HPAS/Allied Mains 2022 Answer Writing Challenge Day 22: Model Answer

Question: The Indo-Pacific Economic Framework for Prosperity (IPEF) is born from a collective desire to make the Indo-Pacific region an engine of global economic growth. Comment. Also, discuss India’s concerns in this context. ( 20 Marks )

Answer: 

IPEF (Indo-Pacific Economic Framework for Prosperity) is a U.S.-led framework for participating countries to solidify their relationships and engage in crucial economic and trade matters that concern the region, such as building resilient supply chains battered by the pandemic. It is being seen as a means to counter China in the region.

IPEF is borne out of collective desire and is not a traditional trade agreement. Rather, it includes different modules covering “fair and resilient trade, supply chain resilience, infrastructure and decarbonization, and tax and anticorruption”. Countries would have to sign up to all of the components within a module, but do not have to participate in all modules. It does not include market access commitments such as lowering tariff barriers, as the agreement is “more of an administrative arrangement”.

IPEF as an engine of global economic growth –

• Digital trade: There is focus on Digital trade. It 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 utilize data processing and analysis, and enhance cybersecurity outside their geographies.
• Supply chain resilience: The framework aspires to secure access to key raw and processed materials, semiconductors, critical minerals and clean energy tech, particularly for crisis response measures and ensuring business continuity. This will bring more transparency, more communication, more data-sharing and an early alert system to deal with any eventuality.
• Green growth: In line with the Paris Agreement, the clean energy, decarbonisation and infrastructure pillar would provide technical assistance and help mobilize finance, including concessional finance, to improve competitiveness and enhance connectivity by supporting countries in the development of sustainable and durable infrastructure for adopting renewable energy.
• Taxation: Lastly, the pillar on tax and anti-corruption is aimed at promoting fair competition by enforcing robust tax, anti-money laundering and anti-bribery regimes in line with existing multilateral obligations, standards and agreements to curb tax evasion and corruption in the region.

However, India has several concerns with the grouping:

• The nature of the framework itself could be a cause for concern. The Biden admi However, India has several concerns with the grouping nistration has domestically portrayed the IPEF as an initiative that will enable the US to compete better with China in the region. Thus, instead of being a sincere and thoughtful economic programme, the IPEF seems primarily a political endeavor meant to counter China.
• Digital governance is perhaps contradictory to India’s current positions on this. Restrictions on international data flows, the requirements of data localisation particularly for the financial services sector, and the customs duties on electronically distributed digital products have contradictions between India and the US positions. Often the US federal and state laws contradict rules preferred by India.
• Many differences exist between India and developed countries, especially when it comes to labour standards, subsidies across borders, particularly for public sector entities, and the role of such entities.

However, if India kept away from the IPEF, it would again be isolating itself in the face of an overwhelming support in the region for the IPEF. It makes no sense to remain at the fringes. It is for these reasons that India entered into the economic multilateral arrangement in the Indo-Pacific.