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The US-driven Indo-Pacific Economic Framework (IPEF) for Prosperity: TPPA in drag or a vacuous vanity project?

Photo: Cabinet Secretariat Cabinet Public Relations Office / Creative Commons

Foreign Control Watchdog | December 2022

The US-driven Indo-Pacific Economic Framework (IPEF) for Prosperity: TPPA in drag or a vacuous vanity project?

by Jane Kelsey, Professor of Law, University of Auckland

The “Indo-Pacific”

When the US launches a high level and concerted re-branding exercise, something big is happening. The latest target is the “Asia-Pacific” region, now to be known as the “Indo-Pacific”. The Indo-Pacific Strategy issued by the White House in February 2022 complained accused the People’s Republic of China of “combining its economic, diplomatic, military, and technological might as it pursues a sphere of influence in the Indo-Pacific and seeks to become the world’s most influential power”. The rebranding de facto excises China from a region in which, for better or worse, it is an economic and strategic powerhouse. Ironically India, hardly a reliable fellow traveller, is elevated in its place.

The term Indo-Pacific itself is not new. Stuff had an interesting article in July this year setting out its long history. What’s new is its revival by the US as a geopolitical and geostrategic counterweight to China. The accompanying rhetoric is redolent of the old Cold War. Free and Open. Connected. Prosperous. Secure. Resilient.

“Free and open” means Investing in democratic institutions, a free press, and a vibrant civil society and Advancing common approaches to critical and emerging technologies, the internet, and cyber space. Not a hint of irony, given the crisis of democracy that pervades the US.

“Connected” includes Expanding U.S. diplomatic presence in the Indo-Pacific, particularly in Southeast Asia and the Pacific Islands, Deepening our five regional treaty alliances with Australia, Japan, the Republic of Korea (ROK), the Philippines, and Thailand and Partnering to build resilience in the Pacific Islands.

“Secure” involves Innovating to operate in rapidly evolving threat environments, including space, cyberspace, and critical- and emerging-technology areas, Continuing to deliver on AUKUS and Expanding U.S. Coast Guard presence and cooperation against other transnational threats.

“Resilience” is equally Janus-faced, promising a “deep commitment” to reducing the impacts of climate change and environmental degradation (despite US addiction to oil and gas) and bolstering global health security (while US corporations profiteer through guaranteed intellectual property rights).

“Prosperous” has, at its core, to:
• Develop new approaches to trade that meet high labor and environmental standards
• Govern our digital economies and cross-border data flows according to open principles, including through a new digital economy framework
• Advance resilient and secure supply chains that are diverse, open, and predictable
• Make shared investments in decarbonization and clean energy

New Zealand on board

It is extraordinary how quickly states across “the region” (whatever we name it) have fallen into line. Old imperial powers have embraced the US’s re-assertion of its regional presence: Australia, with its increasingly strident anti-China stance; Canada, welcoming a new hybridised North-South version of the old Western hegemony; France, wary of its remaining colonies being seduced by China.

Biden has been courting government leaders from Pacific Islands nations, including dinner at the White House, in a new charm offensive explicitly designed to counter China’s growing investment and diplomatic presence. In addition to promises of more money, the US plans to establish new “diplomatic” posts in selected South Pacific countries. Pacific Islands leaders have not been a pushover, but are looking to play the super-powers off against each other to secure the best outcomes.

Predictably, New Zealand has also fallen into line – not without creating some nerves, given long-standing bipartisan attempts to keep our deep economic dependence on China at arms-length from our geo-strategic alliances. Ardern explicitly embraced the term “Indo-Pacific” in July 2021 while eschewing its use as a “subtext for exclusion”. A year later her speech to the Lowy Institute in Australia still tried to tread that fine line, asserting an independent foreign policy while adopting the US’s name for the region:

  • "In the wake of the tensions we see rising including in our Indo-Pacific region, diplomacy must become the strongest tool and de-escalation the loudest call.
  • "We won’t succeed, however, if those parties we seek to engage with are increasingly isolated and the region we inhabit becomes increasingly divided and polarised. We must not allow the risk of a self-fulfilling prophecy to become an inevitable outcome for our region.
  • "We have legacy and interests in the Indo-Pacific. As does Australia. Both countries have invested heavily in relationships and institutions there – not least because what happens in the Indo-Pacific impacts our neighbourhood.
  • "It follows that we must strengthen the resilience of the Indo-Pacific through relationships and importantly economic architecture."

The Politics of IPEF

So far there are two institutional fulcrums to the US’s game plan. The Quadrilateral Security Dialogue or “Quad” of the US, Australia, Japan and India promises to safeguard the “free and open” Indo-Pacific region. The Quad’s mission is:

“promoting a free, open rules-based order, rooted in international law to advance security and prosperity and counter threats to both in the Indo-Pacific and beyond. We support the rule of law, freedom of navigation and overflight, peaceful resolution of disputes, democratic values, and territorial integrity. ”

New Zealand is not yet a party, but the Quad overlaps with the Five Eyes in which successive New Zealand governments are donkey deep.

