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India to join three of four IPEF ‘pillars’

Hindustan Times | 9 September 2022

India to join three of four IPEF ‘pillars’

By Prashant Jha

Signaling its political and strategic commitment to the world’s newest economic architecture in the Indo-Pacific, and in keeping with its national priorities, India is set to join three of the four pillars of the Indo-Pacific Framework (IPEF) at the framework’s first in-person ministerial summit in Los Angeles, people familiar with the development said.

New Delhi has decided to become part of resilient economy (supply chain), clean economy (decarbonisation and infrastructure), and fair economy (anti-corruption and tax) components of the framework, but it will not join the connected economy (trade) pillar of IPEF.

India believes that participating in the pillars will help give it a seat at the global rule-making high table as newer economic arrangements are designed and will boost its own engagement with other Indo-Pacific economies. The pillars also align with India’s own national goals of securing supply chains and reducing dependence on China, ensuring a just energy transition while building infrastructure and pursuing development objectives, and be at the cutting-edge of clean and transparent economic arrangements while tackling corruption and opaque practices that give countries such as China an asymmetric and unfair advantage, people familiar with India’s approach said.

Commerce and industry minister Piyush Goyal, who is representing India at the summit that kicked off on Thursday, will announce the decision.

Speaking to reporters on Wednesday, while outlining the broader rationale of IPEF, he said, “We believe it will open up opportunities for us to work in partnership with each other to ensure that particularly during challenges or difficult times, supply chains remain open, businesses don’t suffer and people of countries don’t suffer because of chaotic conditions that we have seen in the last few years, first with Covid and then the conflict with Russia and Ukraine.”

When asked about his expectations from the summit, Goyal said: “We should have uninterrupted flow of goods and services. We should work to expand business between like-minded countries or countries that believe in the rule of law, that have a common interest in strengthening open economies, and that don’t indulge in any activities which are opaque in terms of business practices. It is a group of very very friendly countries. We believe that we have to ensure that Indo-Pacific region remains secure and open for business.”

Asked about whether the framework was meant to contain China, Goyal said that the initiative should not be looked at from that lens. “It is more a partnership between like-minded rules-based countries. And all those who fall in that definition, who have transparent economic systems are all welcome to join.” The minister also said that as participating countries in IPEF get closer, it is “very natural” that trading relationships will expand and investments will get a leg-up. Calling it a “new and unique” initiative, he added that IPEF had to be given time to “evolve and mature”.

The summit is expected to conclude with a joint statement that will enunciate the principles of each of the pillars and lay the foundations of future discussions over the next 12-18 months.

The framework is an attempt to write the rules of what the United States Trade Representative (USTR) Katherine Tai has called “globalisation 2.0” and address newer global economic challenges, with a focus on creating resilient economies. The US has faced criticism for ceding the economic space in Asia to China, which is the biggest trading partner for many of the countries in the Indo-Pacific, and sees IPEF as a way to fill in the vacuum while taking into account its domestic political imperatives which don’t allow for a free trade pact.

IPEF was launched in May on the sidelines of the Tokyo Quad Summit. Initiated by the US, it has 13 other participating countries: India, Japan, South Korea, Philippines, Australia, New Zealand, Fiji, Indonesia, Brunei, Malaysia, Singapore, Thailand and Vietnam. Since the launch of IPEF, participating countries have been engaged in intensive negotiations to determine the core principles of the four pillars through two virtual ministerial meetings and discussions among officials. As HT had first reported on May 13, participating countries had the option of picking and choosing which pillars they wanted to participate in.

The framework is not a free trade agreement and doesn’t involve market access. India has, in recent months, showed an active desire to enter free trade agreements — it has signed trade pacts with the United Arab Emirates and Australia and is the process of negotiating such pacts with the United Kingdom, Canada and European Union, among other countries. But the trade pillar in IPEF entails commitments on digital trade, labour, and environment, without providing market access. This is understood to have deterred Delhi from participating in the pillar at this stage, even though negotiations continued on the issue till the end.

But supply chain resilience is at the heart of the framework. At IPEF’s launch, Prime Minister Narendra Modi had spoken of how supply chain resilience must be based on three Ts — “trust, transparency and timeliness”. With the pandemic exposing the world’s dependence on China, this pillar is expected to be based on identification of critical minerals, semi conductors, pharmaceutical ingredients among other essential goods; early warning systems that alert participating countries about possible shortages and dependence; and create alternative mechanisms to ensure predictable flow of goods without being hostage to economies such as China.

The decarbonisation pillar will entail a focus on green technologies and sustainable financing — there is a special session dedicated to financing at the IPEF ministerial — while ensuring high quality infrastructure in keeping with principles of transparency and wishes of participating countries. Prime Minister Modi has already scaled up India’s climate ambitions at the Glasgow summit, and the pillar is seen as a possible way to help meet India’s goals while giving another avenue to push the advanced western economies to meet their commitments. The final pillar, anti-corruption and tax, will build on existing international frameworks such as OECD and G-20 principles, United Nations conventions on anti-corruption and anti-bribery, and also include elements such as battling terror financing.

 source: Hindustan Times