What is IPEF?
The Indo Pacific Economic Framework for Prosperity is a regional agreement to build cooperation and economic integration in the Indo Pacific but not in the same way as a free trade agreement.
IPEF is the economic pillar of the US’ Indo Pacific strategy and ‘makes-up’ for the US withdrawal from the TPP (which later went on to form the CPTPP – a regional FTA). Like the CPTPP, IPEF includes a number of countries across the Indo Pacific: Brunei Darussalam, Fiji, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, Vietnam and Australia. Unlike the CPTPP there aren’t any tariff reductions to facilitate the exchange of goods and services.
So why did Australia sign up to a regional agreement which acts like a trade agreement but doesn’t offer market access? There are no doubt geopolitical influences, but looking at it simply, 8 out of Australia’s top 10 merchandise trade partners are part of this initiative and member countries make up 47% of the world’s GDP. Why wouldn’t countries sign on?
With a new Labor Government, will Australia remain a member?
Australia signed up to IPEF before the change in Government and the new Government has shown positive signs of a priority on international relations. In the first week Ministers undertook a range of overseas visits to support and strengthen Australia’s international relations; and in the lead up to MC12, Minister Ayres, Assistant Minister for Trade met with other IPEF member countries.
IPEF seems to have bipartisan support with many interested parties but it’s important to note that the IPEF framework is in very early stages. It was announced less than 2 months ago on 23 May 2022 and in its current form, IPEF is just a US policy. There are yet to be established conversations on member country priorities which could still shape the scope of the four pillars.
1. Connected Economy
2. Resilient Economy
3. Clean Economy
4. Fair Economy
The first pillar makes commitments to labour, the environment, agriculture, transparency, competition and trade facilitation. Much of this is not surprising in a digital globalised world, but the relationship of trade and labour is yet to be so formalised in an agreement such as this.
The second pillar cannot come soon enough. Supply chains are extremely important and extremely precarious. With the rise of new global threats, the public’s attention on the supply chain crisis has faded but that doesn’t make the crisis any where near over. This pillar seeks to anticipate and prevent disruptions in supply chains moving forward.
The third pillar aims to help countries meet energy needs and decarbonisation goals and will likely be the source of much ongoing debate on the right mechanisms to achieve this (which are highly unlikely a one size fits all).
And finally, the fourth pillar which focuses on tax and anti-corruption by promoting good governance and procurement. This pillar aligns anti-money laundering and bribery regimes with multilateral needs whilst building capacity and technical assistance.
Despite the benefits of a connected, resilient, clean, and fair global economy, member countries are not bound by these pillars, nor are they required to join all four. No member country has announced their choice of pillars yet but it wouldn’t be surprising for countries including Australia to sign up to all four. In recent years Australia has been very active in a number of areas which intersect with IPEF pillars – namely digital trade, green economy and supply chains.
Ongoing discussions are expected to take place between senior officials and Ministers, with stakeholder consultations soon to follow. There is no set timeline for IPEF discussions but with the US chairing APEC next year, it would be good timing for an IPEF announcement.
Author: Sara Gillespie, International Policy Committee at Professionals in International Trade (PIT). Sara is a policy advisor at the Australian Chamber of Commerce and Industry and International Chamber of Commerce (ICC) Australia on international policy. Her policy work extends to trade, investment, digitalisation, anti-corruption, and climate policy. In addition, Sara manages the issuance and compliance of Certificates of Origin for the chamber network in Australia. Sara is on the policy committee for Professionals in Trade and is a member of the UN Global Compact Bribery Prevention Network. Sara has experience in risk management consulting and international business, with a particular interest in cross-cultural management. Additionally, she is trained in the areas of archaeology and biological anthropology, with Bachelor degrees in Commerce and Arts. Sara also holds a Certificate in Australian Sign Language. Sara is an advocate for inclusion and diversity, supporting the Deaf community and women’s empowerment initiatives.