The Print - 22 June 2022
India-US bilateral trade disputes at multilateral IPEF? USTR’s meeting triggers alarm in Delhi
An 11 June informal meeting of the Indo-Pacific Economic Framework (IPEF) in Paris — called by US Trade Representative (USTR) Katherine Tai — has sparked worries in New Delhi that Washington could be seeking to resolve some longstanding bilateral trade irritants such as tariffs and intellectual property rights through the backdoor at the new multilateral grouping.
So much so that India is now deliberating whether it should be a part of the trade pillar of IPEF, ThePrint has learnt.
IPEF was launched by US President Joe Biden on 23 May in Japan with 13 Indo-Pacific countries, including India, to enhance trade, economic and investment opportunities and rests on four pillars — trade, supply chains, clean energy, decarbonisation and infrastructure, and tax and anti-corruption.
Washington calls IPEF an “economic arrangement”.
But after the 11 June meeting, New Delhi is concerned that some issues — largely related to market access and IPR, issues that have remained a sore point in bilateral ties — could now come up under the framework’s trade pillar which Tai heads, a top official told ThePrint on condition of anonymity.
The meeting discussed “launching negotiations under the trade pillar”, sparking fears among Indian officials that IPEF could eventually end up as a trade agreement of sorts, the official said.
Commerce and Industry Minister Piyush Goyal skipped the Paris meeting as he was to visit Geneva to attend the Ministerial Conference of the World Trade Organization (WTO). However, a senior official from the commerce ministry attended the meeting.
According to a readout by the Office of the USTR, Tai said at the meeting that the US “looks forward to launching negotiations under the trade pillar, which will help fuel economic activity and investment, promote sustainable and inclusive economic growth, and benefit workers and consumers across the region”.
India is apprehensive that by launching the so-called “negotiations”, the US is trying to push for greater trade liberalisation among the 13 other member states — especially within the Quad grouping, consisting of India, US, Australia, and Japan, which is the main driving force behind the IPEF.
This is the reason, the official said, why India was initially reluctant to join the IPEF — because it feared that the US will bat for elimination of tariffs on goods and services, and certain amendments to the IPR and patents regime, and data protection — issues that have consistently been raised by Washington with New Delhi under the India-US Trade Policy Forum, which last met in November 2021.
ThePrint emailed the Office of the USTR seeking comment but there was no response until the time of publishing this report.
Besides the four Quad countries, IPEF includes Philippines, Brunei Darussalam, Fiji, Indonesia, South Korea, Malaysia, New Zealand, Singapore, Thailand, and Vietnam.
On the day of the launch of the IPEF, Tai had said that, under the framework, the US will focus on a “wide range of trade issues, including the digital economy and emerging technology, labour commitments, the environment, trade facilitation, transparency and good regulatory practices, and corporate accountability”.
According to Michael Kugelman, deputy director and senior associate for South Asia at The Wilson Center, a US-based think tank, joining the IPEF is a “risk” for India. “If it advances to the point where negotiations take place, then India could be faced with difficult choices.”
Countering China under RCEP
India is also worried that to counter China under the Regional Comprehensive Economic Partnership (RCEP), the US might try to bring high-standard trade measures, which New Delhi will not be in a position to comply with as it is not part of a multilateral trade pact, the official highlighted.
During the informal meeting in Paris, Tai, according to the readout, also said that “the United States and IPEF partners that choose to join the trade pillar will seek to build high-standard, inclusive, free, and fair-trade commitments and develop new and creative approaches in trade and technology policy that advance a broad set of objectives related to: labor; environment; the digital economy; agriculture; transparency and good regulatory practices; competition policy; and trade facilitation”.
Thus, India is now deliberating on whether it would like to be part of the trade pillar, and if that option would be given to all IPEF members, the official said, adding that more discussions will follow in the coming weeks on this aspect by the Office of the USTR.
India had walked out of the RCEP in 2019, fearing that Chinese goods would flood Indian markets. However, India chose to be part of the IPEF as it is already a key player in the political aspects of the Indo-Pacific under which the Quad operates, the official said.
The RCEP, signed by 15 Asia-Pacific countries — China, Japan, South Korea, New Zealand, Australia, and the 10 ASEAN (Association of Southeast Asian Nations) member states — aims to remove tariffs on about 90 per cent of the goods traded among member countries over a span of 20 years.
“For India, joining IPEF is a risk… It won’t want to back out, as it did with the RCEP. But it has strong differences with the US and other members on a panoply of IPEF issues, from e-commerce to environmental regulations,” Kugelman of The Wilson Center said.
“India took a gamble by joining the IPEF. It gains immediate term reputational benefits by showing its commitment to key Indo-Pacific initiatives and its willingness to join regional economic groupings, but it could find itself on the wrong side of the table on key policy issues, and that could aggravate some of the long running trade tensions it has had with Washington,” he added.
Biswajit Dhar, trade economist and professor, Centre for Economic Studies and Planning, School of Social Sciences, JNU, said: “The IPEF is going to be hugely challenging for India. Americans are targeting standards under the IPEF because tariffs are mostly passé for most of the countries. India is the only country where tariffs actually matter.”
IPEF and US’ exit from Trans-Pacific Partnership
According to another senior official, with the US having walked out of the Trans-Pacific Partnership (TPP) under former President Donald Trump, the IPEF gives Biden a chance to regain America’s leadership role in the Indo-Pacific region by way of enhanced trade.
This is the reason why the Biden administration had announced, when it unveiled the IPEF last month, that while the trade pillar will be spearheaded by the USTR, the other three pillars will be driven by the US Department of Commerce.
According to a report by the US Congressional Research Service issued in February 2022, ever since President Trump withdrew the US from the TPP in 2017, “many observers have asserted that the United States lacks an economic and trade strategy sufficient to counter China’s increasing economic influence in the Indo-Pacific”.
Once the US starts demanding greater tariff cuts and other relaxations, Dhar said, there will be pushback from the Indian industry and exporting community that have historically opposed such moves.
“The US’ manufacturing sector is non-existent. They survive on agricultural and services exports. So, these are the two sectors where there will be a major push. It is going to be a really tall task,” Dhar said. “Americans are not going to leave any stone unturned. And with an unprecedented global geopolitical jam, India has no option but to join the trade talks under IPEF.”
Kugelman said “IPEF represents an effort by the Biden administration to respond to criticism that it hasn’t offered a broader strategic plan for the pursuit of its economic goals in the Indo-Pacific”.
“IPEF represents the administration’s first stab at laying one out,” he added.
(Edited by Zinnia Ray Chaudhuri)