The second, related limb is the proposed Indo-Pacific Economic Framework (IPEF) “for Prosperity”. US President Biden launched the IPEF in Tokyo in May 2022, flanked by the three other Quad leaders from Japan, India and Australia, whose new Prime Minister Anthony Albanese was speedily sworn in so he could reach Tokyo in time. Jacinda Arden (with Covid) joined by zoom, but discussed IPEF directly with Biden in Washington the following week. Currently thirteen countries are taking part: the Quad, New Zealand, Brunei, Indonesia, Fiji, South Korea, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. Only India’s Prime Minister Modi has publicly expressed reservations, and has opted to participate in only some of the IPEF agenda.

The obvious question is whether IPEF is just the deeply unpopular Trans-Pacific Partnership Agreement (TPPA) in drag. In some respects it is. Barack Obama famously and unsuccessfully tried to sell the TPPA to the American people, and the US Congress, as the vehicle for America to write the rules and calls the shots in the 21st century, not China. Those power politics remain the same. As with the TPPA, the US initiated the negotiation and will set the agenda, dictate the script and approve the outcome, with other states attempting to influence at margins. Even when Trump withdrew the US from the TPPA, many of the US-driven texts were retained by the remaining eleven countries. We also expect parts of the TPPA to form the starting point for US demands.

It’s not hard to see why the Biden Administration has chosen this path. There are three main motivators: placating the Democrat (and Trump) base that is deeply hostile to traditional FTAs like the TPPA as offshoring American jobs and boosting the super-profits of Big Pharma, Big Finance, Big Tech etc, by leaving out intellectual property rights and investment protections while promoting labour and environment rules; marginalising China’s economic/geopolitical/strategic influence in the old Asia Pacific; and securing adherence to new rules on digital, agriculture, etc that advance US commercial and security interests.

“The prosperity” promised by IPEF is principally for the US on terms it can manage politically. The Biden administration is determined to bypass the messy problem of securing approval in the Congress. An “executive agreement” that does not contain market access commitments and does not require the US to change any of its laws avoids that problem. So, unlike the TPPA, IPEF will not include negotiations for other parties to access the US market, removing the most obvious means for other countries to point to any commercial gains. The pro-corporate regulatory settings will reflect the status quo in the US. Add to that the penchant for the US to invoke “national security” exceptions to justify breaching its trade obligations, which makes a mockery of an “open rules-based system” and any pretence that IPEF will be a reciprocal exchange of benefits by all the participating countries.

What is in IPEF for those other participants? Many are keen for the US to re-engage in “the region” and hope there might be some ancillary gains. Others, including New Zealand, would never say no to such a negotiation anyway. Developing countries are being promised special treatment, starting with the Big Tech companies providing training to women and girls – presumably in the expectation they can gain a foothold in those countries, and develop a workforce for call centres and similar operations, assuming those countries have adequate infrastructures to support them.

The substance of IPEF

So what do we know about IPEF? Very little – and that will continue if the US has its way. Many participating governments, including New Zealand, have signed a secrecy pact to to keep the negotiating documents and text secret for five years after the agreement (whatever form it takes) has entered into force. That is two years longer than the secrecy pact in the TPPA!!!! Already Democrat Senator Elizabeth Warren and others have written to the administration complaining about the undemocratic process and warning it had better not be the TPPA mark 2.

This secrecy is all the more poignant given the promise that IPEF is a “progressive” new approach to replace the failed and discredited old-style of free trade deals. US Trade Representative (the US trade minister) Katherine Tai has pitched this as a new generation agreement that addresses 21st century issues like labour, environment and climate change, post-pandemic security of supply chains, etc. Behind the tedious rhetoric of “progressive and inclusive” deals for labour, environment, women, small and medium enterprises, lies a variation on the same old themes.

Half a year since its high profile launch, IPEF remains an enigma, a high-level idea in search of substance. The first few months have been spent on scoping the framework - something you would expect to happen before countries opt in. The Ministers met virtually in late July and in person in Los Angeles in September confirming there are four pillars: trade, supply chain resiliency, clean energy and decarbonization, and tax and anti-corruption. Participants can elect which pillars to partake in, but not which parts of a pillar to accept. To date, only India has opted out of pillar 1. The remainder are in all four.

Pillar 1: “Trade” proposes “provisions and initiatives related to labor, environment, digital
economy, agriculture, competition policy, transparency and good regulatory practices, trade
facilitation, inclusivity, and technical assistance and economic cooperation.” Labour and environment standards mainly involve cooperation and compliance with countries’ existing standards and international obligations. The rest looks likely to extend regulatory constraints in chapters of FTAs that restrict domestic policies and laws, including digital, SOEs, food standards, product labelling, agriculture, fisheries subsidies, customs, competition policy, services, and rights of corporations to lobby over proposed new laws. These are like to mirror and build on the TPPA and other US-led FTAs.

