In “First Thing Today” we noted the Biden administration announced the Indo/Pacific Economic Framework (IPEF) to counter China’s influence in the region. IPEF, consists of four pillars that seek to:
- increase trade links in the Indo-Pacific region,
- strengthen global supply chains,
- promote infrastructure investment and decarbonization, and
- establish new rules on tax and anti-corruption.
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IPEF, which includes Australia, India, Japan, South Korea and New Zealand, intentionally excludes China because the White House sees Beijing as unable to meet the agreement’s high standards. It also doesn’t include Taiwan, whose inclusion would have irked Beijing.
The framework does not offer increased market access through tariff and non-tariff concessions. Instead, IPEF seeks to improve trade relations by reducing costly behind-the-border trade barriers. It is also intentionally vague about the matter of enforceability. The Biden administration has not yet decided whether the pact will have a dispute settlement system like the U.S.-Mexico-Canada trade agreement, or if its commitments will be enforced by unilateral U.S. tariffs like the Phase 1 U.S./China trade agreement. There is no guarantee that this agreement won’t simply be cast aside if a new administration wins the U.S. presidential 2024 election.
Chinese Foreign Minister Wang Yi said the new trade framework was “doomed to fail.”
Bottom line: IPEF is not structured as a free trade deal but is rather a framework that is being called a “21st-century economic arrangement.” As a result, most of its components will likely not have to go through Congress, where there is little appetite for new trade deals.
