The Biden administration’s Indo-Pacific Economic Framework (IPEF) offers a balance against economic dependence on China. Whether it can be sustained long term and without Congress is a question yet to be answered. 

The US government has recognised that the Indo-Pacific region faces major challenges, significant among them Chinese expansionism, climate change, the COVID-19 pandemic, and North Korea’s illicit nuclear weapons and missile program. In order to tackle these comprehensive challenges, the Biden administration has sought to strengthen its collective economic and defensive capacity with allies and partners to empower Indo-Pacific nations. The US is committed to building a free and open Indo-Pacific that is more connected, prosperous, secure, and resilient. This is the US vision and rationale for launching the Indo-Pacific Strategy (IPS), which includes a regional role for the European Union (EU) as well. The EU has responded by announcing its cooperation with the IPS, in line with US strategy on building democratic resilience. The IPS has five key objectives. These include establishing a free and open Indo Pacific, building connections within and beyond the region, developing regional prosperity, Indo-Pacific security, and regional resilience to transnational threats.

In order to implement this strategy, the Biden administration will pursue ten core lines of effort over the next 24 months, until late 2023. IPEF, proposed in October 2021 at the East Asia Summit, is pivotal to these efforts and is regarded as the centrepiece of the administration’s economic strategy in the region. IPEF consists of four pillars: fair and resilient trade, supply chain resilience, infrastructure, clean energy, and decarbonisation, and tax and anti-corruption. The US Trade Representative (USTR) deals with the first pillar, while the Department of Commerce (DoC) is in charge of other three.

Such an economic strategy is absolutely needed and urgent for the US not only because of its deep and abiding interests in the Indo-Pacific region, but also because of the fierce competition that exists over whose economic rules and norms will prevail. Since the US withdrew from the Trans-Pacific Partnership in 2017, it has largely sat on the sidelines of regional economic integration, while China has been actively negotiating trade agreements. On this basis, countries in the region, with the exception of China, welcome IPEF, which could make the US a more active, reliable, and durable partner in regional economic arrangements. US allies and partners characterise the IPEF as the second-best option to the US joining the Comprehensive and Progressive Trans-Pacific Partnership.

Furthermore, it is clear that IPEF provides a way to deal with China’s Belt and Road Initiative (BRI) more strategically. It includes not only advanced economies, but also developing economies in the region in order to share in its challenges and visions. The Biden administration accepts that many developing countries participate in the BRI and are encouraged to invest in infrastructure programs that may create high debt burdens. As a result, developed economies have worried about non-democratic rule settings based on Chinese economic dominance in the region. Many developing economies have become more cautious in accepting the BRI and are looking for an alternative mechanism that enables them to balance for the purpose of greater economic security. This is the core reason why they welcome IPEF.

Expectations of the US and other participating countries for IPEF

Despite the warm welcome of allies and partners, the Biden administration will face challenges and tradeoffs across each pillar of IPEF due to the diversity of economies across the region. The USTR announced that these trade pillars focus on fair and resilient trade with the ambition of including binding commitments in order to win its trade and technology conflicts with China. However, this may be complicated because IPEF will be an executive action rather than a traditional trade deal requiring congressional approval. This means the US cannot offer increased market access or any other concessions that would require amendments to current US laws. This has led to concerns among allies and partners that IPEF could be vulnerable to US domestic politics or that future administrations could abandoned it altogether if it does not contribute to strengthening US national interests. Therefore, several partners, particularly Association of Southeast Asian Nations (ASEAN) member-states, Fiji, and India, may hesitate to sign on to the high standard provisions on digital trade, labour, and environmental standards, since they does not provide any short-term economic or political benefits.

Accordingly, the Biden administration and particularly the DoC expect that the most developed economies in the region such as Australia, Japan, South Korea, New Zealand, and Singapore could join IPEF actively for reshaping global supply chains. This is especially the case for achieving greater autonomy over the four strategic industrial areas of semiconductors, large capacity batteries, critical minerals and materials, and pharmaceutical products – domains that can revitalise domestic manufacturing and strengthen supply chains. For this purpose, the US Congress passed the CHIPS and Science Act and the Inflation Reduction Act (IRA) to better guarantee sustainable economic and defensc security, although there are some disputes between the US, Japan, and South Korea over the conditions of the IRA. Australia, New Zealand, and Singapore have focused on the economic security aspects of the framework. By contrast, it is expected that India, seven ASEAN member-states, and Fiji will seek to negotiate with the DoC on the other three pillars in terms that will seek to maximise their economic and political interests. They would choose any pillars among the three for their own national interests, which is called an a la carte approach.

South Korean Views

South Korea’s official stance on IPEF is that it seeks to avoid the economic exclusion of any one country. In order to avoid any possible economic and political conflicts with China, the South Korean government has sought to position IPEF as free and open to the region. For Seoul, these views are influenced by experiences with Chinese economic sanctions during the US deployment of the Thermal High Altitude Aid Defense missile system. At the same time, however, it expects that the US will not allow Chinese participation in IPEF. On this point, many South Korean scholars welcome IPEF because it can strengthen national defence and economic security. This claim is based on the roles that value chains and technology exchange and cooperation with allies plays in South Korea-US relations. Inadvertently, this exchange will also help South Korea to maintain its export of high-tech capabilities in the semiconductor industry to China. South Korean citizens also support America’s active engagement in IPEF, since it can be used to hedge and balance against Chinese economic and political influence in the region. Many, if not most, in South Korea think that China’s rapid expansion, if unchecked, will harm common values of democracy and human rights, as well as increase unfair economic and trade practices in the region.

Dr Sang Chul Park is a professor of International Business and Trade at the School of Knowledge-based Technology and Energy, Tech University of Korea, scpark@tukorea.ac.kr

This article is published under a Creative Commons Licence and may be republished with attribution.