Theme : Bilateral Groupings & Agreements.
Paper:GS - 2
TABLE OF CONTENT
- Context
- IPEF
- Significance of IPEF
- Challenges
- Road Ahead
Context : IPEF will provide a new platform for regional economic cooperation based on internationally accepted and transparent benchmarks.
IPEF :
- Touted as a substantial step by the U.S. as part of its decade-old “pivot to Asia”, the framework is a declaration of a collective desire to make the Indo-Pacific region an engine of global economic growth.
- It aims to strengthen economic partnership among participating countries to enhance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness in the Indo-Pacific region.
- The IPEF was joined by India, Japan and Australia, and going beyond the Quad, also by 10 ASEAN countries, South Korea and New Zealand.The IPEF was launched with a dozen initial partners who together represent 40% of the world GDP.
- The IPEF framework has four pillars:
- Supply-chain resilience
- Clean energy, decarbonisation & infrastructure
- Taxation & anti-corruption
- Fair & resilient trade.
Significance of IPEF :
- Countering China: China not being a member gives the group a distinct geopolitical flavor since all its members share worries about China’s muscular nationalism and expansionist ambitions.
- Economic Cooperation & Integration: It will produce many immediate benefits on the economic front in terms of cooperation in investment and technology development for clean energy.
- Opportunity for India: India’s joining of IPEF is a strong statement of commitment to Indo-Pacific goals, and to broadening regional economic cooperation, particularly after it walked out of the 15-nation RCEP.
Challenges :
- Common Grounds for Countries: U.S. officials have made it clear that IPEF is not a Free Trade Agreement; nor will it discuss tariff reductions or increasing market access, raising questions about its utility.
- India’s Traditional Positions: Progress in some of the areas identified under the IPEF may involve many departures from India’s traditional positions.It should not be the case that India’s negotiators simply accept what is demanded by advanced-country participants.
- Taxation: Tax provisions are another element of the IPEF that could pose problems. There is a tendency to take taxation as a sovereign function and therefore not subject it to negotiation.
- Unheard Views of Businesses: The views of Indian businesses that are potentially competitive globally are often not heard. The voices that are heard are of businesses that are afraid of competition and happy to lobby for protectionism to survive.Indian business also needs to be mobilized in support of the new integration.
- Complex Negotiation Process: Trade negotiations involve multiple ministries, which then engage in cumbersome inter-ministerial consultations. The negotiations are too complex to be handled by individual ministries acting in silos inevitably burdened by precedence.
- Credibility of IPEF: Given the fact that the U.S.’s previous initiatives (the Blue Dot Network and the Build Back Better World (B3W) Initiative) have made little headway in changing the region’s infrastructural needs, the IPEF faces a credibility challenge.
Road Ahead :
- Establishing Common Standards: The immediate focus should be on establishing the common standards, which could form the basis of deeper integration in the future.Such standards will cover labor rights, environmental standards, protection of intellectual property rights and rules covering the digital economy.
- Balancing Self-Reliance and Globalization: The government has repeatedly clarified that ‘Atma Nirbharta’ (self-reliance) does not mean isolation and protectionism.
- Also, India has always expressed its desire to attract foreign investment and become part of global supply chains.
- This is the right approach and building reliable supply chains is an explicit part of the IPEF agenda.
- Managing Taxation Issue: India should initiate an internal review of its tax administration, involving experts and the Department of Revenue to come up with suitable changes.
- Addressing Tech-related Issues: Digital trade and e-commerce is another critical area included under the IPEF. Given India’s comparative advantage in software development and application, it would be highly desirable to evolve an agreed set of rules that could be applied across like-minded countries.
- There are many contentious issues here such as issues of transparency, requirements of fair competition and the ownership & localization of personal data.
- A constructive role must be played in evolving a global consensus.
FAQs :
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What are the 4 Pillars of IPEF ?
ANS.
- Supply-chain resilience
- Clean energy, decarbonisation & infrastructure
- Taxation & anti-corruption
- Fair & resilient trade.
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What does IPEF aim for ?
ANS. It aims to strengthen economic partnership among participating countries to enhance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness in the Indo-Pacific region.