Indo-Pacific Trade Initiative to Enhance U.S. Economic Influence

By James Holbein and Justin Holbein, Of Counsel

The United States is finally beginning to re-engage with its trading partners on 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-Pacific Economic Framework for Prosperity (IPEF) with a dozen initial partners: Australia, Brunei, India, Indonesia, Japan, Republic of Korea, Malaysia, New Zealand, the 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 for cooperation to build stronger ties, better supply chains, grow the digital economy, address climate change, fight corruption and develop enhanced rules leading to increasing prosperity.  These four areas are:

  • Digital Economy: The U.S. will seek high-standard rules to grow the digital economy, including standards on cross-border data flows and data localization.
  • Supply Chains: Current supply chains are mired in disruption and delays due to the pandemic and inefficient legacy systems.  The IPEF seeks to improve transparency, diversity, security, 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, in mobilizing finance, and development of sustainable and durable infrastructure.
  • Tax and Anti-Corruption:The IEPF is based on members enacting and enforcing effective and robust tax, anti-money laundering, and anti-bribery regimes in line with existing multilateral obligations, standards, and agreements to curb tax evasion and corruption in the Indo-Pacific region.

U.S. foreign direct investment (FDI) in the Indo-Pacific is nearly $1 trillion and FDI entering the U.S. from the region is more than $900 billion.  Regional trade supports more than three million American jobs.  The Indo‑Pacific region is projected to be the largest 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 commercial, economic and financial engagement with countries and companies around the Pacific remain true.

Because the Administration has no ability to pass new free trade agreements due to Congressional opposition, this new initiative will focus on sectoral improvements that advance its domestic agenda, and may enhance the access of U.S. products into 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 U.S. is promoting IPEF to show that we can harness innovation in the clean energy, digital, and technology sectors, and make progress to address fragile supply chains, corruption and other challenges. As noted in the Statement on 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, Republic of Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand, and Vietnam,  … , (recognize that) “economic competitiveness will be largely defined by our ability to harness technology, promote innovation, participate in the digital economy, justly transition energy systems and achieve energy security, and tackle the climate crisis in a manner that produces equitable, inclusive growth and improves socio-economic welfare.”

To put the IPEF initiative into perspective and signal directions that the talks may take, the leaders of 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 substantially and more ambitious initiatives than the IPEF.  The Quad has already set up six leader-level working groups to work on COVID-19 Response and Global Health Security, Climate Change, Critical and Emerging Technologies, Cybersecurity Issues, Cooperation in Space Technologies, and Infrastructure.

The leaders also made announcements concerning other initiatives that will impact the Indo-Pacific region and that could easily be raised in IPEF talks, 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 Fellowship: The group will sponsor 100 American, Australian, Indian, and Japanese students to study in the U.S. each year for graduate degrees in STEM fields.
  • The Quad Vaccine Partnership and Global Health Security: This initiative addresses multiple approaches to COVID-19 issues.
  • Climate Change: Several projects will focus on a Shipping Task Force, to develop Green Shipping Corridors among Quad countries, as well as efforts to deploy clean hydrogen, minimize methane emissions, develop a 10-Year Clean Energy Supply Chain Plan, and reduce disaster risk for extreme weather 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 Open RAN Track 1.5 dialogues and the Memorandum of Cooperation on 5G Supplier Diversification and Open RAN.
  • The Quad Cybersecurity Partnership:In order to prevent and mitigate cyber incidents that plague all of the partners, the Quad will strengthen information-sharing among each country’s Computer Emergency Response Teams (CERT) and improve software and Managed Service Provider (MSP) cybersecurity standards. 
  • Space Cooperation: Quad partners will strengthen their commitments to the free, full, and open sharing of space-based civil Earth observation data, including access to U.S. cooperative civil Earth observation programs. 
  • Sustainability: The Quad partners intend to host a two-day workshop on implementation of the Long-Term Sustainability (LTS) Guidelines for Indo-Pacific countries focused on how LTS implementation can lead to positive changes in national policies, regulations, and outcomes.
  • Quad Infrastructure Coordination Group: This new working group seeks to improve collaboration and coordination designed to address digital connectivity, transportation infrastructure, clean energy and climate resilience.
  • Quad Humanitarian and Disaster Relief Mechanism: The group will coordinate and mobilize civilian-led disaster assistance efforts, with support from civil defense and military assets when needed, to respond to disasters in the Indo-Pacific.

It is likely that the IPEF initiative will harness the work done by the Quad to advance U.S. cooperation, collaboration, leadership, funding and support for the types of efforts already underway.  These efforts could take years, but there will be incremental progress that may impact your business much sooner. If any of the issues concern your business, it would be wise to monitor these efforts and weigh in with recommendations when opportunities arise. 

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