The United States and a dozen other nations launched the Indo-Pacific Economic Framework for Prosperity (IPEF) on Monday in Japan.
“The future of the 21st century economy is going to be largely written in the Indo-Pacific–in our region,” President Biden said.
In addition to the U.S., the initial countries joining in–Australia, Brunei, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam–cover half of the world population and more than 60 percent of the global gross domestic product (GDP), Biden said.
“And the nations represented here today, and those who will join this framework in the future, are signing up to work toward an economic vision that will deliver for all peoples, the vision for an Indo-Pacific that is free and open, connected and prosperous, and secure, as well as resilient, where our economic growth is sustainable and is inclusive,” he added.
The White House said IPEF will enable the U.S. and its allies “to decide on rules of the road that ensure American workers, small businesses and ranchers can compete in the Indo-Pacific.” IPEF will also help fight inflation by lowering costs through making supply chains more resilient in the long term, protecting against costly disruptions that lead to higher prices for consumers.
U.S. foreign direct investment in the region totaled more than $969 billion in 2020 and has nearly doubled in the last decade, according to a White House fact sheet. Trade with the Indo-Pacific supports more than 3 million American jobs.
“We’re writing the new rules for the 21st century economy that are going to help all of our countries’ economies grow faster and fairer,” Biden said at the launch event in Tokyo. “We’ll do that by taking on some of the most acute challenges that drag down growth and by maximizing the potential of our strongest growth engines.”
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The framework will focus on four key pillars to establish high-standard commitments that will deepen America’s economic engagement in the region. On trade, the U.S. will engage comprehensively with partners on a wide range of issues, including high-standard rules in the digital economy, such as cross-border data flows and data localization. The U.S. will also seek strong labor and environment standards and corporate accountability provisions “that promote a race to the top for workers through trade.”
“We will seek first-of-their-kind supply chain commitments that better anticipate and prevent disruptions in supply chains to create a more resilient economy and guard against price spikes that increase costs for American families,” the White House said. “We intend to do this by establishing an early warning system, mapping critical mineral supply chains, improving traceability in key sectors and coordinating on diversification efforts.”
The U.S. will seek “first-of-their-kind commitments on clean energy, decarbonization and infrastructure that promote good-paying jobs.” as well as concrete, high-ambition targets that will accelerate efforts to tackle the climate crisis, including in the areas of renewable energy, carbon removal, energy efficiency standards and new measures to combat methane emissions.”
The Regional Comprehensive Economic Partnership (RCEP) that includes 15 East Asian and Pacific nations, including China but not the U.S., went into force on Jan. 1, creating the world’s largest trading bloc by economic size, according to United Nations Conference on Trade and Development (UNCTAD) study.
“The economic size of the emerging bloc and its trade dynamism will make it a center of gravity for global trade,” the report said.
Under the RCEP framework, trade liberalization will be achieved through gradual tariff reductions. While many tariffs are abolished immediately, others will be gradually reduced during a 20-year period.
The tariffs that remain in force will be mainly limited to specific products in strategic sectors, such as agriculture and the automotive industry, in which many of the RCEP members have opted out from trade liberalization commitments. Trade between the bloc’s 15 economies was already worth about $2.3 trillion in 2019 and UNCTAD’s analysis shows the agreement’s tariff concessions could further boost exports within the newly formed alliance nearly 2 percent or approximately $42 billion.
While Biden did not comment on whether IPEF was meant to counter RCEP, he said, “The United States is deeply invested in the Indo-Pacific.”
“We’re committed for the long haul, ready to champion our vision for a positive future for the region together with friends and partners,” Biden added. “It’s a priority in our agenda and we’re going to keep working to make progress with all of you every day so that we can deliver real, concrete benefits for all our people. That’s how I believe we will win the competition of the 21st century together.”