ASEAN Perspectives on the Indo-Pacific Economic Framework: A Geoeconomic Boon for America’s Indo-Pacific Engagement?
By James Robert Balzer, Policy Brief Writer
On May 23, President Biden announced the US-led Indo-Pacific Economic Framework (IPEF), with 13 inaugural signatories covering 40% of global GDP. While not an FTA, it intends to advance the economic vigour and resilience of the Indo-Pacific. The IPEF — along with the Build Back Better World initiative — also represents a key node in the US’ development and investment response to China in the region. In particular, the Framework will consolidate American influence over trade and commerce in ASEAN.
Former POTUS Donald Trump’s withdrawal of the US from the TPP left a geoeconomic void in America’s engagement with the region, making the US much less appealing for countries such as Indonesia, Singapore and Malaysia. Consequently, it has been up to the Biden administration to demonstrate the geoeconomic heft of its Indo-Pacific strategy, which the IPEF intends to do, especially in ASEAN.
Its four pillars: connected economy, resilient economy, clean economy and fair economy, have largely positive reception across ASEAN. Pillars such as ‘resilient economy’ especially matter in light of supply chain disruptions and increasing diversification of offshore manufacturing sites. Resilience is in turn reinforced by the ‘connected economy’ pillar, as America and its allies deepen trade relations. US trade with the Indo-Pacific already supports over three million American jobs and is the source of almost $900 billion of FDI.
However, concerns persist regarding the IPEF’s currently vague content and direction. Additionally, ASEAN member states worry that joining the Framework will force them to choose between China or the US, which could undermine constructive trade and investment relations with the former. This apprehension is particularly salient given the region’s well established economic ties to China and the need for a strong post-COVID recovery.
Furthermore, Washington’s decision to exclude market access from the IPEF is causing hesitation and disappointment. Consequently, the main incentives presented by Washington are investments and technology sharing, especially regarding the digital economy and green energy.
This complements the priorities of some national governments, such as Singapore and Vietnam. Singaporean Prime Minister Hsien Loong cited the IPEF’s digital and green economy characteristics as something that “resonate[s] strongly in the [ASEAN] region”. Additionally, Vietnam has communicated interest in the clean economy pillar of the IPEF in addition to the connected economy pillar furthering its digital economy,
Moreover, Indonesia and Malaysia recognise the benefits to their digital and green economies, as highlighted by the Indonesian trade ministry. Malaysia’s prime minister is also confident the IPEF will benefit his country’s electrical and electronics (E&E) sectors and its digital economy.
Reservations still remain regarding the exclusion of Myanmar, Cambodia and Laos from the deal, signaling a missed opportunity for strong regional coherence on the agreement. However, concerns regarding human rights in Myanmar, in addition to Laos and Cambodia’s alignment with China, make a whole-of-ASEAN alignment to IPEF unlikely.
Certain commentators suggest the IPEF does not have particular long term appeal beyond traditional partners of the US and that greater emphasis be placed on the initiative’s ‘pull’ and inclusion. This may include recalibrating the four pillars as something individual countries can influence and modify. Such an approach could allow more ambitious countries, and those with more particular interests, to tailor their IPEF participation to their needs and desires. In addition, it could create a precedent of more targeted rulemaking and standard-setting efforts in the long-term.
To sum up, the IPEF represents America’s return to economic engagement with the Indo-Pacific region through comprehensive and contemporarily relevant thematics. However, the practical elements of the initiative draw concern from member states. To ensure America is the sustained partner of choice for the region, it needs to consider a more inclusive and tailor-made implementation of the IPEF. This is especially the case in light of ASEAN’s desire for a strong post-COVID recovery, adaptation to climate change, decarbonisation and a comprehensive digital economy.
