The United States is finally beginning to re-engage with trading partners around the Pacific Rim after the disastrous withdrawal from the Trans-Pacific Partnership free trade agreement in 2016. On May 23, 2022, President Biden launched the Indo Economic Framework – Pacific for Prosperity (IPEF) with a dozen initial partners: Australia, Brunei, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand and Vietnam. https://www.whitehouse.gov/briefing-room/statements-releases/2022/05/23/fact-sheet-in-asia-president-biden-and-a-dozen-indo-pacific-partners-launch- the-indo-pacific-economic-framework-for-prosperity.
This new initiative will focus on four areas of cooperation to strengthen ties, improve supply chains, develop the digital economy, fight climate change, fight corruption and develop improved rules leading to increased prosperity. These four areas are:
- Digital Economy : The United States will seek high-level rules to develop the digital economy, including standards on cross-border data flows and data localization.
- Supply Chains: Current supply chains are mired in disruptions and delays due to the pandemic and inefficient legacy systems. IPEF seeks to improve transparency, diversity, safety and sustainability to make supply chains resilient and well-integrated.
- Clean energy, decarbonization and infrastructure: The IEPF seeks to accelerate the development and deployment of clean energy technologies to decarbonize our economies and build resilience to climate impacts by deepening cooperation in technologies, mobilizing financing and developing sustainable and sustainable infrastructure.
- Taxation and the fight against corruption:The IEPF relies on members enacting and enforcing effective and robust tax, anti-money laundering and anti-corruption regimes in line with existing multilateral obligations, standards and agreements to combat tax evasion and corruption in the Indo- peaceful.
U.S. Foreign Direct Investment (FDI) in the Indo-Pacific is nearly $1 trillion and FDI entering the U.S. from the region is over $900 billion . Regional trade supports more than three million American jobs. The Indo-Pacific region is expected to be the biggest contributor to global growth over the next 30 years, according to the White House fact sheet. These numbers are larger than when the TPP was negotiated, and the same compelling reasons for trade, economic and financial engagement with Pacific countries and companies remain true.
Since the administration lacks the ability to pass new free trade agreements due to congressional opposition, this new initiative will focus on sectoral improvements that advance its national agenda and could improve the access for American products to other markets, even without becoming a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The successor agreement to the TPP includes Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
The United States promotes IPEF to show that we can harness innovation in the clean energy, digital, and technology sectors, and make progress in tackling fragile supply chains, corruption and other challenges. As stated in the statement on the Indo-Pacific Economic Framework for Prosperity made on May 23, 2022, https://www.whitehouse.gov/briefing-room/statements-releases/2022/05/23/statement-on-indo – pacific-economic-framework-for-prosperity/, “the United States, Australia, Brunei Darussalam, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam, … , (acknowledging that) “economic competitiveness will be largely defined by our ability to harness technology, promote innovation, participate in the digital economy, make the just transition of energy systems and to ensure energy security, and to address the climate crisis in a way that produces equitable and inclusive growth and improves socio-economic well-being.
To put the IPEF initiative into perspective and signal the directions the talks could take, leaders from the Quad nations – Australia, India, Japan and the United States – met in Japan on May 24, 2022. They issued a joint statement https://www.whitehouse.gov/briefing-room/statements-releases/2022/05/24/quad-joint-leaders-statement/ with substantive and more ambitious initiatives than the IPEF. The Quad has already established six leadership-level task forces to work on COVID-19 response and global health security, climate change, critical and emerging technologies, cybersecurity issues, technology cooperation space and infrastructure.
The leaders also made announcements regarding other initiatives that will have an impact on the Indo-Pacific region and which could easily be brought up during IPEF discussions, including:
- Maritime: The Indo-Pacific Partnership for Maritime Domain Awareness (IPMDA) can become a near real-time, integrated and cost-effective maritime system for monitoring offshore waters for all countries in the region.
- The Quad Scholarship: The group will sponsor 100 American, Australian, Indian and Japanese students to study in the United States each year for graduate degrees in STEM fields.
- The Quad Vaccine Partnership and Global Health Security: This initiative addresses several approaches to issues related to COVID-19.
- Climate change: Several projects will focus on a shipping task force, to develop green shipping corridors between Quad countries, as well as efforts to deploy clean hydrogen, minimize methane emissions, develop a 10-year chain plan clean energy supply and disaster risk reduction for extreme weather conditions. events by integrating and facilitating climate information services.
- Common Statement of Principles on Critical Technology Supply Chains: The group seeks to deploy open and secure telecommunications technologies in the region, working with industry through the Open RAN Track 1.5 dialogues and the 5G and Open RAN Supplier Diversification Cooperation Protocol.
- The Quad Cybersecurity partnership:In order to prevent and mitigate cyber incidents that plague all partners, the Quad will strengthen information sharing between computer emergency response teams (CERTs) in each country and improve cybersecurity standards for software and managed service providers (MSPs).
- Space cooperation: Quad partners will strengthen their commitments to free, comprehensive, and open sharing of civil Earth observation data from space, including access to U.S. cooperative civil Earth observation programs.
- Sustainability: The Quad partners intend to organize a two-day workshop on the implementation of the Long-Term Sustainability Guidelines (LTS) for Indo-Pacific countries, focusing on how the implementation of LTS can lead to positive changes in national policies, regulations and outcomes.
- Quadruple Infrastructure Coordination Group: This new working group aims to improve collaboration and coordination designed to address digital connectivity, transport infrastructure, clean energy and climate resilience.
- Quad Humanitarian and Disaster Relief Mechanism: The group will coordinate and mobilize civil disaster assistance efforts, with the support of civil defense and military assets if necessary, to respond to disasters in the Indo-Pacific.
It is likely that the IPEF initiative will leverage the work done by the Quad to advance U.S. cooperation, collaboration, leadership, funding, and support for the kinds of efforts already underway. These efforts could take years, but there will be incremental progress that could impact your business much sooner. If any of the issues relate to your business, it would be wise to monitor these efforts and provide recommendations when opportunities arise.
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