US President Joe Biden (right), seen here reviewing the honor guard with Japanese Prime Minister Fumio Kishida in Tokyo, published an economic framework during his visit to Japan last week. The IPEF came as a lifeline for India, which remained outside the China-centric pact of Southeast Asian countries in 2020.
Swimming pool Getty Images News Getty Images
Two years after withdrawing from China’s free trade pact in Southeast Asia, India is taking the chance to become the founder of another US-led group.
The launch of the US-led Indo-Pacific Economic Framework in Tokyo during President Joe Biden’s first official trip to Asia last week gave India a chance to make its own foothold in the Pacific.
New Delhi’s move to strengthen its alliance with Washington comes amid news that the United States is ahead of China to become India’s largest trading partner in the fiscal year ending March 2022.
With the exception of India and the United States, all other nations involved in the launch of IPEF are part of a competing bloc, the Regional Comprehensive Economic Partnership. The RCEP includes China, which is the largest trading partner of most members of the pact.
Indian Foreign Minister Subramaniam Jaishankar later reaffirmed India’s commitment to IPEF. At a conference in India with Southeast Asian countries last week, he said India is building infrastructure to build closer ties with Southeast Asia through Myanmar and Bangladesh, which will be in line with the new framework.
“[Connectivity] “Not only will it be based on the partnerships we have with ASEAN and Japan, but it will actually make a difference in the Indo-Pacific economic framework that is now being created,” Jaishankar said.
States in [Indo-Pacific] the region can overcome geography and rewrite recent history if it fixes politics and the economy.
Submanaman Jaishankar
Minister of Foreign Affairs of India
“States in [Indo-Pacific] “The region can overcome geography and rewrite recent history if it fixes policies and the economy,” he said.
Both Bangladesh and Myanmar are part of the One Belt One Road initiative, in which China has invested billions of dollars in infrastructure projects on different continents. India has stayed out of President Xi Jinping’s signature initiative due to an ongoing border dispute. In addition, a key component of the BRI passes through areas of Pakistan-controlled Kashmir. India claims that all of Kashmir is its own.
With the exception of China
India’s early flare for IPEF is a reversal for the South Asian giant, which has chosen to stay out of the China-oriented RCEP, which launched earlier this year. The RCEP includes Japan, South Korea, Australia, New Zealand and the 10 countries of Southeast Asia, making it the largest free trade pact in the world.
“The main drawback of the RCEP was the inclusion of China,” Arvin Virmani, a former chief economic adviser to the Indian government, told CNBC. “China agrees to everything on paper, but does not bother to evade the rules in practice. IPEF is very attractive to India because it includes countries from East and Southeast Asia, but excludes China,” he said.
China, which last week criticized the IPEF as a “doomed” effort, rejected it again on Monday.
“How can it be called inclusive if it purposefully excludes China, the largest market in the region and the world?” Chinese Foreign Minister Wang Yi Wang asked during a visit to Fiji, which became the newest member to join. to the IPEF last week.
Although the IPEF is not designed as a trade pact, trade is one of its four pillars. The other pillars are supply chain resilience; clean energy, decarbonisation and infrastructure and, finally, taxation and the fight against corruption.
“India will benefit from the signing of a multilateral framework, which will mean some standardization in various sectors,” former Indian Indian industrial secretary Rajan Katoch of Bhopal, a city in central India, told CNBC.
“I hope this will lead to something (in trade) because it will put pressure on the Indian system to be more open. India is too protectionist, in my opinion, given the capabilities of its people,” he said. Katoch added that IPEF could allow India to push for supply lines for some products to be relocated to India.
But strategic calculations can outweigh economic considerations. “It’s becoming a very segmented world and you’ve set foot in this camp … you want to see that too,” Katoch said.
India-China tension
India’s aversion to a pact involving China is based on geopolitical considerations. Tensions on India’s Himalayan border with China erupted in a bloody conflict two years ago. Tens of thousands of troops on both sides are still stationed at the border.
Katoch said that while lowering barriers to US markets is not currently being discussed at this stage, this could eventually be changed through negotiations.
“Perhaps [negotiations could result in] some reduction of barriers or some encouragement to relocate the supply chain to India. I guess that will happen, “he said.
But India’s importance to the United States is strategic rather than economic. As the only Asian country to share a disputed land border with China and strong enough to face the emerging superpower, India is a key component of the US Indo-Pacific strategy to limit China. This strategic merger could lead to concessions on both sides.
The very notion of the Indo-Pacific region is empty without the participation of India.
Joshua P. Meltzer
Senior Fellow, Brookings Institution
“The very idea of the Indo-Pacific region is empty without India’s involvement,” said Joshua P. Melzer, a senior fellow in the Brookings Institution’s global economy and development program, in a recent analysis. He added that India could accept IPEF better than RCEP as it did not make any demands for lower tariffs.
“IPEF also comes at a time when India has clarified its strategic concerns about China. Increasing rapprochement between China and Russia could also make India seek even closer relations with the United States, “Meltzer said.
Add Comment