhancing digital economy and trade.  

Digital trade incorporates not just the purchase and sale of goods online but also data flows that enable the operation of global value chains and services, like smart manufacturing, platforms and applications. The idea here is to overcome downstream costs for businesses as well as upscale the ability to utilise data processing and analysis, and enhance cybersecurity outside their geographies.