STRATEGIC ASSESSMENT. U.S. President Joe Biden is actually facing a dilemma related to trade in Asia. Many trade deals have also become political “poison” for Americans. Most of them attribute these deals to the risk of losing their jobs. At the same time, the U.S. is concerned that China’s influence is growing in the Asia-Pacific. In such a dynamic, Biden launched the Indo-Pacific Economic Framework (IPEF). In a broad sense, IPEF is the U.S.’ way of marking its commitment to remaining a major power in Asia-Pacific.
From the Chinese side, IPEF is considered to contain its own sensitivity, mainly related to the exclusion of Taiwan in the framework of economic cooperation. This exception is noteworthy given that Taiwan is a leading producer of computer chips, a key element of the digital economy that will be part of the IPEF negotiations. Internally in the U.S., building consensus in the process is also decisive.
Two researchers at the Center for American Progress, Tobias Harris and Trevor Sutton, in their analysis in Foreign Policy, deemed that there was anxiety about IPEF, including among the Asia-Pacific countries. They think it is not wrong for governments in Asia to have mixed feelings about IPEF because U.S. trade officials indicated they weren’t prepared to offer access to U.S. markets, let alone pursue free trade agreements like the TPP. According to critics, it will likely have little practical impact on real-world conditions.
U.S. President Joe Biden invited seven of the 10-member ASEAN, including Indonesia, to join the launch of his new trade offensive, aimed at distancing them from China, their most important trading partner.
Instead of obtaining any concrete economic advantages, the ASEAN members were there only to hear Biden preach about the latent danger of corruption and the refusal of big corporations to fulfil their tax obligations. Biden lured them to enter his trap, but he was reluctant to use a tempting bait because the “price” would be expensive.
Biden’s initiative, the Indo-Pacific Economic Framework (IPEF), is also a “slap in the face” for Japanese Prime Minister Fumio Kishida because Tokyo was the main champion of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an alternative for the Trans-Pacific Partnership which the Trump administration had dumped.
Indonesia and countries in this region need the U.S. presence, especially to counterbalance China’s assertiveness in the South China Sea, and for Indonesia in the Natuna waters. However, the lucrative U.S. market is their most important interest. Biden persuaded Indonesia and other nations to join his multilateral campaign to isolate China. But what he offers is too poisonous to accept. Sorry to say, the IPEF has become a laughingstock in the region.
Economic observer from the Institute for Development of Economics and Finance (Indef) Eko Listyanto said all types of foreign economic cooperation, including the Indo-Pacific Economic Framework (IPEF), must have a positive impact on the Indonesian economy. However, Eko underlined that the government should be able to fully utilize Indonesia’s participation in IPEF since supporting countries such as the United States and others must have set their strategies in this cooperation.
He said Indonesia, as a commodity-exporting country, has a strong potential to promote their commodity more extensively to the IPEF’s 12 members. Eko said Indonesia’s decision to join IPEF was used by the Indonesian government as a sort of balance of power in the Indo-Pacific Region between the United States and China. However, Eko warned the government not to have Indonesia caught up in the agenda of interests by the United States and China.
The IPEF agenda is forward-looking and addresses at least some issues that are relevant for the region, so it will also hold a degree of substantive appeal. Administration officials are going to great lengths in their public comments to stress that IPEF “is not a traditional free trade agreement.” The positive: The IPEF addresses important issues that are normally beyond the purview of trade agreements and its modular approach allows countries to sign on for some parts but not others.
The let-down: The IPEF lacks the market access commitments contained in traditional agreements — a major disappointment for trade partners. Participating members may find some aspects desirable, but the IPEF demonstrates the very tight corner the Biden administration is backed into on trade. It is also unclear what — if any —enforcement mechanisms the framework will include. Broadly speaking, the aspect that potentially troubles ASEAN members most is the prospect of the IPEF becoming, either in perception or in reality, a bulwark against China’s influence in the region (Red/many sources).
