IPEF: another vague attempt to counter China

The fundamental flaw of 'Indo-Pacific Economic Framework for Prosperity' remains in its offer to partner countries

The alliance network of the United States has been one of the most durable cogs in its foreign policy machine since the Second World War. The American alliances have continually evolved after the Cold War, but they now face a new challenge – perhaps a more formidable one: China’s growing economic might and technological advancement.

In pursuance of this policy, the US has been cobbling up new alliances in the Indo-Pacific region. The most recent was AUKUS which is intended to be a strategic partnership among Australia, the United Kingdom, and the United States to bolster their allied defence capabilities in the Indo-Pacific. Moreover, the US also sought to revive the Quad, officially the Quadrilateral Security Dialogue, among four countries: the US, Australia, India, and Japan, to tackle security and economic issues.

Read more: Indo-Pacific Economic Framework not a blessing to Asia

And in this tight race against China, and in many ways against time, the Administration of US President Joe Biden launched another alliance: the Indo-Pacific Economic Framework for Prosperity (IPEF), with a dozen initial partners in May this year.

While the flagship economic proposal for the Indo-Pacific holds narrow value, it is unclear if it will benefit or even provide Washington the economic dominance that it so desperately craves against Beijing’s growing influence amongst South and Southeast Asian countries.

The fundamental flaw of the IPEF remains in its offer to partner countries – particularly the lack of substantial market access or trade privileges. In the absence of sufficient incentives, these nations are unlikely to make any significant commitments to the latest trade pledge by Washington. Consequently, Biden’s plan presents a weak alternative that can push value networks away from Beijing’s sphere or counter its geoeconomic influence.

To the US President’s limited advantage, Beijing does seem somewhat less attractive than it did, due to its internal struggles with the pandemic and its debt, but it is still in a stronger economic position to tempt regional players compared to Washington. Unlike the US, where reluctance toward trade agreements predates Biden and even Trump, China offers greater consistency in its financial partnerships – significantly increasing its overall ability to exert economic influence.

Also read: US, India partnership targets arms, AI to compete with China

Interestingly, at the time of its launch, the US administration positioned the IPEF as a crucial offer that aimed to focus on reducing reliance on China, building key areas in the region’s economy, including supply chain, but it appears to be nothing more than another desperate attempt by Washington to decouple regional countries from China. All in all, Washington’s latest economic initiative is loosely available to its regional partners in Asia without any binding trade agreements, which technically makes the entire arrangement ad hoc and vulnerable to drastic changes that are inevitable once Biden exits the White House. In fact, if anything, the IPEF guarantees the temporary creation of economic cliques to counter China's growing influence. But even if that is the ultimate objective, Biden seems to be achieving very little when it comes to counterbalancing the Chinese monopoly on economic power. Countries within the region refuse to fall into any trap that forces them to choose between the two competing global powers – US and China.

Having said that, this is not the first attempt by a US administration to isolate China in a region it has successfully managed to dominate – primarily due to its position and proximity. In the not-so-distant past, Washington sought to marginalize Beijing through the Trans-Pacific Partnership (TPP). The so-called regional mega-deal, a centerpiece of former president Obama's strategic pivot to Asia, was abandoned because his successor’s administration was reluctant to open up its own domestic market and share trade dividends with other countries.

Fast-forward to 2023, this time, under the IPEF, it appears that the US administration will be even more conservative in sharing trade benefits with other countries. And with limited or no practical economic benefits for regional participants, the hollow talk about supply-chain resilience and security offers no practical incentive for the Asia-Pacific countries – leaving many to eventually believe that Washington views them as nothing more than an instrument to contain Beijing’s growing power and influence – with no regard for the region’s interests.

For the US to be seen as a sincere partner in the economic success of South and Southeast Asian nations, it has to realize that the region’s economic development is intertwined with China, which has become the largest trading partner of almost all ASEAN members, and that Beijing cannot be excluded from the equation – without significant losses.

While the 46th US president acknowledges that geopolitics and value networks are evolving rapidly and that traditional trade agreements alone cannot address these changes, his perspective on policy lacks foresight. Biden’s latest trade pledge, according to many experts, including FT’s former International Economy Editor, Alan Beattie, generates significant rhetoric but offers very few economic benefits, in the long-run, for countries that are once again being lured into Washington’s already shrinking sphere of economic influence.