Pillar 2: “Supply chains” are to become “more resilient”, better integrated and efficient, while protecting workers. The ministers “reaffirm our commitment to fair and open markets and the rules-based multilateral trading system”, aim to “ensure secure and resilient supply chains and to minimize disruptions and vulnerabilities, which may require evolving our public institutions and improving coordination with the private sector” (subtext for empowering corporations in the public sphere), and “seek to coordinate crisis response measures and to expand cooperation to better prepare for, and mitigate the effects of, disruptions to better ensure business continuity and improve logistics and connectivity, particularly in critical sectors”. That includes security of digital technologies, such as raw materials and semi-conductors. All code for less dependency on, and marginalisation of, China.

Pillar 3: “Clean Economy” intends to “accelerate our efforts in pursuit of greenhouse gas emissions mitigation and elimination, enhanced energy security, and climate resilience and adaptation, as well as sustainable livelihoods and quality jobs for our populations”. But it relies on markets and technologies to do so. There is a long list of goals and promises, including clean energy technologies, energy efficiency, energy sector security and transformation, de-carbonise high emissions sectors, and “just transition” to more sustainable jobs. Expect a focus on liberalising tariffs and regulations on “environmental goods and services”, while avoiding any commitments to cut emissions or address the major climate villians, like fossil fuels and agriculture, because those really matter to the US, Australia and New Zealand.

Pillar 4: “Fair Economy” invokes the principles of “fairness, inclusiveness, transparency, the rule of law, and accountability” and levelling the playing field by “preventing and combating corruption, curbing tax evasion, and improving domestic resource mobilization”. The work will “support” the OECD-driven Inclusive Framework that was intended to address the tax avoidance practices of Big Tech and other transnational companies, but now heavily favours the corporations. It remains to be seen whether the US will even sign up to that.

Of the four “pillars” Tai is only in charge of Pillar 1 on trade. The other three fall under the much more traditional and hawkish Secretary of Commerce Gina Raimondo, whose department has a notorious revolving door for the corporate lobbyists, especially Big Tech. Senator Warren, alongside various US watchdog groups, have been exposing this too.

Is IPEF just a vanity project going nowhere?

There is just not enough information to know if IPEF will put a new set of handcuffs on future governments seeking to address the massive challenges of our time, including the climate crisis, precarious work, Big Tech’s control of the digital ecosystem, while deepening the battle for hegemony between the US and China. It could just as easily be pie in the sky. The US has one eye on deliverables as it hosts APEC in 2023. But it’s totally unclear what they might be, as there is no coherence across the four pillars of IPEF, no apparent timetable, no idea what legal form it might take and how obligations might be made binding, if at all.

It is also unclear which countries might remain at the end. Seven of the ten ASEAN countries have agreed to participate. But these are early days. Few ASEAN countries will want to jeopardise their relationship with China for nothing tangible in return. They have just agreed the Regional Comprehensive Economic Partnership (RCEP), including China, which is much less ambitious than the TPPA, including on digital trade rules that benefit Big Tech, and does not include binding obligations on labour and environment.

At the same time, the US may struggle to get domestic support for a deal including Malaysia, Indonesia and Vietnam, which have already been targeted by US unions for their human rights and labour records. The US elections add to its domestic uncertainties. So-called “early harvests” are unlikely to be on the big ticket items. There is little chance that IPEF will be concluded before the 2024 presidential election, and is likely to be dead in the water if the Democrats lose. That will become even more pressing as many newly elected members of Congress are expected to hanker after an old fashioned free trade agreement, preferably re-joining the TPPA/CPTPP. As an “executive agreement” the future of IPEF ultimately depends on the sitting President’s enthusiasm. That’s a lot of political capital and government resources to pour down that hole.

The New Zealand government has a further dilemma. For years successive governments have sat on the fence, assuming they could divorce the country’s economic dependency on China from strategic alliances that were becoming stridently anti-China. That dependency is now overwhelming, making IPEF’s overtly anti-China strategy a real economic liability. Deepening this rift, with no market access to the US to show for it, should be a hard sell, even for MFAT. But secrecy, bipartisan support, and media disinterest will assist them.

The next step for IPEF is a senior officials meeting in Brisbane in early December 2022. The Australian government has conceded to pressure to hold some kind of “stakeholder” process that could let a glimmer of light into proceedings, but could also prove a token concession that also legitimises the presence of corporations at the negotiations. A ministerial meeting is planned, probably in Malaysia, around March next year. At some stage before too long governments, including New Zealand, are going to make decisions about whether this is worth the candle. Equally, those who campaigned against the TPPA will need to decide whether to launch a similar level of opposition to IPEF.

 source: Foreign Control Watchdog