Finance

IPEF making economic gains above the naysaying critics


SINGAPORE – While skepticism abounded ahead of last week’s Indo-Pacific Economic Framework (IPEF) meetings in Singapore, the results underscored the Biden administration initiative’s potential and need for even greater private sector support.

Because the IPEF’s ambition falls short of the last US foray into Asia-Pacific trade leadership – the Trans-Pacific Partnership (TPP) – many questioned the IPEF’s value from the start.

Yet the initiative’s focus on supply chain resilience, green economy investments and tackling obstacles to doing business in the region is proving the Biden administration’s prescience while reaffirming US leadership in regional economic, investment and integration issues.

That was seen in last week’s signing of the Clean Economy and Fair Economy Agreements, which demonstrated the initiative’s partners continue to take the necessary steps for ratification, acceptance and approval of IPEF agreements.

The Office of the Secretary of the US Department of Commerce released six press releases announcing multiple deliverables during the Singapore meeting, including significant new achievements related to the IPEF Agreement Relating to Supply Chain Resilience (Pillar II), the IPEF Agreement Relating to a Clean Economy (Pillar III) and the IPEF Agreement Relating to a Fair Economy (Pillar IV), as well as the overarching Agreement on IPEF.

(The IPEF brings together Australia, Brunei, Fiji, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, Vietnam and US.)

Still, critics note that IPEF does nothing to address the US’s conspicuous absence in addressing regional trade barriers and creating opportunities that traditional free trade agreements offer. They note IPEF does not equal TPP when it comes to trade liberalization. But the past week showed the seriousness of IPEF in finding other ways for the US to lead.

Dr Deborah Elms, the respected head of trade policy at the Hinrich Foundation, testified before the US Congress two weeks ahead of the meetings that “IPEF is a poor substitute” for what the other 13 members of the framework truly want – a US return to traditional free trade agreements.

She cited in particular the region’s desire for the US to join the CPTPP, the successor to the TPP which includes mechanisms that would bind the US to partners in the Indo-Pacific, including through market access, stronger labor and environmental provisions as well as regulatory consistency across a range of areas.

Others shared a similar assessment. “Doubts follow Raimondo on trip to sign more IPEF deals”, read a Politico headline ahead of US Secretary of Commerce Gina Raimondo’s trip to Singapore, where she signed the two agreements and led a delegation of investors to the IPEF Clean Economy Investor Forum.

“[W]ithin the business community, a big question hangs over the deals: will they make any difference?”, the article asks. The reporting found many in the private sector thought they would not.

Realistically, a return to TPP cannot and will not happen with the Democratic Party’s hard shift on free trade and with the potential return of Donald Trump to the White House. Trump, who withdrew the US from TPP on his third day in office, has vowed to do the same to IPEF if he is returned to the presidency.

“Under the next administration… the Biden plan for ‘TPP Two’ will be dead on day one,” Trump said at a recent campaign event in Iowa. “It’s worse than the first one, threatening to pulverize farmers and manufacturers with another massive globalist monstrosity designed to turbocharge outsourcing to Asia.”

IPEF, of course, does no such thing, especially with the initiative’s relevant trade provisions now seemingly on indefinite hold. Recognizing the political realities, the splitting of IPEF into four pillars, with only one focused on trade, turns out to be a useful feature and not a bug.

Unique to IPEF, its Investor Forum on Clean Economy shows engagement can occur when tangible results are achievable.  

The Singapore forum identified US$23 billion in terms of potential investment in accelerating the green energy transition by providing modes for cooperation and allowing governments, developers and investors to meet and address priorities in different ways than otherwise available. Private equity firms KKR and GIP co-chaired the initiative, with global investors BlackRock, GIC, Rockefeller Foundation and Singapore’s Temasek all part of the coalition.

To catalyze investment to advance the energy transition, regulatory frameworks must be established. The IPEF partners continued their progress on a range of climate solutions through the cooperative work program (CWP) mechanism, which focuses on hydrogen, carbon markets, clean electricity, emissions intensity accounting, e-waste and small modular nuclear reactors.

Momentum is also building around the Indo-Pacific Partnership for Progress (IP3), a collaboration of public, private, and non-profit leaders dedicated to mobilizing capital and expertise to advance economic growth, sustainability, and inclusivity. 

A US return to traditional free trade agreements would, as the Hinrich Foundation’s Elms noted, “bind the US to partners in the Indo-Pacific.” And as Bilahari Kausikan and I wrote regarding the 20th anniversary of the US-Singapore FTA, creating the strongest geopolitical latticework for the US requires not just a crisscross of strips representing diplomacy, defense and development, but also trade.

FTAs done correctly will enhance that effort. The US must remain a regional leader engaged with multiple partners in whatever fora are politically realistic. And for now, the IPEF remains the only game in town, as I wrote for Asia Times in November.

Singapore showed the IPEF’s promise to advance US interests in the region. Increasing engagement from businesses and investors, which are by design critical to IPEF, are the next steps in advancing that success.

Steven R Okun is chief executive of APAC Advisors and senior adviser to geostrategic consultancy McLarty Associates, based in Singapore.



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