• In 2019, India walked out from the trade pact called the Regional Comprehensive Economic Partnership (RCEP).
• RCEP involves China, Japan, South Korea, Australia, New Zealand and the 10-state Association of Southeast Asian Nations (ASEAN) grouping.
• In 2023, India is getting into the U.S.-driven Indo-Pacific Economic Framework for Prosperity (IPEF).
• It includes many RCEP countries but China is replaced by the United States.

Indo-Pacific Economic Framework (IPEF)

• IPEF is a United States led framework for participating countries.
• IPEF is aimed to solidify members relationships and engage in crucial economic and trade matters that concern the region.
• It is neither a free trade agreement, nor a security pact.

Members:

• The U.S. will be partnering with 12 initial countries including Quad members (Australia, India and Japan).
• It also includes seven ASEAN countries: Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam, as well as South Korea and New Zealand.

Features:

• There will be no binding commitments regarding market access characteristic of trade deals like the Regional Comprehensive Economic Partnership (RCEP) or free trade agreements.
• IPEF will focus on increasing regulatory coherence between the member nations.

Four pillars of the IPEF:

• Connected economy
• Resilient economy
• Clean economy
• Fair economy

IPEF vs RCEP

Economic Challenges with China

• India’s relationship with China has experienced a further decline.
• Concerns regarding China revolved around the potential impact of a trade agreement on India''s manufacturing sector, specifically the influx of low-cost Chinese products into Indian markets.

Economic Challenges with the U.S.

• Economic challenges with the U.S. have also been problematic, encompassing areas such as agriculture, intellectual property, labour and environmental standards, and the digital economy.

Advantages of IPEF

• IPEF proposal completely removes the tariff element of typical trade deals.
• It is entirely about all these other areas.
• The U.S. has also found a tariffs-free trade deal, presented as a new kind of win-win economic partnership, as a good way to get around the resistance of many countries, including India, to free trade agreements, as they used to be called.

Issues with IPEF

• IPEF’s ‘new age’ language: It knits vaguely-worded webs that are not obvious in their actual economic impact, other than to U.S. strategists who created the proposals.
• Advantage to the US: Assessments show that the IPEF would result in a complete stranglehold over the economic systems of the participating countries, in a manner that is to the complete advantage of the U.S.
• The IPEF is really about developing a strategic-economic bloc centred on the U.S. and excluding China.
• The long-term impact of the IPEF will leave little room for domestic policies to help countries industrialize.

IPEF and India

• The IPEF has four pillars: trade, supply chains, clean economy, and fair economy.
• India has joined the first three pillars but not the trade pillar.
• Joining the trade pillar would be the worst, but the other pillars also contribute to developing new economic architectures and structures that are not tariff-based.
• In the long run, these new architectures and structures could have an even stronger effect on economic and trade flows than tariffs.

Impacts of IPEF on India:

• In an increasingly digitalizing world, hard-wiring supply chains and giving up policy space in key areas such as digital, labour, environment, and export constraints would be like locking India in a gilded techno-legal cage of irreversible economic dependency.
• The IPEF can already be seen to have deep implications in agriculture, in terms of genetically modified seeds and food, surrendering policy space for regulating Big Tech, and compromising a comparative advantage in manufacturing because of unfair labour and environment standards.
• It will also seriously affect India’s ability to create a vibrant domestic ecosystem in emerging areas such as a digital economy and green products.

India places great importance on establishing a strategic alliance with the U.S. as a primary objective in its foreign policy. However, forging a strategic partnership with the U.S. does not necessarily entail becoming economically dependent on it. India should not entail blindly accept an economic framework driven solely by U.S. self-interest, as it may not align with India''s current economic interests.