America's rivalry with China is set to intensify further with the launch of the Indo-Pacific Economic Framework, a U.S.-led initiative which is widely seen as an effort to counter China's influence in the Asia-Pacific, according to the South China Morning Post. This is the second time the U.S. has excluded China in a multilateral trade arrangement in the region.
Earlier, when the U.S.-led Trans-Pacific Partnership, comprising 12 countries, was about to be concluded, the U.S. itself withdrew under President Donald Trump. The remaining 11 countries went ahead and signed the free trade agreement as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP. China formally applied to join the group in September 2021.
Fifteen countries in the Asia-Pacific region comprising all major economies, including China, have in the meantime joined the Regional Comprehensive Economic Partnership, or RCEP, creating the world's largest trading bloc. The agreement came into force after ratification by 10 countries in January. The U.S. chose to stay out and India balked at the last minute.
According to the World Bank, the agreement covers 2.3 billion people or 30 percent of the world's population, contributes $25.8 trillion — about 30 percent — of global GDP and accounts for $12.7 trillion of global trade in goods and services, more than one-fourth.
The U.S. absence from the CPTPP and RCEP, two of the largest trading agreements in the world, demonstrates a lack of American economic engagement with the region. The U.S.-led IPEF is presumably an attempt to rectify this shortcoming. It reflects the American ambition to strengthen economic ties with key economies in the Asia-Pacific.
But the IPEF focuses on trade facilitation, standards for the digital economy and technology, supply chain resiliency, decarbonization, clean energy, infrastructure, worker standards and other areas of shared interest while remaining silent on market access — something that all trade facilitation agreements aim for. The IPEF is thus no substitute for the CPTPP or RCEP.
Thirteen countries agreed to join the IPEF negotiations, including Australia, Brunei, Fiji, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand and Vietnam. Participating countries can choose any of the processes. China, the world's biggest trading nation and a key partner in global supply chains, was not invited to join, which lays bare the real purpose of creating another economic agreement in the presence of the more substantial CPTPP and RCEP.
Questions about the purpose behind the IPEF on top of two of the world's largest multilateral trade pacts have already arisen. It is unclear to what extent countries with deep trade and economic relations with China will participate in a visibly anti-China coalition. Some countries may have participated to balance relations with both China and the U.S. or even to keep drawing the U.S. into the region as a bulwark against China's overwhelming presence. Major ASEAN economies may have considered strategic benefits over economic ones.
Nonetheless, openly apprehensive voices regarding China's absence include Mohamed Azmin Ali, Malaysia's senior minister for international trade and industry, who emphasized that the framework should be inclusive and engaging for all ASEAN players.
Similarly wary of America's intentions, Muhammad Lutfi, Indonesia's trade minster, who attended on behalf of President Joko Widodo, said: “We do not wish to see the IPEF merely as an instrument to contain other countries.”
Singapore's Prime Minister Lee Hsien Loong stated that the IPEF “should remain open, inclusive and flexible.” The agreement, he added, should enable members to continue working with other partners in “overlapping circles of cooperation” and leave membership open so others can join later. Singapore, he added hopes for an “Indo-Pacific that is free and open, connected and prosperous.”
Beijing has accused Washington of creating divisions with its newly launched IPEF, saying it was forcing countries in the region to pick sides between the U.S. and China. Chinese Foreign Ministry spokesman Wang Wenbin questioned the need for a new economic alliance where three already exist — the CPTPP, RCEP and APEC.
The U.S. is trying to use this framework to isolate China, but it will only isolate itself in the end,” Wang said.Like Trump, U.S. President Joe Biden has struggled to craft a coherent China policy that would overshadow China's deepening economic ties with all the regional states. The CPTPP and RCEP offer market access to member states, but without preferential market access to the U.S. in the IPEF there is little incentive for member states to choose it over the other two. China's application to join the CPTPP, on the other hand, offers the possibility of huge preferential access to the Chinese market for other member states.
Meaningful economic engagement with the Asia-Pacific faces a number of challenges within the U.S. While the U.S. may still control the global financial infrastructure, China has overtaken it in regional trade. While China's economic engagement makes it an indispensable regional partner, the U.S. has countered by pursuing military engagement — the Quad and AUKUS. How long can the U.S. supplement its presence with military engagement alone? Only time will tell.
