US-Proposed ‘Indo-Pacific Economic Framework’ Questioned
THE “Indo-Pacific Economic Framework” is the most mysterious and vague economic initiative after World War 2. In October 2021, US President Biden proposed the “Indo-Pacific Economic Framework” concept at the 16th East Asia Summit. The known content is full of policy goals, with little mention of specific plans and action programs. The framework is more like a political declaration. Public information shows that the United States has a strong unilateral dominance in the initiative, which not only excludes China completely, but also regards containment of China as the goal in the discussion of the framework by US officials.
The Indo-Pacific Economic Framework consists of four major sectors: promoting fair trade, improving supply chain resilience, decarbonizing infrastructure and clean energy and the environment, and taxation and anti-corruption. Except for the first section, which is carried out by the Office of the United States Trade Representative (USTR), the other three are all under the responsibility of the Ministry of Commerce, and no high-level representatives from other departments of the US government are ready to join the framework. The United States has repeatedly stressed that the framework is not a trade agreement and does not include market opening. The United States said that invited countries can choose to participate in any of the second, third and fourth blocks, but to join the first block that promotes fair trade, it must accept the other three blocks.
Whether the “Indo-Pacific Economic Framework” can be successfully implemented, many experts are full of doubts about it. They noted that the following important issues need to be addressed if the “Indo-Pacific Economic Framework” is to be implemented.
First and foremost is the issue of reciprocity. Almost all economic agreements after the war were based on market openness and mutual benefit. If the United States does not open its market, how can it compensate other countries to provide some form of policy compromise to achieve the principle of reciprocity after participating in the framework?
Second, the framework has an unequal legal status. The United States is prepared to implement the framework’s commitments in the form of a presidential executive order. The implementation of framework commitments, which bypasses congressional approval, has a weak legal status and risks being overturned after the quadrennial presidential election. However, the United States requires other countries’ commitments under the framework to have the status of legal enforcement, and this unequal legal status will bring internal political pressure and legal challenges to many countries.
Third, the challenge of framing exclusive content. Many of the target countries of the Indo-Pacific Economic Framework are also members of the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). In the past, there were no exclusive clauses in economic or trade agreements, and they were generally arranged in a way of stacking preferences. If the framework includes provisions on technology restrictions and supply chain sanctions, will it affect these countries’ commitments to other international treaties, especially RCEP, which is heavily articulated on supply chain issues? It is worth noting that the US is not a member of RCEP or CPTPP, it does not have this problem.
Fourth, the United States has different views on the framework at home and abroad. Biden’s domestic argument is that the framework can effectively contain the rise of China, and the logic for the invited countries is to jointly build a new economic cooperation framework based on American values. Different domestic and foreign discourses can turn the frame into an American political issue, drawing many countries into American politics. In recent years, the United States has repeatedly been in turmoil in the field of international economic cooperation. Obama fully promoted the Trans-Pacific Partnership agreement to suppress China, but Trump withdrew as soon as he took office. The reversal of the US attitude has left many countries with lingering fears.
Fifth, the bull-carriage approach will slow down negotiations. The Ministry of Commerce’s intervention framework has changed the historically dominated economic and trade negotiation model of the USTR, which can easily slow down the efficiency of international rules negotiation. The framework involves the digital economy, supply chain coordination and other fields, which are all international frontier issues. They are full of variables brought about by rapid technological progress. There are important differences between the United States and Europe in these two fields, and China is also an important part of these two fields. Critical countries, the framework calls for an agreement to be reached within 18 months is not easy. Especially for Southeast Asian countries that are not currently at the forefront of technology and key positions in the supply chain, but still rely on trade, this kind of “high-level” framework is not very attractive.
Sixth, the framework involves issues of taxation and anti-corruption, and there is no international consensus. This section is a topic newly added to the framework in 2022 and was not mentioned in the first document last October. The United States has implemented unilateral sanctions dominated by domestic law for a long time. The addition of taxation and anti-corruption to the framework has caused many imaginations to worry that the framework will become an extension of the US position. How other participating countries will accept the US proposal is a conundrum.
The current level of ambiguity in the framework is shocking, and there should be a clearer outline when the extraordinary US-Asean summit takes place in mid-May. However, the US foreign policy is now full of hard line unilateralism. It is worth observing which countries will be invited to participate in the “Indo-Pacific Economic Framework” in May. It is not optimistic how such a grand declaration-style framework will be implemented, and targeting is a concern.
The above analysis is an abridged version of a widely referenced analysis by geo-economic expert Dr. Henry Chan published from Toutiao.
Philippine Department of Trade and Industry (DTI) Secretary Ramon Lopez and US Trade Representative (USTR) Ambassador Katherine Tai also held a bilateral meeting in D.C. to discuss trade and investment issues, sectoral and industrial cooperation, and the trajectory of the Philippine-US economic relations. At the same time, Secretary Lopez has been instrumental in the Philippines signing on to the RCEP, though Congressional approval has been delayed amid the national elections.
Dr. Henry Chan is an internationally recognized development economist based in Singapore. He is also a senior visiting research fellow at the Cambodia Institute for Cooperation and Peace and adjunct research fellow at the Integrated Development Studies Institute (IDSI).
Also published in Manila Times. We welcome logical feedback and possibly working together with compatible frameworks (firstname.lastname@example.org)