Daily Editorial Analysis for 25th May 2022

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The new Indo-Pacific bloc

Context: 12 countries including India have agreed to join the Indo-Pacific Economic Framework launched by the US.

Why the framework

• The Biden Administration’s realization that its near-on looker status to the trade arrangements in the region did not match its Indo-Pacific strategic objectives spurred work on a new framework for doing trade.
• The aim was to reclaim economic leadership in East Asia and the ASEAN region without giving away concessions that would anger domestic lobbies.
• IPEF would address as “setting the rules of the road for the digital economy, ensuring secure and resilient supply chains, helping make the kinds of major investments necessary in clean energy infrastructure and the clean energy transition, to raising standards for transparency, fair taxation, and anti-corruption”.
• US Commerce Secretary has said the IPEF “marks an important turning point in restoring US economic leadership in the region and presenting Indo-Pacific countries an alternative to China’s approach to these critical issues”.

Joining the IPEF

• India has announced it will join the bloc despite its concerns over certain aspects of the IPEF.
• The other 11 countries are Australia, Brunei, Indonesia, Japan, the Republic of Korea (South Korea), Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam, which together account for 40% of the world’s GDP.
• Taiwan is not part of it.
• The 12 countries are yet to begin negotiations, which is the next step in the process.
• The US hopes it will draw in more members.
• US officials have emphasized that IPEF is not a free trade agreement, and not even any other kind of trade agreement, but one that will offer flexibility.
• The negotiations will be along four main “pillars”. Countries would have to sign up to all components within a pillar, but do not have to participate in all pillars.
The four pillars are:
 Trade that will include digital economy and emerging technology, labor commitments, the environment, trade facilitation, transparency and good regulatory practices, and corporate accountability, standards on cross border data flows and data localizations;
 Supply chain resiliency to develop “a first- of-its-kind supply chain agreement” that would anticipate and prevent disruptions;
 clean energy and decarbonization that will include agreements on “high-ambition commitments” such as renewable energy targets, carbon removal purchasing commitments, energy efficiency standards, and new measures to combat methane emissions
 tax and anti-corruption, with commitments to enact and enforce “effective tax, anti-money laundering, anti-bribery schemes in line with [American] values”.
India & the IPEF
• The Indian Prime Minister, who participated in the launch thanked the US president for the initiative and said “The Indo-Pacific Economic Framework is a declaration of our collective will to make the region an engine of global economic growth.”
• The Ministry of External Affairs statement on IPEF said India “is committed to a free, open, and inclusive Indo-Pacific region and believes that deepening economic engagement among partners is crucial for continued growth, peace, and prosperity. India is keen to collaborate with partner countries under the IPEF and work towards advancing regional economic connectivity, integration and boosting trade and investment with in the region”.

India’s concern

• India’s main concern is on the issue of data localization, on which it has locked horns with the US over the last two or three years.
o In 2019, the government has introduced a Bill in Lok Sabha that envisages a framework for localizing Indian data and the establishment of a Data Protection Authority.

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