- The geopolitical situation is constantly witnessing churning is obvious to any casual observer. The fast-evolving dynamics around the globe necessitate the coming together of like-minded countries to form alliances, especially on matters concerning trade agreements. It’s another matter altogether that those alliances extend friendships to other crucial instruments too like the transfer of science, technology, commerce, energy-both conventional and renewable, and military arms & ammunition. As you are aware, the Quad consisting of the US, Japan, Australia, and India was formed primarily to check the growing aggressiveness and ambitious posture of China. Now, the Quad appears to be consolidating the alliances by extending to other broader areas too.
PC: Jason Wakeam
- During the Quad summit meeting between the leaders of the four countries in Japan provided the occasion to extend the understanding and reach of the alliance beyond mere formalities. Thirteen countries, including India and the US, launched a process to establish the Indo-Pacific Economic Framework for Prosperity (IPEF). Note that the platform is meant for economic negotiations among members who contribute about 40% of global GDP. The common thread running through them is anxiety about China’s aggressive positioning. Therefore, it’s a measure to complement a security-oriented platform like the Quad, the IPEF currently is largely amorphous. Moreover, the US has stated that it’s not a traditional free trade agreement.
- Nonetheless, it’s the most visible foundational element of their overall Indo-Pacific strategy. As such, how is IPEF to be gauged in the present context? As newspapers widely reported, IPEF needs to be juxtaposed to two critical FTAs any of its members have joined, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Regional Comprehensive Economic Partnership (RCEP). RCEP, which came into force in January, includes China and is the world’s largest FTA spanning 30% of global GDP. Interestingly, China has also formally applied to join CPTPP, which is the gold standard for deep trade agreements that aim to dismantle barriers hindering freer movement of goods, services, people, and ideas.
PC: FTA Education and Outreach
- Thus, the evidence shows many IPEF members chose tighter trade integration with China despite security concerns challenging the former’s latent potential. Barring the US and India, other key members have moved towards greater harmonization of their respective trade regimes with China. In turn, China will remain part of the supply value chains which run through these economies. Hopefully, IPEF does represent a useful platform for India as it’s chosen to opt out of RCEP. Of course, it also brings out the limitation of India’s current approach to trade policy. Despite bilateral FTAs proving to be a positive sign, cannot match the potential of broader agreements in linking up with global supply chains. It’s imperative India should not shy away from real trade agreements spreading across the Indo-Pacific as the costs of keeping away are too high.
