What is the Indo-Pacific Economic System?

President Joe Biden faced a dilemma in Asian trade. He was unable to rejoin the Trans-Pacific Partnership (TPP), which his predecessor left the United States in 2017. Regardless of their content, many of the associated trade agreements were politically poisonous to the United States. Voters who linked them to unemployment.

So Biden came up with an alternative. The United States on Monday announced countries joining the new Indo-Pacific Economic Framework while former Vice President Biden visited Tokyo. It is best known by its initials IPEF in the tradition of trade deals. (Pronounced EYE-Pep.)

who are you?

The framework has 13 member countries that account for 40% of global GDP, including the United States, such as Australia, Brunei, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Thailand and Vietnam.

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What will IPEF do?

It’s still an issue to figure out. The current explanation is largely hopeful, as Monday’s announcement signals the beginning of a dialogue between participating countries to ultimately decide what will be included in the framework. In a broad sense, this is a way of placing a sign that the US is willing to maintain its leadership in Asia.

“We are writing new rules for the economy of the 21st century,” former Vice President Biden said in the announcement. “They will help the economies of all countries grow faster and equitably. We will do this by addressing the most serious problems that are hampering growth.”

White House National Security Adviser Jake Sullivan said: “The IPEF is focused on further integration of the Indo-Pacific economy, especially in new areas such as the digital economy, where we are working to set standards and rules and ensure that secure and resilient supply chains exist.” .”

The idea that a new standard for world trade is needed is not just about dissatisfaction among American voters. It is the awareness of how the pandemic is disrupting entire ranges of supply chains, closing factories, delaying cargo ships, clogging ports, and increasing inflation worldwide. These vulnerabilities became more evident after Russian President Vladimir Putin ordered an invasion of Ukraine in late February, causing dangerously high food and energy costs in many parts of the world.

Who will finalize the details?

Negotiations with partner countries revolve around four pillars or topics, with the US Trade Representative and the Department of Commerce sharing the work.

The US trade representative will handle the talks on the “fair” trade pillar. This could include efforts to protect US workers from job loss as China’s accession to the WTO in 2001 resulted in severe manufacturing layoffs. These job losses have destroyed parts of America, upset voters, and fueled the political rise of Donald Trump, who withdrew the United States from the Trans-Pacific Partnership upon taking his oath of office in 2017 as president.

The Department of Commerce will oversee negotiations on three other pillars: supply chain resilience, infrastructure and climate change, and taxes and anti-corruption. Commerce Secretary Gina Raimondo flew to Japan with Biden on Air Force One. She was also with the president while in South Korea, where he highlighted the US plant investments of automaker Hyundai and electronics giant Samsung.

The added point is that, according to administration officials, countries can choose which pillar they want to belong to. You don’t have to support all four.

Who can join the club?

The White House says the IPEF will be an open platform. However, the Chinese government faces criticism that any agreement could become a “monopoly” faction, which could lead to even greater chaos in the region.

And China, the world’s second-largest economy, is showing a sensitive reaction to establishing an IPEF. Taiwan, over which China claims sovereignty, is also excluded from the treaty. This exclusion is noteworthy as Taiwan is also a leading manufacturer of computer chips, a key component of the digital economy that will be part of the IPEF negotiations.

White House national security adviser Jake Sullivan said on Sunday that all trade negotiations with Taiwan would be one-on-one.

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How long will it take?

Once the talks begin, negotiations are expected to take 12 to 18 months, an aggressive timeline for a global trade deal, according to US administration officials. The official requested anonymity to discuss the plan, he added, adding that building consensus in the United States is also key.

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