The recent transition of India from the Regional Comprehensive Economic Partnership (RCEP) to the Indo-Pacific Economic Framework for Prosperity (IPEF) has sparked doubts regarding the reasons for the choice and its potential consequences for the country.
What exactly is the Regional Comprehensive Economic Partnership?
- The Regional Comprehensive Economic Partnership (RCEP) is a trade agreement involving 15 Asia-Pacific countries, including Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam, as well as China, Japan, South Korea, Australia, and New Zealand.
- The goal of RCEP is to establish a regional free trade zone that encompasses a large percentage of the global economy. It is regarded as one of the world’s greatest trade accords in terms of population, GDP, and trade volume.
- The RCEP discussions began in 2012 and are expected to be completed in November 2020. The deal is regarded as an important step forward in regional trade integration, especially in light of increased protectionism and uncertainty in the global trading system.
What is the Indo-Pacific Economic Framework (IPEF)?
- The IPEF is a proposed economic framework by the United States as an alternative or supplement to the RCEP.
- The IPEF’s mission is to foster economic cooperation, trade, and investment among participating countries in the Indo-Pacific region, with the United States serving as the primary facilitator.
- The IPEF focuses on non-tariff areas such as intellectual property, services, investment, domestic legislation, digitization, labour, and environmental standards, according to the article.
- Unlike previous trade agreements, which focus primarily on tariffs, the IPEF appears to emphasise these larger aspects of economic integration.
Potential reasons for India’s change from the RCEP to the IPEF
- Strategic Partnership with the United States: Developing a strategic partnership with the United States is India’s top foreign policy aim. The move to the IPEF could reflect India’s desire to align more closely with the US and its Indo-Pacific policy.
- Relationship with China Deteriorating: India’s relationship with China has deteriorated further. The move to join the IPEF could be interpreted as an attempt by India to distance itself from China and connect with countries with comparable economic and strategic goals.
- Economic Concerns: India may have been concerned about the RCEP’s possible impact on its industrial sector. Fears of inexpensive Chinese goods flooding the Indian market may have encouraged India’s determination to investigate other economic frameworks such as the IPEF.
- Non-tariff Issues and Economic Interests: The IPEF’s emphasis on non-tariff issues such as intellectual property, services, investment, and the digital economy may be more closely aligned with India’s economic interests. India may aim to address these challenges and negotiate accords that are more favourable to its own sectors and economic goals by joining the IPEF.
- Balancing Regional Influence: India’s participation in the IPEF could be part of a larger strategy to offset China’s growing influence in the area. India may seek to exercise its own influence and impact regional economic dynamics by aligning with countries such as the United States, Japan, South Korea, Australia, and others in the Indo-Pacific.
IPEF’s four Pillars
- Trade is one of the four pillars of the IPEF. This pillar is concerned with facilitating commerce and lowering obstacles among participating countries. While India has not yet joined the trading pillar, it may under pressure to do so.
- Supply Chains: The goal of this pillar is to create connected and efficient supply chains within member countries. To enable smooth trade flows, it is probable that cooperation and coordination in areas such as logistics, infrastructure, and connectivity will be promoted.
- The clean economy pillar promotes sustainable development, environmental conservation, and green technologies. It will almost certainly include agreements and collaboration to fight climate change, cut emissions, and promote clean energy and sustainable practises.
- Fair Economy: The fair economy pillar seeks to create a level playing field for businesses while also promoting inclusive economic growth. It will almost certainly include clauses concerning competition policy, fair trade practises, and resolving disparities within and between member countries.
Serious implications for India Joining the IPEF
- Economic Dependence: Joining the IPEF may increase economic reliance on the United States. If the IPEF aspires to create an integrated economic system centred on the United States, India may become overly reliant on US-driven policies that do not accord with India’s distinct economic interests and aspirations. This may impede India’s ability to pursue independent economic policies.
- Trade-offs and Market Access: The framework may compel India to make concessions in a variety of areas, including agriculture, intellectual property, labour and environmental standards, and the digital economy. In exchange for market access or participation in the IPEF, these trade-offs may include surrendering specific domestic policies or sectors.
- influence on Domestic industry: The IPEF, in particular non-tariff obstacles, intellectual property rights, and labour and environmental standards, may have an influence on India’s domestic industry. Depending on the terms, India’s manufacturing industry and other businesses may encounter competitiveness, compliance, or market access issues, which might have an impact on employment, growth, and economic development.
- Policy Constraints: Joining the IPEF may constrain India’s policymaking autonomy in critical areas such as agriculture, labour, the environment, and the digital economy. The IPEF may include commitments that limit India’s ability to design and implement policies that are compatible with its national interests, potentially limiting the country’s ability to defend domestic sectors, regulate markets, or make critical reforms.
- Implications for Small and Medium firms: The regulations and requirements of the IPEF may have a disproportionate impact on India’s small and medium-sized firms (SMEs). Compliance with standards, laws, or market access criteria may present difficulties for SMEs, thereby limiting their growth and competitiveness.
- Loss of Sovereignty: Depending on the structure of the IPEF, India’s participation may imply relinquishing some sovereignty or decision-making authority to the collective interests of participating countries. Because of this loss of sovereignty, India may be unable to define its own economic policies or adapt to emerging challenges or objectives.
Way Forward
- Conduct a full and complete review of the potential benefits and hazards connected with IPEF membership. Examine the precise terms, provisions, and prospective effects on several economic sectors, such as agriculture, manufacturing, services, intellectual property, and labour standards.
- Prioritise National Interests: Define and prioritise India’s national interests in terms of economic growth, job creation, industrial development, and long-term growth.
- Talks: Actively engage in talks and discussions with IPEF participants to ensure that India’s concerns, interests, and aspirations are effectively reflected and handled. Negotiate favourable terms and provisions that safeguard and advance India’s economic interests.
- Strengthen Domestic Industries: To improve competitiveness and resilience, focus on strengthening domestic industries and sectors. Invest in R&D, innovation, infrastructure, and skill development to guarantee that Indian firms can compete and capitalise on opportunities created by participation in the IPEF or other trade frameworks.
- Broaden Trade Partnerships: Continue efforts to broaden trade partnerships beyond the United States and the Indo-Pacific region while considering the IPEF. Investigate chances to increase trade and investment ties with other countries or regions that have economic interests similar to India’s and offer prospective growth opportunities.
- Encourage regional cooperation: Promote Indo-Pacific regional cooperation through alternative frameworks or platforms that better correspond with India’s interests and provide a more inclusive and fair approach to economic integration.
- Domestic Policy Reforms: Strengthen domestic policy frameworks and institutions to support economic growth, boost competitiveness, and address labour, environment, intellectual property, and other IPEF-covered issues.
- Transparency and public consultation: Ensure transparency and engage in public consultation processes to solicit input and comments from stakeholders such as industry groups, civil society organisations, academia, and specialists.
@the end
It is critical for India to approach the IPEF decision with a long-term perspective, taking into account national interests, economic priorities, and the potential impact on diverse industries. With a well-informed and strategic approach, India will be able to make decisions that maximise advantages while minimising dangers to its economy and society.
Source: https://www.thehindu.com/news/international/explained-what-is-the-indo-pacific-economic-framework-for-prosperity/article65460071.ece