September 13, 2022
TOKYO – The creation of economic rules for the Indo-Pacific region must be driven by Japan and the United States, which both put weight on freedom, democracy and other values.
A framework must be developed as a way to compete with China.
A ministerial-level meeting was held for the Indo-Pacific Economic Framework (IPEF), a new economic bloc initiative led by the United States, and a total of 14 countries, including Japan, the United States, South Korea and Australia, agreed to enter into formal negotiations.Seven of the 10 members of the Association of Southeast Asian Nations were among them.
Ministerial statements were compiled in four areas: Trade, supply chains for critical goods, a clean economy for decarbonisation and a fair economy for anti-corruption.
The framework allows each country to decide on which areas to participate in. Thirteen of the countries, including Japan and the United States, will negotiate in all four areas. India has decided not to participate in the trade area, but it is still highly significant that 14 countries, which together account for about 40 per cent of the world’s gross domestic product, will cooperate in rulemaking.
Fair rules must be established that will lead to economic growth in each country.
In the area of supply chains, participating parties will aim to establish a system for countries to share information and flexibly provide inventories of critical goods in the event of an infectious disease outbreak or a conflict.
In the area of clean economy, countries will promote infrastructure investment and technological cooperation for decarbonization, and regarding trade, they will work on the safe distribution of data and other challenges, according to the statements.
However, the statements did not include the elimination or reduction of tariffs. ASEAN countries hope the U.S. market will be open to them, and some believe they will not see the new framework as that advantageous. It is therefore necessary to work out concrete measures that each country can benefit from.
India is not a signatory of two free trade frameworks — the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP). Its joining the IPEF negotiations is a welcome move.
The rest of the participating countries should demonstrate the benefits of the IPEF, such as enhanced economic security, and deepen cooperation with India.
The aim of the IPEF is to keep China in check. China is a member of the RCEP and has also applied for membership in the TPP, in an apparent display of its intention to dominate trade in this region.
However, China has been viewed as problematic due to its unfair industrial subsidies to state-owned enterprises and infringement of intellectual property rights, among other actions. It is undesirable for such a country to take the lead in rulemaking.
There has been concern that the United States would become less involved in Asian economies, since it withdrew from the TPP. It is important for Japan to serve as a bridge between the United States and Asian partners in the IPEF negotiations and to strengthen economic relations.